How to Invest for Retirement Wisely: 9 Safe Investment Tips


How prepared are you for retirement? Let’s be honest: Nobody wants to think about retirement. It is terrifying to think that one day you will be 60, 70, or 80. But it does not have to be a scary time if you are prepared for what is coming. The best way to prepare is to start concentrating on the financial aspect of your senior days. Even if you are starting later, it is better late than never to invest for retirement wisely.

If you are like most Canadians, you probably have an insufficient amount saved or invested for your retirement years. Whether it is because you do not make enough money or because you are scared of investing in the market, there are many reasons why the retirement dream may be exactly that: a dream.

With that said, it is imperative to save for retirement because, no matter how old you are, it is always right around the corner. You can start preparing today by putting your money into a diverse array of investment vehicles.

Here are nine safe investment tips to teach you how to invest for retirement wisely:

1. Dividend Income Stocks

Dividend income stocks is the safest investment for retirement. Many value stocks offer a dependable monthly or quarterly dividend. Of course, you just need to find them and hold onto your shares during the best of times and the worst of times.

While everyone has their own preferences, Canadian investors typically have a good selection of dividend-paying stocks to purchase. Here are just some of them:

  • Canadian Tire: 3.33% yield
  • Pizza Pizza: 9.31% yield
  • Hydro One: 3.46%
  • Suncor Energy: 4.98%
  • Enbridge: 6.38%
  • Telus: 4.64%
  • Nutrien: 4.41%

If you are new to the world of stock investing and you have limited funds, it is best to start out with only a couple of tickers before dipping your toe into others.

2. REITs

Real estate might be too expensive for millions of Canadians right now, but that does not mean you need to sit on the sidelines. You can invest in real estate through a Real Estate Investment Trust (REIT).

A REIT is a mutual fund that aggregates real estate holdings, such as vacation properties, commercial buildings, and apartment buildings. You do pay a maintenance fee for expenses, property management, and rent collection. On the whole, a REIT can be an attractive choice on how to invest for retirement.

3. GIC Laddering

When you want the rewards without the risks, the Guaranteed Investment Certificate can be a simple and effective way to invest for retirement. The GIC laddering is a good strategy for maximising your investment returns without locking in your dough for the long-term.

Here is how it works: When your term matures, you reinvest the new amount (principal plus return) in a five-year GIC term. That is it. You rinse and repeat when each GIC matures.

4. Mutual Funds

A mutual fund is a gathering of stocks with different distributions. For example, a mutual fund could be 2.3 percent invested in Microsoft, 1.8 percent in Alphabet, 1.6 percent in Amazon, 0.9 percent in Netflix, and then the rest are scattered throughout the particular industry.

Mutual funds are great ways to invest for retirement when you do not want to trade stocks individually and do not have the time nor the inclination to monitor the market. Many mutual funds also provide dividends that you can reinvest or pocket.

5. Immediate Annuities

An annuity is technically a type of insurance, but it is still a product that offers a steady income. Immediate annuities offer you an income right away and benefit those who are already in retirement. While they do make your assets illiquid and you could lose money before cashing out, immediate annuities can be a perfect complement to your Social Security.

6. Make a Retirement Investment Plan

Many people understand how to invest for retirement, but they are unsure what their plan is for their future. You cannot blame them for it because who wants to play for the tail-end of your life?

With that said, it is important for your standard of living to plan for your retirement financially. You cannot just set aside an automatic savings plan and hope you have enough to have fun in your final days. This is especially important if you have certain plans, like traveling or living in a retirement home.

7. Don’t Panic and Invest Irrationally

When you see a market rout, as if you have witnessed throughout the coronavirus crisis, it can be tempting just to cash out and enjoy whatever gains you generated during your lifetime. But this is the worst thing you can do because most market crashes are blips on the radar and are mostly temporary.

If you see your portfolio tumble eight percent, you should not panic. Instead, you should ride out the storm. And, if you are an active investor, perhaps you can buy the dip!

8. Calculating Inflation is Key

A glaring mistake that many people make with how to invest for retirement, even the savvy investors, is forgetting to crunch the inflation. Indeed, $100,000 today is not the same in 30 years – your purchasing power takes a nosedive.

A simple trick you can do is to increase your monthly savings or investments every year. So, for example, if you are saving $100 a month right now, then perhaps you can raise it to $120 next year and $140 a year after and son. It all adds up in the end.

9. Conservative vs. Risk-Taking Investments

Let’s be honest: Any amount of contributions to your retirement is a positive move. No matter the amount, you should be commended for making an honest effort. With that out of the way, if you are contributing just $25 a month to your retirement, whether it is in a mutual fund or a tax-free savings account (TFSA), it will not be much to sustain a living.

Many people fear putting too much into markets because they do not want to lose their principal. Unfortunately, because the cost of living is only rising, you may need to take on a bit more risk. And, depending on the circumstances, you might need to abandon your conservatism and embrace the risk.