Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Investing in your 40s: 8 ways to prepare for retirement

Protect your wealth by reassessing your asset allocation strategy.

Investing in your 40s is all about ramping up your investment goals in preparation for retirement. But even if you’re a little late to the game, there’s plenty you can do to safeguard your finances and start building an investment portfolio to help carry you through retirement.

How to start investing in your 20s: 7 tips for beginners

1. Clarify your financial goals

Let’s face it: things have changed since you were in your 20s. Heck, things are different now than they were a decade ago. An important step to take as an investor in your 40s is to clarify your financial goals. Whether you do this alone or with a partner, friend, family member or financial adviser, take some time to lay it all out.

Review your income, expenses, savings, investments — you name it. You want to get a holistic picture of your finances to reassess your goals accurately and inform your retirement plan. As tempting as it may be to leave your finances on autopilot, it’s crucial to stay flexible and adaptive as your life circumstances evolve.

2. Build a detailed retirement plan

If you haven’t begun work on your retirement plan, don’t panic. You still have plenty of options to start planning your retirement. As you begin to budget for retired life, consider the following:

  • Timeline. Much of your retirement plan hinges on when you plan to retire. The transition to early retirement could take place in your late 50s — others wait until over the age of 70 to truly call it quits. Consider when you’d ideally like to retire and work backward to determine how many years you have to plan and save.
  • Lifestyle. While some look forward to spending their retirement with friends and family, others aspire to travel and whittle down their bucket list with high-flying adventures. Aim to budget for at least 80% of your current spending habits in retirement — more if you plan to busy yourself with travel.
  • Expenses. Anticipated expenses are one thing: emergency expenses are another. Make sure you account for both when plotting your retirement fund.
  • Inflation. If compound interest is an investor’s best friend, the growing inflation rate is undoubtedly an enemy. Factor cost of living increases into your retirement investing strategy.
  • Taxes. Getting taxed on your investments is never pleasant, but it’s possible to get strategic about where and when you take on the burden of paying tax. While a true tax-free investment doesn’t exist, tax-advantaged retirement accounts, like RRSPs or TFSAs, are a practical way to control how your investments are taxed.
  • Estate planning. While it may be uncomfortable to contemplate, ensuring your estate is in order is an important part of preparing for retirement. Sit down with your loved ones or financial adviser to devise a strategy for your assets and accounts after you die.

How much do I need to retire?

Generally speaking, most retirees need about 80% of their pre-retirement salary annually to live comfortably. So, if you make $60,000 per year before retirement, anticipate budgeting $48,000 per year once you retire.

Once you’ve got your ideal retirement income in mind, you can use the 4% rule to determine how big of a nest egg you’ll need to build. The 4% rule is typically considered to be a safe withdrawal rate for retirement — although some financial advisers argue that the rule is outdated and doesn’t account for major market upheavals, economic crises or fluctuations in withdrawal rates.

That said, the 4% rule can give you a general idea of how much you’ll need to save for retirement. You simply divide your ideal retirement income by 4% to arrive at the amount you’ll need to save.

Annual retirement incomeNest egg
$40,000$1 million
$50,000$1.25 million
$60,000$1.5 million
$80,000$2 million

If you’re still unsure how much you need to retire comfortably, rely on a retirement calculator to help you set some nest egg milestones. Consider a new brokerage account if you need to expand your investing.

3. Maximize your RRSP contributions

By the time you hit your 40s, you’ve probably cycled through your fair share of jobs, from part-time gigs as a 20-year-old to full-time roles across various employers. Regardless of your employment history, there’s a chance you have a couple of old RRSPs kicking around.

If that’s the case, you’ll want to read up on rolling over unused RRSP contribution room from prior years. Everyone has a maximum yearly contribution amount, but if you don’t use the full amount, it will roll over to the following year. Your contribution room never expires. You could be sitting on the opportunity to save thousands of tax-deferred dollars beyond what you normally contribute.

Check your most recent Notice of Assessment to see what your total contribution limit is for the current tax year (this figure includes rolled over amounts from previous years).

4. Rebalance your portfolio

Your investment portfolio should be anything but static. Instead, it should act as a direct reflection of your ongoing financial goals; flexible and adaptive in the face of major life events. Even passive investors investing with a human or robo-advisor can’t afford to set it and forget — not in the long run, at least.

It’s crucial to revisit your investment accounts on a routine basis. The asset allocation strategy of a 20-year-old investor will look different than that of a 40-year-old. The longer your time horizon, the more risk you can afford to take. That said, you don’t want to pull out of all your high-growth stocks in favor of safer, more conservative investments, like bonds.

Maximizing your returns as you move closer to retirement is a delicate balancing act. And the ideal balance ultimately comes down to your risk tolerance and individual investment goals. But if you’re looking for a ballpark range, advisers suggest investors in their 40s should aim for 70% high growth assets, like stocks, and 30% conservative assets, like bonds.

Compare stock trading platforms

Name Product Available Asset Types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
Wealthsimple Trade
Stocks, ETFs
Get a $50 bonus when you open a Wealthsimple Trade account and deposit and trade at least $150.
Pay no commissions when you trade Canadian stocks and ETFs with Wealthsimple Trade.
BMO InvestorLine
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$9.95 + $1.25 per options contract
$0 if conditions met, otherwise $25/quarter
$0 - $9.95
Buy and sell a select group of Canada’s most popular ETFs without paying commissions.

