In the summer of 2019, I’d discussed some retirement strategies for Canadians to pursue as we looked ahead to a new decade. Some of these included maxing out registered room and being sure to invest early and often to take advantage of long-term gains in the market.
For many Canadians, retirement planning is a daunting exercise. Today, I want to discuss how you can simplify your retirement. Let’s dive in.
Making retirement investing easy: Focus on blue chips
Building a retirement portfolio can be very challenging. The stakes are high for many Canadians who are hoping to live comfortably in their post-work years. When it comes to investing, sometimes it is best to keep it simple. In this instance, that means pursuing reliable blue-chip stocks.
A blue-chip stock tends to be in a company with a national reputation for quality, reliability, and consistent profitability.
Canadian banks stocks are always a favourite among those who prefer blue chips. Royal Bank is the largest of the bunch. Its shares have dropped 7.1% in 2020 as of close on June 10. The dip in Royal Bank and its peers has provided a nice buy-low opportunity for investors of all stripes, including those building a retirement portfolio.
Like its peers, Royal Bank is a profit machine. Shares last had a favourable price-to-earnings ratio of 11 and a price-to-book value of 1.6. Moreover, Royal Bank offers a quarterly dividend of $1.08 per share, which represents a 4.6% yield.
Enbridge is a blue-chip stock in the energy sector that is also perfect for a retirement portfolio. The energy giant saw its adjusted earnings increase year-over-year in Q1 2020 in the face of the COVID-19 pandemic.
It has been resilient in the face of turbulence in the energy sector. Enbridge offers a quarterly dividend of $0.81 per share, representing a tasty 7.3% yield. The company has delivered dividend-growth for over 20 consecutive years.
Shorten your investment horizon
Another way to simplify your retirement planning is to shorten your investment horizon. This is especially helpful in the volatile environment investors have been exposed to in 2020. Late last year, I’d explained why it is dangerous for your retirement plan to assume that you will work forever.
By shortening your investment horizon, those nearing retirement can focus on stock trajectories in the next five years rather than the next twenty or more. It will also add structure and avoid procrastination that is common in investors of all ages. This shift in strategy also blends nicely with our focus on blue-chip stocks.
Consolidate your assets
This is an especially good strategy for those nearing retirement. Over a long life, many Canadians will have accumulated bank and investment accounts at multiple institutions. It is much easier to keep track of resources by consolidating assets at one institution.
This is not just reserved for banking and investment accounts either. Sticking to one credit card is also a great way to keep a better handle on your finances ahead of retirement.