Think it’s Too Late to Save for Retirement? Think Again

Retirement is still possible, but you may need a new strategy with growth stocks like Shopify (TSX:SHOP)(NYSE:SHOP)

| More on:
edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk

Image source: Getty Images

“I’ll probably never retire” is a phrase I hear more often now. Unfortunately, this claim is believable. Most Canadians have little to no retirement savings. Some are relying on the equity in their home, but that may not be enough to fund multiple decades of living expenses. 

If you feel like you’re falling behind, here are some ways you could catch up. 

Aggressive growth strategy

Most retirement investment advice focuses on safety and reliability. But if you’re 60 years old and just a decade away from retirement, you can’t really rely on compounding returns. 

You need a new approach to accumulate wealth, which probably involves an aggressive growth strategy. Growth stocks have delivered immense returns in recent years, and there’s no reason to believe they’ll slow down. These aren’t risky penny stocks, either! 

A well-known tech stock like Shopify (TSX:SHOP)(NYSE:SHOP) has delivered a jaw-dropping 5,839% return since 2015. That’s a compounded annual growth rate of 78.6% over roughly seven years. To put it another way, you could have invested $10,000 in Shopify stock in 2015 and turned it into $583,900 by now. 

Can Shopify continue to deliver such performance? Absolutely. The company’s worth $211 billion right now, while its largest competitor is worth $2 trillion. The global e-commerce market is worth well over $20 trillion. There’s plenty of room to grow. 

If you have modest savings right now, consider a tech growth stock to help you accumulate wealth rapidly. 

Systematic withdrawals

If the tech growth stock approach is too aggressive for you, there is another way. You could stick to the traditional strategy of investing in blue-chip dividend stocks. But if you’re close to retirement, you may need to add another element to your strategy: withdrawals. 

A systematic withdrawal plan is ideal for retirees with limited savings. Essentially, you’ll sell a percentage of your stock portfolio every year to fund your lifestyle. Statistical studies show that selling between 3% to 4% of your portfolio should help you live off your capital indefinitely. 

How does this work? The statistical studies analyzed stock market returns over the past few decades. On average, stocks deliver a total return of 6-7% a year. So, selling less than that should allow you to retain your capital over the long run. 

This strategy should allow you to retire on a few hundred thousand dollars.

Retirement is achievable

It’s never too late to start retirement planning. Even if you have little to no savings right now, you could flip the script quickly. An aggressive, tech-focused growth strategy should help you accumulate wealth. Alternatively, you can plan to sell a fixed percentage of your stock portfolio every year. 

A little research and a new perspective is all you need to achieve retirement. Good luck!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify.

More on Investing

stock analysis
Investing

2 Safe Stocks I’m Buying Hand Over Fist Right Now

Although there is still a tonne of uncertainty about the economy heading into 2023, here are two safe stocks to…

Read more »

dogecoin is a speculative investment
Investing

Man’s Best Friend: A Retail Stock That Weathers Recession

Pet care could be recession resistant, so Pet Valu (TSX:PET) should be on your radar.

Read more »

oil and natural gas
Energy Stocks

Better Buy: Suncor Energy Stock or Canadian Natural Resources

Suncor and Canadian Natural Resources are generating strong profits. Is one undervalued?

Read more »

Arrowings ascending on a chalkboard
Dividend Stocks

3 TSX Stocks With Dividends That Outpace Inflation

Investors that worry about losing buying power due to inflation could put money into these three stocks! They’re known for…

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

Dividend Seekers: Which of These 3 TSX Energy Stocks Is a Better Buy?

Which is a better bet among TSX energy bigwigs?

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Top Value Stocks to Buy in December 2022

Stocks such as Bank of Montreal and NFI Group are trading at attractive and cheap valuations in 2022.

Read more »

edit Person using calculator next to charts and graphs
Investing

4 Things to Know About Algonquin Stock in December 2022

Algonquin Power & Utilities (TSX:AQN) stock is down, but did you know these four key facts about it?

Read more »

oil and gas pipeline
Energy Stocks

Better Deal: Enbridge Stock or Pembina Pipeline?

Enbridge and Pembina Pipeline are two top Canadian energy infrastructure stocks. Which is a better deal for income and growth…

Read more »