Smart investing is crucial at any age or marital status, though your goals and strategies are going to be different along the way.
Tom Hamza, president of the Investor Education Fund, says for most people age is an important indicator of where their financial goals are aimed and you’ll want to increase the number of income-generating investments you hold as you get older.
“There are life stages and your investment portfolio should always match the stage of life you’re in. A great rule of thumb is that the fixed-income part of your portfolio should equal your age — that’s something that should consistently change,” he said.
Young investors should pay off their debts first in order to free up income for investing, while older ones should focus on protecting their capital.
“For young people, if you have outstanding debts like student loans or credit card debt, tackle those first. Make sure your house is in order first, then focus on paying ahead. As you get older, you’ll want to reduce risk and have more sources of reliable income,” Hamza said.
Christine Van Cauwenberghe, director of tax and estate planning at Investors Group, says seniors and retirees need to take special care to navigate the tax system because maximizing the use of their saved money is paramount at that stage in their lives. Seniors should speak with an investment adviser to figure out how to arrange their financial situation to make sure they pay as little tax as possible while still drawing a comfortable income.
“For seniors, it’s very important to minimize your net income. If you just rearrange a few things, you can often save a lot of money,” Van Cauwenberghe said.
For couples, Van Cauwenberghe says marriage or a common-law situation can offer a wealth of investment boosts, such as pension income splitting and spousal RRSPs, but it can also create new challenges so make sure you speak with an expert.
Hamza says for couples where one person earns significantly more than the other, options exist to split income away from the higher earner to the lower one, lowering taxes in the process.
“You want to make sure the higher income earner pays fewer taxes,” he said.
No matter what your age or marital status, however, don’t treat your tax return as a spending bonus — if possible, reinvest it instead.
“For many people, it will make sense to take that tax return and apply it to other investments to get more bang for your buck — don’t just use it as spending money,” Hamza said.
