At 45, many Canadians are in the thick of retirement planning, with some catching up and others on track. According to recent data, individuals aged 35 to 44 have an average Registered Retirement Savings Plan (RRSP) balance of $49,014, making up 47% of their total retirement savings of $104,159.
For those in their mid-40s, this figure might provide a useful benchmark. Yet whether it’s sufficient hinges on personal retirement goals, desired lifestyle, and other income streams. Experts often recommend having about four times your annual salary saved by age 50. This suggests that at 45, you’d ideally be nearing three times your annual income in total savings.
Falling short
The reality, though, is that many Canadians find themselves falling short of these guidelines. Life happens, with mortgages, childcare costs, or unexpected expenses limiting how much you can tuck away. If your RRSP balance isn’t where you’d like it to be, there’s good news. You still have time to catch up. Increasing your contributions, utilizing unused RRSP room, and selecting the right investments can make a big difference. Diversification is key here, as it spreads risk while optimizing returns.
Enter Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC), a fantastic option for those looking to supercharge their RRSP investments. VXC offers exposure to a wide range of international equities. Effectively diversifying your portfolio beyond Canada. This exchange-traded fund’s (ETF) top holdings include Vanguard Large Cap Index Fund (58.17%), Vanguard FTSE Developed All Cap ex North America Index ETF (24.80%), and Vanguard Emerging Markets Stock Index Fund (10.16%). The result? Access to the world’s top markets and opportunities for growth.
Recent growth
Let’s talk performance. VXC boasts a stellar year-to-date return of 24.80% and a one-year return of 35.07% as of writing. These figures reflect its exposure to global equities, which have benefited from recovering markets, technological innovation, and robust corporate earnings. The fund is heavily weighted toward technology (24.96%), financial services (15.41%), and industrials (10.98%). Sectors that often outperform during periods of economic expansion.
Its recent performance speaks volumes, but what about the future? VXC’s global diversification means it’s well-positioned to weather market fluctuations while capturing growth from various regions. That said, investing in international equities does come with risks, including currency volatility and geopolitical uncertainty. However, these risks are often offset by the broader growth potential offered by emerging and developed markets alike.
Looking ahead
For the long-term investor, VXC’s low management fees and high exposure to global innovation make it a solid choice. Suppose your RRSP is currently concentrated in Canadian stocks or fixed-income securities. Adding VXC can balance out your portfolio and introduce significant growth potential. Its holdings span everything from large-cap U.S. stocks to small-cap emerging market players, ensuring you’re not putting all your eggs in one regional basket.
Still, catching up on your RRSP contributions means more than just picking the right investments. It’s also about maximizing your tax advantages. Every dollar contributed to your RRSP lowers your taxable income, giving you an immediate financial boost while helping you save for the future. Pair this with a strategic investment like VXC, and you’re setting yourself up for growth over the coming decades.
Bottom line
If you’re worried about not having enough saved, don’t panic. Start by calculating how much you need annually in retirement and work backward to determine how much you should save each year moving forward. Tools like contribution calculators and guidance from financial advisors can simplify the process. Even if you can’t max out your RRSP every year, consistently contributing what you can and investing wisely will compound into meaningful growth over time.
In short, while the average RRSP balance at age 45 provides a decent yardstick, it’s more important to focus on where you want to go from here. With options like VXC in your investment toolkit, you can diversify globally, enhance growth potential, and catch up to ensure a comfortable and secure retirement.
