Hitting 40 can feel pretty late to look at a retirement account and discover mostly tumbleweeds. Yet there’s a useful number hiding behind the panic: 25 years.
Someone starting at 40 still has a quarter-century before 65. That’s enough time for a fairly ordinary $500 monthly investment to become anything but ordinary. The bigger mistake would be deciding you’re already too late and losing another 5 or 10 years.
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Start with $500
Investing $500 every month equals $6,000 annually or $150,000 contributed over 25 years. Compound growth can do the rest. Here’s what that could look like assuming contributions are made monthly.
| MONTHLY INVESTMENT | ANNUAL RETURN | VALUE AT 65 |
|---|---|---|
| $500 | 6% | $346,497 |
| $500 | 7% | $405,036 |
| $500 | 8% | $475,513 |
Those returns aren’t guaranteed, nor do the figures account for fees or inflation. Still, they show why starting now matters considerably more than mourning the missing decade. Waiting until 45 changes the equation dramatically because compound growth loses five of its most valuable years.
The account matters, too. The 2026 Tax-Free Savings Account (TFSA) dollar limit is $7,000, so $500 monthly fits beneath this year’s limit if an investor has sufficient room and makes no other contributions. Unused room carries forward, while withdrawals generally become new room the following calendar year. Canadians should still calculate their personal room rather than assume they have the maximum.
That makes investing inside a TFSA especially useful. Investment gains and withdrawals can remain tax-free. A Registered Retirement Savings Plan (RRSP) can also make sense, particularly for higher-income earners who can benefit from the deduction today. Once the account is ready, though, the money needs somewhere to grow.
An income engine
Manulife Financial (TSX: MFC) is one company I’d consider as part of that long-term portfolio. Manulife sells insurance, wealth-management and retirement products across Canada, Asia and the United States. That gives it several earnings engines, with its growing Asian operations providing particularly attractive long-term potential as wealth and insurance demand expand.
Recent results suggest that strategy is working. Second-quarter core earnings rose 12% year over year to $1.9 billion, while core earnings per share climbed 16%. The company also just removed another chunk of old risk from its books. On October 1, Manulife completed a deal transferring biometric risk on $3.2 billion of long-term-care reserves to Munich Re. Its recent reinsurance transactions have now reduced its legacy long-term-care risk by about 24%.
Get paid while you wait
Manulife currently pays $0.49 per share quarterly, or $1.94 annually. At a recent $60.62 share price, that produces a yield of about 3.2%. That dividend can also be reinvested, buying additional shares that can produce their own dividends. It’s one reason Canadian dividend stocks can work particularly well when retirement is still decades away.
The stock trades around 16.4 times trailing earnings. That isn’t dirt cheap after a strong run, so I wouldn’t dump an entire retirement contribution into it at once. Insurance claims can surprise, market declines can hurt wealth-management revenue, and Manulife’s international exposure brings currency and economic risks. A single stock also shouldn’t become someone’s entire retirement strategy simply because they got a late start.
Bottom line
Starting retirement savings at 40 may not be ideal. Yet starting at 45 because 40 felt too late would be considerably worse.
At a 7% hypothetical return, $500 invested monthly from 40 to 65 could grow to roughly $405,000 from just $150,000 of contributions. Add Canada Pension Plan (CPP), Old Age Security (OAS) and potentially higher contributions as income grows, and the retirement picture can change considerably.
Manulife offers one way to put part of that money to work through growing earnings, a rising dividend and a business shedding older risks. The most important investment, however, is the first automatic $500. Give it 25 years, and time can still do an impressive amount of heavy lifting.