An easy-to-use online trading platform with access to research, tools, and the option to access InvestorLine adviceDirect for additional professional support.
Scotia iTRADE
Bonds, Options, Mutual Funds, ETFs, GICs, International Equities
$9.99 + $1.25 contract ($4.99 + $1.25 contract if completed 150 trades or more a quarter)
$9.99 ($4.99 if completed 150 trades or more a quarter)
Pay no annual account fees.
Buy, sell and trade ETFs, Equities, Options and more with competitive commissions.
CIBC Investor's Edge
Stocks, Bonds, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$9.95 + $1 per contract
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
Qtrade Direct Investing
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Get up to 50 free trades. Be one of the first 100 new Qtrade clients to use the promo code 50FREETRADES and deposit a minimum of $10,000 (or top up to $15,000 to get $150 transfer fees waived). Valid until September 30, 2021.
Qtrade Direct Investing offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.

Compare up to 4 providers

5. Prioritize high-interest debt

Debt doesn’t need to be a four-letter word — at least not the type you’re thinking of. Debt tends to get a bad rap, but carrying debt is incredibly common. And so long as you carry it responsibly, there’s little need to panic.

Consider prioritizing high-interest debt, like credit card debt, over low-interest or tax-deductible debt, like your mortgage. And if you find yourself facing down multiple debt streams and feel overwhelmed, explore the debt avalanche and debt snowball methods. Both are designed to help you create an actionable game plan for multiple debts.

6. Explore alternative investments

Diversification remains a core ingredient of any healthy portfolio. As you enter your peak earning years and prepare for retirement, consider branching out into alternative investment classes.

    • RESP. If you have children, consider a Registered Education Savings Plans (RESP), a tax-advantaged account that can be used to cover qualifying education expenses later in life. Plus, funds in an RESP can grow tax-free; you only pay income tax when the funds are withdrawn.
    • GICs. Guaranteed investment certificates offer consistent interest rates over set terms — typically 30 days to 5 years. You’ll find the most competitive GIC rates accompany the longest terms and most GICs have minimum deposits of $500 or more.
    • Real estate. An investment in real estate can take many forms, from mutual funds and REITs to purchasing property outright and becoming a landlord.

7. Consider a financial adviser

If actively managing your investments has become overwhelming, don’t be afraid to ask for help. Investors in their 40s often have a rich and diverse financial history. And if wrangling up accounts, calculating retirement expenses and navigating the obstacle course that is tax-advantaged investing has become altogether too much, it may be time to consider a financial adviser.

Financial advisers can assist with investments, retirement savings, estate planning and more. In Canada, investment advisers must be registered at the national and provincial levels.

They must be registered under the Securities Commission in the province in which they intend to offer services. This involves training and passing specific exams. The must also pass the Canadian Securities Course (CSC) exam administered by the Canadian Securities Institute (CSI), which provides courses and examinations for the Investment Industry Regulatory Organization of Canada (IIROC).

Financial advisers can be hired through banks and wealth investment firms, like National Bank, RBC Dominion Securities and Edward Jones. Many advisers charge for their services using an annual asset management fee that typically ranges from 1% to 2% of your total account balance. For portfolio worth $1 million or more, the fee may fall below 1%.

And if you’re looking for investment guidance, a human isn’t your only option: robo-advisors are algorithm-driven digital services that manage your portfolio on your behalf, making automatic adjustments based on your investment preferences.

How to find the best financial advisors in Canada

8. Monitor your investments

Keep track of your portfolio’s performance by regularly reviewing your investments. Hands-off investors who leave their portfolios with human or robo-advisors may only need to check in once per quarter. Active investors — especially those with volatile, high-growth stocks — may want to check in more often.

Ultimately, the frequency with which you revisit your portfolio will depend on your trading strategy. But be careful not to over-monitor your accounts. Financial experts warn that too-frequent checking often lends itself to loss-inducing trades.

Bottom line

Investing in your 40s is all about staying organized and adaptive. Consolidate your investments, revisit your asset allocation strategy and don’t be afraid to branch out into new investment classes. Review your investment options across multiple platforms and assets to keep your portfolio — and returns — on an upward trajectory.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

More on investing

How to buy Planet Labs (PL) stock in Canada when it goes public

How to buy Planet Labs (PL) stock in Canada when it goes public

Everything we know about the N/A IPO, plus information on how to buy in. Read more…
Top Canadian stock discussion forums in 2021

Top Canadian stock discussion forums in 2021

We look at 6 popular stock discussion groups from Canada and overseas.

Read more…
Best dividend stocks in Canada

Best dividend stocks in Canada

We’ve rounded up the top dividend stocks in Canada. Check out current stock prices, historical stock performance, company info and more.

Read more…
How to short the Nasdaq

How to short the Nasdaq

Find out how to short the NASDAQ, the world’s second largest stock exchange, with inverse exchange-traded funds (ETFs) or derivatives.

Read more…
How to master international stock trading with currency hedging

How to master international stock trading with currency hedging

Protect your international stock portfolio from currency fluctuations by hedging your investments.

Read more…
How to invest in renewables

How to invest in renewables

Investing in renewable energy isn’t just good for the planet—it can be good for your portfolio too.

Read more…

More guides on Finder

Ask an Expert

You must be logged in to post a comment.

Go to site