Investing in your 40's


The other day I had a someone call concerned that their opportunity to invest had passed them by. There is much to be said for starting early ... but it is not always easy to do everything with kids, mortgage and bills.

Check out this article from Mackenzie Financial Insight Magazine / Website on Investing in your 40's ...



Now that you’re in your 40s you’ve probably entered your top earning years. Sure you’ve been spending a lot of money paying down the mortgage and vacationing with the kids, but lately you’ve had a nagging feeling that you should be saving more for retirement. You’re not alone.
Like many people your age you might not have a financial plan, but once you have one you’ll be surprised at how easy it is to carry out. For a complete analysis of investing in your 40s click here.

Building a financial plan

When you set out to create your financial plan, begin by looking ahead into the future to envision how you want to be living 20 years from now, and ask yourself how you intend to get there. A number of questions will obviously come up, so if you don’t have a financial advisor consider getting one – there’s nothing like a good money coach to help steer you toward your financial goals.

Here’s a list of questions to consider

  • How much does it cost each month to maintain my standard of living?
  • What lifestyle do I see for myself in the future?
  • What will I need financially to achieve each of my goals?
  • When do I plan to retire?
  • How much income do I have available to invest?
  • What investments are in my portfolio today?
  • What’s my overall net worth?
  • Do I have enough set aside for emergencies?

Now start building your portfolio

Once you’ve considered the above questions, with the help of your financial advisor, you can decide what to invest in. As you move ahead you’ll be able to see how each element of your investment portfolio contributes something different toward your long-term financial plan.
For example, because you’re still young and in mid-career, you may want to focus on investments that can produce higher returns over time, rather than those that produce short-term cash flow. That’s one of the reasons why people in their 40s often invest in mutual funds that can offer higher potential returns and are suitable for a larger portion of your portfolio.



Try investing automatically

A Pre-Authorized Chequing (PAC) plan is a simple way to start investing on a regular basis. A PAC automatically redirects money from your bank or trust company into a mutual fund of your choice. In this way you can make regular, systematic deposits into your investment or RRSP account following a payment plan of your own creation.

Be tax-efficient

Once you have your investing strategy worked out, make sure that it’s tax efficient – that’s an industry expression that simply means, make sure you choose investments and strategies that reduce the amount of tax you have to pay.
Certainly one of the most effective ways to trim your tax bill is to make an annual contribution to an RRSP, which you can deduct from your gross income. And you can invest the income tax return you’ll likely receive, and in the meantime the funds you’ve invested in your RRSP continue to grow on a
While RRSPs are a great tax shelter, be careful what you put into a registered plan. That’s because while interest income is taxed at your highest marginal rate, dividends and capital gains are taxed at a far lower rate. Since investment income held within an RRSP remains fully sheltered until withdrawal, it generally makes sense to hold highly-taxed investments inside your RRSP and investments that produce dividends and capital gains, which are taxed at a lower rate, outside of an RRSP.
Of course, diversification of investments between registered and non-registered should fit your overall retirement and financial plan. In a non-registered investment account, be aware that switching between mutual funds can trigger capital gains, although taxes can be deferred by investing in Mackenzie Capital Class funds which only distribute Canadian dividends or capital gains, so taxes are kept to a minimum.

Open a Tax-Free Savings Account

Another way to reduce your tax load is to contribute $5,000 annually to a Tax-Free Savings Account. You won’t get a tax deduction on your contribution, but you’ll never have to pay tax on the capital gains, interest and dividends earned in a TFSA, not even when withdrawn.
One of the advantages of a TFSA is its flexibility. For example, unused contribution room can be carried forward to future years. And any amount withdrawn from a TFSA can be re-contributed in a future year without reducing contribution room. TFSA money can be used for any purpose you wish – from down payments on a home to vacations or financing your child’s college education And don’t worry: When you’re retired, making a withdrawal from your TFSA won’t affect your eligibility for the federal tax credit or income-tested benefits such as the Canada Child Tax Benefit, Old Age Security or the Guaranteed Income Supplement.



No matter your age ...get started today!

The above article is provided by mackenzie financial is responsible for its content can be found at http://www.mackenziefinancial.com/mfc_insight/en/finance/fullStory072009b.shtml

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