How to build a retirement plan that tunes out the market noise | Canada Voices

Planning for retirement can feel like solving a complex puzzle, with each piece representing a decision that could impact your future. But here’s the good news: It’s never too late to take control. In this series, we aim to simplify the process, providing actionable insights to help you confidently manage your financial future.

The options available to Canadians looking to build their retirement savings may be growing, but the fundamentals of sound investment remain the same.

As cryptocurrencies reach record highs some Canadians may be tempted to take a closer look at speculative assets, but experts warn that when it comes to retirement savings, slow and steady wins the race.

“With speculative assets you can do exceptionally well, or you can lose a ton of money, and that’s why I think speculative investing should be limited to a smaller portion of an investor’s portfolio,” says Jason Heath, an advice-only financial planner at Toronto-based Objective Financial Partners. “Boring, over the long run, has a higher probability of success.”

Heath explains that access to more investment tools and apps, alongside social media content from non-experts, has driven many towards riskier assets like cryptocurrencies, “meme stocks,” and individual company shares in recent years.

“Although it can be tempting to try to hit a big home run and find something that will magically make you rich, it tends to be a slow, steady process,” he says. “I’ve worked with thousands of clients in my career, and the vast majority have achieved financial independence slowly and surely over a number of years.”

Those looking to grow their wealth for retirement are advised to invest in more diversified assets – like exchange-traded funds (ETF) and mutual funds – and more stable assets, like government backed bonds and Guaranteed Investment Certificates (GICs).

ETFs trade like stocks on an exchange with lower fees, while mutual funds are managed by professionals and priced at the end of the day, often with higher fees. For stability, government-backed bonds and Guaranteed Investment Certificates (GICs) are considered to be low-risk options. Bonds pay regular interest as loans to the government, while GICs guarantee fixed returns over a set period, offering security and predictability for conservative investors or those nearing retirement.

Heath says most Canadians should seek to make those investments via a registered savings plan, such as a Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA) or First Home Savings Account (FHSA).

Though each has its own set of restrictions, limits and requirements all offer Canadians the opportunity to earn investment returns tax-free. The RRSP also allows them to defer income taxes on those funds until the money is withdrawn.

“When we’re in a lower income bracket, TFSAs tend to make more sense, and when we’re in a higher income bracket, an RRSP makes more sense – but understanding when and why you’re going to need this money over the course of time is really important,” explains Chris Poole, a financial planner and president of CWP Financial Services Inc. for Sun Life Financial.

Both Poole and Heath also emphasize the importance of taking advantage of employer-supported savings plans that offer matching contributions, when available.

“If you are in a workplace where you have access to a boosted amount of savings because you’re getting employer matching, that is something we almost always want to take advantage of,” Poole says. “There’s nowhere else in the market that you can put 6 per cent of your salary and get a 100 per cent return.”

Poole also recommends against putting too much stock in the housing market, as many of his clients ultimately find downsizing or getting equity out of their real estate assets more difficult and less desirable than they had originally anticipated. “If you own a house, you can’t exactly go to the ATM on the side of the wall and just sell one brick at a time,” he says.

Poole explains that Canadians have three ways to use the equity in their homes to fund their retirement: downsizing, renting out a portion, or borrowing against the property, such as with a homeowner’s line of credit. Each has its own drawbacks and complications.

“The switch from larger house to smaller house doesn’t actually create added equity in the way that many perceived it would,” he says. “Smaller houses are expensive too, the cost of moving is expensive, and the land transfer tax adds up.”

Though some may be tempted to get more pro-active with their retirement investing, Poole says the best approach is to create a plan that matches their long-term financial goals and taking a hands-off approach – only checking-in periodically to ensure they’re on track.

“There are so many distractions,” he says, “but the reality is when we look at our own financial road map and build a plan based on our unique needs, it gives us the permission to tune out the noise.”