Realizing that you’re behind on retirement can be stressful. Retirement savings is a process that can span decades, and it comes alongside career, family and lifestyle goals.
Fortunately, for investors in their 40s, things aren’t as dire as they would seem. There are more than two decades of compounding in many cases to continue building that portfolio.
All that’s needed is the right investments that can provide a balance between growth and income. And thankfully, there are several great moves to get retirement savings back on track.
Here’s a look at three of those moves that investors who think they are behind on retirement can start making today.
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Move #1: Build a diversified core
One of the first and most important moves for investors to make is to build that foundation core.
While there’s no shortage of great options on the market that can help meet that goal, one that works really well is iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC).
XIC is a market ETF that contains a broad mix of Canadian companies across different sectors of the economy. Included in that basket are the big banks, energy companies, utilities, industrial companies and even large tech names.
The appeal here is simplicity. Rather than choosing individual names that hopefully outperform the market, investors of XIC participate by buying the broader Canadian market.
While the main focus of the fund is growth, the ETF also offers a distribution that, as of the time of writing, offers a yield of 2%. That’s not the highest yield on the market, but it can be reinvested to purchase additional units over time.
For investors who feel they are behind on retirement, that mix of diversification, long-term growth appeal, and reinvested distributions can make XIC a great starting point.
Move #2: Invest in a reliable dividend grower
Another move for investors who feel that they are behind on retirement to consider is investing in a company that has consistently increased its dividends.
A great example of this is Fortis (TSX: FTS).
Fortis is one of the largest utility stocks in North America. The company operates regulated electricity and natural gas businesses in the U.S., Canada and the Caribbean. Those operations generate predictable revenue, backed by long-term regulated rates.
The end result is a stable revenue stream that allows Fortis to invest in growth and pay a handsome dividend.
As of the time of writing, Fortis offers a yield of 3.4%. While respectable, the real reason investors turn to Fortis is for its dividend growth. The company currently holds the second-longest increase streak in Canada, at 52 consecutive years.
For investors with another decade or more before retirement, Fortis has plenty of appeal.
And while Fortis won’t provide explosive growth, the stock has returned nearly 9% over the past year and over 37% over the trailing five-year period.
Move #3: Add a source of consistent income
A final move for investors to consider is investing in an established business that generates income while also offering long-term appreciation.
That’s where Bank of Montreal (TSX: BMO) comes into focus.
BMO is one of Canada’s big bank stocks. In fact, BMO is the oldest of Canada’s big banks, with nearly two centuries of uninterrupted dividend payments. That’s an impressive record that has survived multiple recessions and periods of market volatility.
As of the time of writing, BMO offers a yield of 3%.
The bank offers personal banking, commercial lending, wealth management, and capital markets operations across Canada and in the U.S.
Like Fortis, those dividends can be reinvested in the years leading up to retirement. Over time, additional shares can help increase the amount of income the portfolio generates.
It’s not too late if you feel like you’re behind on retirement
Being behind on retirement savings doesn’t mean needing to take unnecessary risks to catch up.
A diversified ETF like XIC, a dividend grower like Fortis, and an established income-producing bank like BMO each offer a way to build long-term wealth.
In my opinion, one or all of the above should be core holdings in any larger, well-diversified portfolio.
