It can be hard to think about retirement during a volatile market. On the one hand, the TSX Composite Index has never been higher. On the other hand, that means there could potentially be a pullback at any time. That means your investments are somewhat in limbo. But if you want to retire by 50, there is certainly a way. Especially in this market where solid stocks continue to trade at a discount.
The first step of course is to take advantage of what Canada has to offer. That comes down to three methods of investment. There’s the Tax-Free Savings Account (TFSA), which offers $75,500 of contribution room this year after adding $6,000 on January 1, 2021. Then there’s the Registered Retirement Savings Plan (RRSP), which comes down to how much you make to figure out contribution room and is taxed if you take anything out before retirement except in a few circumstances. And of course, there’s the Canada Pension Plan (CPP), which should be automatic unless you’re self-employed.
Now if you have all these savings accounts set up, there’s only one thing left to remember: 50 is early. By today’s standards, that would mean if you live to be 100, you’ll only have worked for about 30 years! I mean, that’s awesome, but not necessarily realistic. And to be honest, it might be boring! But hey, it’s your life. And if you’re willing to save, keep your costs low, and stay healthy then by all means, use this method to retire by 50!
The key is to start early. If you’re 40, it’s going to take an enormous investment to suddenly be able to retire in a decade. However, if you’re new to investing and in your early 20s, for example, you have plenty of time to see your funds soar! That’s potentially 30 years of growth you can look forward to.
What you need now are a few items. You’ll need a stock that not only offers dividends, but has offered them for a long time. You also will want a stock that is well known in the industry, one that isn’t likely to disappear overnight. It will also have to be a stock that has a strong future outlook. Finally, it should also be cheap! Luckily, if you want to retire early, all of this comes together with Suncor Energy Inc. (TSX:SU)(NYSE:SU).
Former Dividend Aristocrat
Up until the market crash, Suncor stock was a Dividend Aristocrat. The fully-integrated energy company had 25 years under its belt of dividend growth each and every year. That came to an end when it slashed its dividend ahead of the market crash and on the back of a poor oil and gas sector.
So today, not a lot has changed. It’s still a poor sector, and the market is still volatile. That’s why shares are so cheap. However, if you’re going to invest for decades like I mentioned, then you can be sure you’ll see a massive turnaround for this company. Suncor stock is a great buy as it still offers a 3.76% dividend yield.
As well, its integrated business model means it has the cash flow to support itself even when times are tough (like now). It also has several growth projects that will come to fruition when the energy sector rebounds.
Put it all together
If you manage to maximize your TFSA and RRSP contributions, pay off debts, and invest a solid amount in Suncor stock, there really isn’t a reason you could retire by 50 if you’re around 20 today. If you look at the past two decades as a guide, Suncor stock has a compound annual growth rate (CAGR) of 12.5%. That’s nothing to sneeze at.
Yet if shares bounce back to where they were pre-crash, you could soon see a sudden boost that doubles your investment. Say you were maxing out your TFSA, that could turn a $75,500 investment into $140,704.54 at today’s prices! And that’s only the beginning.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.