October 19th, 2021 | Lifestyle

Diversifying Your Investment Portfolio Into Retirement

In North America, our mass mentality very much fosters the concept of delayed gratification. We work hard all of our careers up until a certain point when we’ve amassed enough wealth to see us through for the rest of our lives and then finally, we take a break.

Retirement is the promised point almost all working professionals strive to reach. However, once they’ve finally arrived, many find the retirement life isn’t as relaxing as they’d initially hoped. For some, that’s down to a limited sense of usefulness and societal contribution. Others, purely out of boredom and isolation. One of the most common, however, is due to financial limitations.

This post is all about how you can take measures to avoid having your personal finances affect how much you get out of your retirement, and how diversifying your investment portfolio can make retirement as easy, fun, and lucrative as possible.

Maintaining Wealth Into Retirement

The first thing retirees must focus on is maintaining the wealth they already have. The idea of retirement isn’t to build up your savings to a certain number and then spend the rest of your days burning through it, hoping that your bank account stays healthy for longer than you do.

Instead, it’s much healthier for both your mental and financial well-being to maintain your wealth for as long as you can throughout retirement. That way, you can feel comfortable footing the bill for necessary expenses while simultaneously feeling relaxed and content you’ll be leaving behind a significant amount of your wealth for future generations to enjoy later on.

The key to maintaining your wealth well into retirement is to start early. Whether it simply means preserving your capital or sustaining your lifestyle and the purchases you make on a day-to-day basis. Both financial motives are funded by the same practices. Unsurprisingly, both revolve heavily around taxation.

Starting from a young age, the best thing you can do to preserve wealth into retirement is first to build up savings accounts that allow you to withdraw from them either tax-free or at a palatable rate when you need them. While accounts like RRSPs and RRIFs (Registered Retirement Income Funds) do charge a premium for you to withdraw from them, especially when withdrawing early, knowing when and how to access your savings while minimizing that premium is both an art and a science.

For more help with that, we always recommend you invest in the very best financial advisor you can. Their professional advice has the potential to earn you more money in the long run than any stock, bond, or individual investment you can make.

Are you in need of some qualified and trustworthy real estate investment advice from a team of proven professionals? If so, simply Contact Us here to set up your initial real estate investment consultation.

Growing Wealth Into Retirement

Now that you’ve made arrangements to maintain your wealth into retirement, let’s take things one step further and talk about growing your wealth into retirement. Yes, you can actually continue to get richer even when you stop working. This is where things can get quite fun.

Just because you’ve already cut out a piece of your very own Happy Retirement cake doesn’t mean you can’t keep making money — instead, it’ll need to be through alternative routes that you can spend the rest of your life exploring, cultivating, and benefiting from. Whether they’re simple or complex, the key here is to have fun with them while being mindful of earning more than you put in.

For example, if you have a second home, garden suite, vacant basement, or pied-à-terre off somewhere warm, you could consider investing a little time, energy, and savings into those spaces to transform them into rentable suites. These will earn you passive income for as long as you can keep them tenanted, either permanently or via apps like Airbnb.

Using existing capitol or equity to fund the purchase of more property is another great way to build your investment portfolio and grow your wealth, even if you are no longer working a regular job.

Real estate is one of the most valuable investments one can make, especially investing in coveted, premium properties. Whether you’re upsizing, moving into your forever home, or looking for a stunning holiday home or investment property, browse through our collection of luxury homes for sale on Our Properties page here.

Investing: Stocks vs. Real Estate

Of course, perhaps the most proven way to both maintain and build wealth at the same time is to hone your skills as an investor — or at least know who to go to for advice. And, when it comes to investing, there are usually two main streams you can explore: the stock market and the real estate market.

As a group of professional Realtors®, you’d probably be making a safe assumption to believe we’d heavily advocate for the latter — investing in real estate. And while we definitely do enjoy transmitting the power and financial benefits of investing in properties, we also know that the best investment portfolios are diverse.

We would never urge our clients to put all of their eggs in one basket, as placing everything you own on the success of one particular group of investments isn’t a very secure way to manage your financial future. That being said, choosing the balance between investing in the stock market and the real estate market is largely up to you, the investor, to decide.

Looking at the historical data, real estate has proven to be an enormously reliable grower of wealth and capital, as much as anything else, essentially. While the real estate market can endure some worrisome dips and swings on a more micro-scale, the bigger picture is clear to see — real estate appreciates in value and long-term investments create opportunities to grow vast profits. The stock market, on the other hand, can be unpredictable. Although, with higher risks come higher returns. Clients who invest wisely in the stock market could see higher profits. However, we like to think of real estate investments as a long-term, slow-burning type of investment.

The Added Benefit of Investing in Real Estate

Purchasing real estate also has a second wind in terms of profit. For example, you will reap the long-term benefits of the property appreciating in value, with the intention to either sell it eventually or have it inherited by your children. However, you can also reap immediate benefits from owning more real estate if you choose to rent the property and become a landlord. Collecting rent is a great way to bolster your finances and maintain consistent income. However, be sure to work with a trusted financial planner to help you navigate the tax rules pertaining to this strategy.

One thing is for sure though, it’s best to get into the world of real estate investing sooner rather than later if that’s your plan.

Only a couple of decades ago it wouldn’t be out of the question to find a beautiful detached family home in prime Rosedale for under the million-dollar mark. Today, you’d be hard-pressed to find a finished detached home anywhere in the city for that price point, let alone in one of Toronto’s most coveted neighbourhoods.

As Mark Twain once succinctly put it, “Buy land, they’re not making it anymore.”

The strength of a long-term investment in real estate often comes down to one vitally important factor — location. Where you buy can be just as important as what you buy, which is why we direct our Buyers and investors to our Neighbourhoods page, where they can conduct some valuable market research.

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