Learn how to choose retirement investments that will let you profit from the best stocks to buy on the market today

Understanding what you want from retirement is one of the most important things you can do while you’re still working.

Continue reading to discover how to choose retirement investments for your diversified portfolio—plus what tax shelters are best to hold those investments.

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Discover how to choose retirement investments, including putting them in spousal Registered Retirement Savings Plans (RRSPs)

RRSPs are the best-known and most widely used tax shelters in Canada. RRSP account contributions are tax deductible, and the investments grow tax-free. When you later begin withdrawing the funds from your RRSP, they are taxed as ordinary income.

Note that a spousal RRSP is one way to achieve equal retirement income. Suppose you are the higher-income spouse. You can make contributions to a spousal RRSP, and claim the tax deduction. Your contributions to the spousal RRSP will count toward your annual RRSP deduction limits.

Your spouse can still contribute their full deduction to their own separate RRSP. When the money is withdrawn from the spousal RRSP years later, it is taxed in the hands of your spouse. That’s an advantage if he or she is still in a lower tax bracket.

Find out how to choose retirement investments like high-quality dividend-paying stocks to insulate your earnings

You can still look at blue chips as the strongest and most secure stocks on the market. Just be sure you look at the stock’s qualities and not just at the label.

We continue to believe that investors will profit most—and with the least risk—by buying shares of well-established, dividend-paying stocks with strong business prospects.

These are companies that have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace.

Stocks like these give investors an additional measure of safety in volatile markets. And the best ones offer an attractive combination of low p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

Learn how to choose retirement investments such as Registered Retirement Income Funds (RRIFs) to help your long-term retirement investment planning strategy

If you have one or more RRSPs, you’ll have to wind them up at the end of the year in which you turn 71.

Converting your RRSP to a RRIF is clearly one of the best of three alternatives at age 71. That’s because RRIFs offer more flexibility and tax savings than annuities or a lump-sum withdrawal (which in most cases is a poor retirement investing option, since you’ll be taxed on the entire amount in that year as ordinary income).

Like an RRSP, a RRIF can hold a range of investments. You don’t need to sell your RRSP holdings when you convert—you just transfer them to your RRIF.

When you hold a RRIF, you must withdraw a minimum each year and report that amount for tax purposes. (You may withdraw amounts above the minimum at any time.) Revenue Canada sets your minimum withdrawal for each year according to a schedule that starts at 5.28% of the RRIF’s year-end value at age 71, reaches 6.82% at age 80, and levels off at 20% at age 95.

ETFs can play a role in your retirement portfolio

We still feel that investors will profit the most with a well-balanced portfolio of high-quality individual stocks, but ETFs can also play a role in a portfolio.

There are three main reasons to use ETFs in your retirement investing.

1. ETFs diversify a portfolio. Using ETFs, you could build a diversified portfolio of conservative, mostly dividend-paying stocks spread out across most if not all of the five main economic sectors (Manufacturing & Industry, Resources, Finance, Utilities and Consumer). But you’ll need to look carefully at an ETF’s holdings to see if it follows this investment strategy.
2. Conservative ETFs are relatively low risk. Holding higher-risk stocks in your TFSA is a poor investment strategy because they come with a greater risk of loss. If you lose money in a TFSA, you lose both the money and the tax-deduction value of the loss. Conservative ETFs can be a good alternative.
3. ETFs are flexible. If funds are limited, you may need to choose between TFSA and RRSP contributions, but ETFs—perhaps purchased with small monthly contributions—can be used for either.

Use a proven approach to investment planning and enjoy a stable retirement

You can improve your returns and cut risk if you structure your retirement investing around our three-part approach to Successful Investing: First, invest your money mainly in well-established, dividend-paying companies; second, spread your investments out across most if not all of the five main economic sectors (Manufacturing & Industry, Commodities & Resources, the Consumer sector, Finance, and Utilities); and lastly downplay or avoid stocks in the broker/media limelight.

Have you started planning for retirement? What do you think is the best investment choice you’ve made to secure your future?

What is the best advice anyone has given you for retirement planning?