Turning 45 can feel like a real crossroads. You’re likely deep in the thick of life’s major expenses. Mortgage payments can feel like a never-ending cycle. Childcare costs, if you have kids, can be a significant drain on the budget. And career pressures might be at their peak as you strive for advancement or stability. While retirement might still seem like a distant shore on the horizon, it’s definitely starting to appear larger and more defined in your field of vision. It’s a time when the need to seriously consider long-term financial security becomes increasingly apparent.
How do you stack up?
When we take a look at the average savings held by Canadians in this 45 to 49 age bracket, a somewhat concerning picture emerges. The average balance held within a Tax-Free Savings Account (TFSA) for individuals in this age group hovers around a modest $21,177. While the TFSA is a fantastic tool for tax-free growth, this average balance suggests that many Canadians in their mid-40s might not be fully leveraging its potential for long-term savings.
The picture for Registered Retirement Savings Plans (RRSPs) is somewhat brighter on the surface, with an average balance of approximately $150,300 for the same age group. This figure might initially seem reassuring. However, when we delve a little deeper and consider the median RRSP balance, which sits at around $70,000, a different story unfolds. The median represents the midpoint of all balances, meaning that half of Canadians in this age range have RRSP savings below $70,000, while the other half have more. The significant difference between the average and median suggests that a smaller number of individuals with very high RRSP balances are skewing the average upwards and that a substantial portion of Canadians in their mid-40s are potentially facing a retirement savings shortfall.
Adding another layer of complexity to this situation is the current high inflation. In a high-inflation world, the purchasing power of your hard-earned savings diminishes at a much more rapid pace. This underscores the critical importance of not only diligently saving a significant portion of your income but also strategically investing those savings in a manner that allows them to grow at a rate that outpaces inflation.
Get it done
One strategy to consider in this high-inflation environment is to allocate some of your investment portfolio to strong, resilient, and growing companies. A prime example of such a company is Brookfield Infrastructure Partners (TSX:BIP.UN).
Brookfield Infrastructure Partners is a prominent global infrastructure company that owns and strategically operates a diverse portfolio of essential infrastructure assets across a wide range of sectors. These sectors include utilities, transport, midstream, and data infrastructure. What’s particularly attractive about these types of assets in an inflationary environment is that revenues are often linked to inflation. This means that as the general price level rises, the revenues generated by these assets tend to increase as well. This provides a natural hedge against the eroding effects of inflation on your investment returns.
In its most recent earnings report, Brookfield Infrastructure Partners reported an impressive annual revenue of approximately US$21.04 billion. This substantial revenue figure highlights the sheer scale and breadth of the company’s global operations. Furthermore, the company achieved a net income of US$1.683 billion for the year, demonstrating its ability to generate significant profits from its diverse infrastructure holdings. Perhaps most importantly for retirement savers seeking income, Brookfield Infrastructure Partners also proudly announced its 16th consecutive distribution increase.
Bottom line
For investors in their mid-40s who are actively seeking to bolster their retirement savings and ensure they are better prepared for the future, incorporating resilient and income-generating assets like BIP into their investment portfolios held within their TFSA and RRSP accounts can be a prudent and potentially rewarding strategy. By strategically allocating a portion of their savings to such companies, they can enhance the overall growth potential of their retirement accounts and increase their chances of outpacing inflation over the long term, ultimately leading to a more financially secure and comfortable retirement.
