Build a retirement investment plan more successfully when you focus on tried and true ways of saving, like using an RRSP and a RRIF, among other strategies

Instead of taking on extra risk, take the safer route to retirement planning. Save more now, work longer, or plan to spend less. Retirement leaves you with lots of free time, and filling it costs money. But postponing retirement, or working part-time as long as you’re able, can pay off in higher current income, more contentment and greater long-term security.

Here are five retirement investment plan tips to help you prepare for a successful future.

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1. Turn frugality into a game as part of your retirement investment plan

Retirement income planning doesn’t have to be about moving money around. Sometimes it’s easier to live frugally. People who come from humble circumstances often develop a degree of both frugality and industriousness early in life.

It’s easy to let frugality evaporate in mid-life, when money becomes more plentiful. But some find that if they return to frugality later in life, it’s more fun than ever. It’s a little like taking pleasure from a game that you haven’t played since you were young.

Your enjoyment of, or distaste for, frugality is partly a matter of attitude. But that’s under your control. Don’t think of it as penny-pinching. Think of it as taking charge of a part of your life, so that more of your money goes to things you choose.

2. Invest in a Registered Retirement Savings Plan (RRSP) as part of your retirement investment plan

RRSPs are a great way for investors to cut their tax bills and make more money from their retirement investing. RRSPs are a form of tax-deferred savings plan. RRSP contributions are tax deductible, and the investments grow tax-free. (Note that you can currently contribute up to 18% of your earned income from the previous year. March 1, 2025 is the deadline to contribute to an RRSP for the 2024 tax year.)

When you later begin withdrawing the funds from your RRSP, they are taxed as ordinary income.

If you want to pay less tax on dividends while you’re still working, investing in an RRSP is the way to go.

3. Convert your RRSP to a RRIF at age 71 to get the maximum benefit

Convert your RRSP to a RRIF at age 71 to make sure that you get the maximum. RRIFs offer more flexibility and tax savings than annuities or a lump-sum withdrawal. And like an RRSP, a RRIF can hold a range of investments.

If you have one or more RRSPs (registered retirement savings plans), you’ll have to wind them up at the end of the year in which you turn 71. When you do, you’ll have three main retirement investing options:

• You can cash in your RRSP and withdraw the funds in a lump sum. In most cases, this is a poor retirement investing option, since you’ll be taxed on the entire amount in that year as ordinary income.
• You can purchase an annuity.
• You can convert your RRSP into a RRIF.

4. Make realistic calculations for your retirement investment plan

If you plan to retire at 65, and you’re 50, you won’t be dipping into your investments for 15 years. Let’s say you have $200,000 in your RRSP, and expect to add $15,000 in each of the next 15 years.

To determine if this is enough, you need to make some realistic retirement calculations about investment returns and income needs.

Long-term studies show that the stock market as a whole generally produces total pre-tax annual returns of 8% to 10%, or around 6% after inflation.

For the purposes of retirement planning, we’ll assume a 6% yearly return, and disregard inflation. Your $200,000 grows to $479,312*, and your yearly $15,000 RRSP contributions add up to $370,088, for total retirement savings of $849,400.

(*Be sure to check your math. There are many compound-return calculators available online. For example, you can find a comprehensive compound-return calculator at the Bank of Canada’s website.)

5. Don’t be distracted by the direction of the stock market

In the course of your investing career, you’ll make some good guesses about market direction, and some bad ones; overall, they are likely to average out. That’s why it’s best to keep to your plan no matter what the market does. It’s much easier to spot high-quality investments than it is to try and predict the next shift in the direction of share prices.

This plan can produce great results for you, when you start early and stick with it. However, few investors do that. Many investors simply run into too many ways to get sidetracked, and fail to stay with this steady—and successful—approach.

Use our three-part Successful Investor approach to build your retirement investment plan

1. Hold mostly high-quality, dividend-paying stocks.
2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
3. Downplay or stay out of stocks in the broker/media limelight.

What is the main focus of your retirement investing?

What has been the most difficult part of keeping your retirement investing plan on track?