By the time investors hit the age of 45, retirement savings and the amount in those accounts begin to feel a lot more serious. The early career years are in the rearview mirror, and the typical 45-year-old is focused on where they stand compared to others.
The important takeaway for investors is not to obsess over the balance but rather to focus on how best to use those accounts moving forward.
Source: Getty Images
The numbers don’t tell the full story
The typical 45-year-old may have investments spread across both a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP).
The TFSA and RRSP are both powerful wealth-building accounts, but they work in different ways. A TFSA offers tax-free growth and tax-free withdrawals, with contributions made using after-tax income. An RRSP, meanwhile, is more directly tied to retirement planning because contributions can reduce taxable income today, while withdrawals are taxed later.
This means that two typical 45-year-olds can have similar account balances but very different financial situations.
Fortunately, some investments can help those account balances grow over time.
Fortis offers steady long-term compounding
One way is to focus on businesses that are built for stability. Fortis (TSX:FTS) is a great example that fits that role well. Fortis is one of the largest utility stocks in North America, operating regulated utility assets across Canada, the United States, and the Caribbean.
This gives the utility exposure to essential services such as electricity and natural gas, making it a top defensive pick. That’s because utilities offer steady demand irrespective of how the economy is doing.
That defensive anchor is a huge bonus for long-term investors, such as a typical 45-year-old looking for long-term growth.
Prospective investors should also note that Fortis pays out a quarterly dividend and has provided generous annual upticks to that payout for over 50 consecutive years.
For investors looking to grow their retirement accounts over the long term, Fortis is an option that’s hard to ignore.
Get instant TSX diversification from one ticker
An alternative to picking an individual stock like Fortis to build a portfolio is to invest in an exchange-traded fund (ETF). A perfect example of this is iShares S&P/TSX 60 Index ETF (TSX:XIU).
The iShares S&P/TSX 60 gives investors exposure to 60 of the largest companies on the TSX. That includes big bank stocks, energy producers, pipelines, insurers, telecoms, and any other large businesses on the market.
The key point here is that the ETF allows investors to own the basket instead of trying to pick individual winners. For the typical 45-year-old investor, the simplicity that it offers is huge.
A broad ETF like iShares S&P/TSX 60 reduces the need for investors to monitor individual stocks. Instead, the ETF allows a more passive, buy-and-forget approach.
As part of either a TFSA or RRSP, the ETF provides broad exposure, dividend income, and long-term growth potential without making the portfolio overly complicated.
How much has the typical 45-year-old saved?
So, how much has the typical 45-year-old saved? Published estimates for investors in that age group suggest that the typical 45-year-old may have between $90,000 to $100,000 across both TFSA and RRSP accounts.
Fortunately, a typical 45-year-old with less saved still has two decades to allow for growth. All they need are the right investments and patience to let compounding work.
That’s where investments like Fortis and the iShares S&P/TSX 60 ETF can help. One offers defensive dividend growth, and the other broad market exposure.
In my opinion, one or both should be core holdings in any well-diversified portfolio.
Buy them, hold them, and watch your portfolio (and future income) grow.
