Young Canadians may not have too much when it comes to investing for their retirement. However, this is the perfect time to think about it. If you’re already budgeting, consider just adding just $75 per month to put towards retirement. And all of it could be tax free.
Consider your TFSA as a retirement option
The Tax-Free Savings Account (TFSA) was originally introduced as another retirement option for Canadians. If you have the goal of retirement in mind, starting out with a TFSA is an excellent choice.
You can not only invest each month but also collect passive income that’s all tax free. That passive income can then be sent right back into your TFSA stock of choice on top of the $75. Do this again and again, ideally through automated payments, and you can be set up for life.
An option to choose
Now, if you’re going to do this for life, then you don’t want to choose just some random growth stock. Sure, you can put aside some of your investments for riskier options, but not as a whole. Instead, consider investing in your retirement through a conservative option for stable growth as well as stable dividends.
This will allow you to see your funds rise higher and higher because you have decades of time ahead of you. What’s more, choosing a safe option means that should a recession hit when you want to retire, you’ll be ahead of the game.
An option I would consider is Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC). This company provides you with global exposure to companies on the Financial Times Stock Exchange (FTSE). It merely excludes Canada, so you can pick up the slack there elsewhere.
Shares are up 7% in the last year alone and year to date after the market dipped. You can also bring in a dividend yield at 1.82% — not a huge yield, but, again, you don’t need much!
How much you could make
The Vanguard ETF has grown at a compound annual growth rate (CAGR) of 7.52% in the last nine years since coming on the market. Its dividend of $0.98 has grown at a CAGR of 9.3% in that time. So, let’s see what that $75 per month, or $900 a year, could get you by the time you turn 60.
| Stock Price | Dividend | Dividends Received | Shares Purchased | Total Shares Accumulated | Stock Value | Total Investment | Dividends Reinvested |
|---|---|---|---|---|---|---|---|
| $48.26 | $0.98 | $17.64 | 18.00 | 37.65 | $1,816.22 | $900 | $17.64 |
| $51.90 | $1.07 | $40.18 | 17.34 | 54.99 | $2,852.42 | $1,800 | $40.18 |
| $55.79 | $1.17 | $66.49 | 16.14 | 71.13 | $3,964.48 | $2,700 | $66.49 |
| $59.94 | $1.29 | $96.59 | 15.03 | 86.16 | $5,173.67 | $3,600 | $96.59 |
| $64.37 | $1.42 | $130.97 | 14.01 | 100.17 | $6,491.12 | $4,500 | $130.97 |
| $69.10 | $1.57 | $170.80 | 13.06 | 113.23 | $7,928.88 | $5,400 | $170.80 |
| $74.13 | $1.74 | $216.92 | 12.18 | 125.41 | $9,500.05 | $6,300 | $216.92 |
| $79.49 | $1.92 | $270.89 | 11.35 | 136.76 | $11,217.01 | $7,200 | $270.89 |
| $85.18 | $2.12 | $334.11 | 10.57 | 147.33 | $13,094.17 | $8,100 | $334.11 |
| $91.23 | $2.34 | $408.75 | 9.84 | 157.17 | $15,146.86 | $9,000 | $408.75 |
| $97.66 | $2.57 | $496.68 | 9.16 | 166.33 | $17,391.67 | $9,900 | $496.68 |
| $104.49 | $2.83 | $600.61 | 8.52 | 174.85 | $19,845.77 | $10,800 | $600.61 |
| $111.77 | $3.12 | $723.45 | 7.93 | 182.78 | $22,527.08 | $11,700 | $723.45 |
| $119.53 | $3.43 | $868.56 | 7.39 | 190.17 | $25,454.96 | $12,600 | $868.56 |
| $127.82 | $3.76 | $1,039.44 | 6.88 | 196.05 | $28,650.14 | $13,500 | $1,039.44 |
| $136.69 | $4.13 | $1,240.58 | 6.42 | 200.47 | $32,134.91 | $14,400 | $1,240.58 |
| $146.20 | $4.53 | $1,476.71 | 5.98 | 203.45 | $35,932.41 | $15,300 | $1,476.71 |
| $156.42 | $4.97 | $1,754.84 | 5.57 | 205.02 | $40,067.97 | $16,200 | $1,754.84 |
| $167.40 | $5.44 | $2,082.48 | 5.20 | 205.99 | $44,567.96 | $17,100 | $2,082.48 |
| $179.22 | $5.96 | $2,468.73 | 4.85 | 206.84 | $49,460.91 | $18,000 | $2,468.73 |
| $191.95 | $6.53 | $2,924.60 | 4.53 | 207.37 | $54,777.17 | $18,900 | $2,924.60 |
| $205.67 | $7.16 | $3,463.20 | 4.24 | 207.61 | $60,548.33 | $19,800 | $3,463.20 |
| $220.48 | $7.86 | $4,098.64 | 3.97 | 207.58 | $66,808.01 | $20,700 | $4,098.64 |
| $236.47 | $8.63 | $4,846.06 | 3.73 | 207.31 | $73,591.96 | $21,600 | $4,846.06 |
| $253.75 | $9.49 | $5,721.02 | 3.50 | 206.81 | $80,939.16 | $22,500 | $5,721.02 |
| $272.43 | $10.44 | $6,740.73 | 3.29 | 206.10 | $88,892.81 | $23,400 | $6,740.73 |
| $292.64 | $11.49 | $7,923.05 | 3.10 | 205.20 | $97,499.85 | $24,300 | $7,923.05 |
| $314.52 | $12.64 | $9,288.60 | 2.93 | 204.13 | $106,811.76 | $25,200 | $9,288.60 |
| $338.24 | $13.91 | $10,860.79 | 2.77 | 202.90 | $116,883.42 | $26,100 | $10,860.79 |
| $363.95 | $15.30 | $12,665.96 | 2.62 | 201.51 | $127,774.97 | $27,000 | $12,665.96 |
| $391.83 | $16.83 | $14,732.29 | 2.49 | 199.99 | $139,550.86 | $27,900 | $14,732.29 |
| $422.09 | $18.51 | $17,091.40 | 2.36 | 198.36 | $152,281.65 | $28,800 | $17,091.40 |
| $454.95 | $20.34 | $19,777.88 | 2.24 | 196.60 | $166,040.78 | $29,700 | $19,777.88 |
| $490.67 | $22.36 | $22,829.33 | 2.14 | 194.74 | $180,909.63 | $30,600 | $22,829.33 |
| $529.56 | $24.56 | $26,286.19 | 2.04 | 192.78 | $196,976.29 | $31,500 | $26,286.19 |
At the end of 35 years, your total investment of $31,500 will have grown to $196,976.29 from just $75 per month!
