Investing in your 70s

As Canadians live longer and healthier lives, it's becoming increasingly important to plan for a long and fulfilling retirement. Investing in your 70s can help to ensure that you have the financial resources to enjoy your golden years and pursue your dreams.

Want to travel the world? Buy that dream car you’ve always wanted? Investing during your retirement years can help provide a steady source of income along with special tax advantages in certain account types like the Registered Retirement Income Fund (RRIF).

Investing in your 70s can also provide peace of mind and financial security. By building up your savings and diversifying your investments, you can protect yourself against market volatility and unexpected expenses. This can give you the confidence and flexibility to enjoy your retirement on your own terms, without worrying about running out of money.

“Rolling over” an RRSP to a RRIF is a common financial strategy for seniors in Canada who want to receive a reliable stream of income during their retirement. Due to Income Tax Act requirements, this must be done before the end of the calendar year in which you turn 71 years of age.

When you roll over your RRSP to a RRIF, you transfer the money and/or investments from your RRSP into a new RRIF account. This allows you to continue to invest your retirement savings and receive a steady stream of income from your investments.

The amount of income you receive from a RRIF is based on a formula that takes into account your age, the value of your RRIF, and the minimum withdrawal amount that is required by the government.

Note: If an RRSP account is not rolled over (transferred into) into a RRIF, it must be withdrawn and will be subject to withholding taxes. This is why if you’re approaching the age of 71 and haven’t rolled over, it’s a smart idea to be ready before the deadline at the end of the year.

As an investor in your 70s, it's important to carefully consider your time horizon and risk tolerance when making investment decisions. Your time horizon is the length of time you have remaining to invest and grow your savings, and your risk tolerance is your willingness and ability to take on risk in pursuit of potential rewards.

Time horizon is an important factor in your investment decisions because it can affect the types of investments that are suitable for you. For example, if you have a short time horizon, you may want to focus on more conservative investments that offer a steady stream of income, such as fixed income products (bonds, GICs) or dividend-paying stocks/equities. This can provide a measure of financial security and help to supplement your retirement income from other sources.

On the other hand, if you have a longer time horizon, you may be able to take on more risk in pursuit of higher returns. This could involve investing in more volatile assets, such as stocks or real estate, which have the potential to provide higher returns but also come with a higher level of risk.

In addition to your time horizon, risk tolerance is also an important factor in your investment decisions. Your risk tolerance is your willingness and ability to take on risk in pursuit of potential rewards. This can be influenced by factors such as your age, your investment goals, and your overall financial situation.

For example, if you are in your 70s and retired (or approaching retirement), you may have a lower risk tolerance than a younger investor.

As you age, the income withdrawn from your accounts through retirement will decrease the total amount you have invested, which is the opposite of what you’ve been doing all these years saving and adding to your RRSP. This decreasing balance will have a large effect on your overall time horizon and how long you can invest. Since your time horizon may be shorter, you may not have as much time as younger investors to recover from any market downturns or losses.

This could mean that you are more comfortable with more conservative investments that offer a steady stream of income, rather than taking on more risk in pursuit of higher returns.

Overall, it's important to carefully consider your time horizon and risk tolerance when making investment decisions in your 70s. By taking these factors into account, you can develop a personalized investment strategy that aligns with your individual goals and circumstances, and helps you reach your financial goals.

As a retired investor in Canada, it's important to understand how your RRIF (or LIF) withdrawals can affect your Old Age Security (OAS) payments. OAS is a government-run pension program that provides a monthly income to eligible seniors in Canada, and it can be an important source of income for retirees.

However, your OAS payments can be reduced or "clawed back" if your net income exceeds a certain threshold. This means that if you have a high level of income from sources such as RRIF withdrawals (or other sources), your OAS payments may be reduced.

The amount of your OAS payment that has to be repaid is determined by the federal government's "OAS clawback formula." This formula takes into account your net income and your net income for the previous year, and applies a graduated rate of reduction to your OAS payments. The higher your net income, the greater the reduction in your OAS payments.

It’s always a good idea to consult with a tax professional or accountant if you have questions about the tax or benefit implications of your withdrawals.

Overall, structuring your RRIF withdrawals during retirement is an important part of managing your financial plan and maximizing your retirement income. By taking a thoughtful and strategic approach to your RRIF withdrawals, you can ensure that you have the financial resources you need to enjoy your retirement on your own terms.

Note: Questrade does not provide tax or retirement planning advice or recommendations, please consult with your own tax advisor for personalized information.

Designating a trusted contact person (TCP) is an important step for every retired Canadian investor, and while completely optional at Questrade, it’s highly recommended.

A TCP is anyone aged 18 or older who you've identified as someone we can contact in situations where we are unable to reach you for urgent matters or after an extended period of time.

Your trusted contact will not be able to view your account information, execute transactions, or inquire about account activity, and we will not disclose any of your financial information to them.

As an investor in your 70s, it's also important to carefully consider your beneficiary designations in order to ensure that your assets are distributed in accordance with your wishes after you pass away.

Learn more about adding beneficiaries to your account in this article.

In conclusion, investing in your 70s can be a smart financial move, provide you with additional income, help you to grow your savings, and provide peace of mind for your future. While there may be challenges to consider, such as investment risks and the impact of inflation, careful planning and a diversified investment portfolio can help to mitigate these and maximize your chances of success.

Whether you’re interested in Self-directed investing and taking matters in your own hands, or prefer to leave it up to the experts with Questwealth Portfolios, make sure your money is working hard for you during your golden years.

Questwealth Portfolios is a service provided by Questrade Wealth Management Inc. Questrade Wealth Management Inc. is a registered Portfolio Manager, Investment Fund Manager, and Exempt Market Dealer. Questrade, Inc. provides administrative, trade execution, custodial, and reporting services for all Questwealth accounts.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.