Want to Retire as a Millionaire?
If you are a millennial like me, you are probably feeling a little confused.
Let me lay it down for you – if you live in a major city such as Toronto or Vancouver, your parents probably purchased a home for a reasonable price, paid it off in 25 years, and now it is worth upwards of $1 Million.
If you ask your parents what you should invest in, they more than likely will say “real estate.” It was a straightforward way to invest when they were young. Now, young people cannot afford a starter property, and even if we could, the likelihood of the value increasing the same way is extremely low.
So, the question remains, what can young people invest in to retire with $1 Million?
You have three incredibly powerful investment vehicles at your disposal – Your TFSA, dividend stocks, and time.
In your TFSA, you can contribute a maximum of $5,500 / year, tax-free. If you have been making the maximum contribution – that is great, if not, the unused contribution room carries forward indefinitely.
Obviously, its best to catch up on your unused contribution space, but if you cannot, let’s assume you are going to sock away $5,500 / year for the next 35 years.
Wisely chosen dividend stocks should average a return of 5%, especially when you make use of the dividend reinvestment plan (if applicable). If the plan is not available, all you do is reinvest the dividend payments into more stock in the company.
Get this: at a 5% return, the $5,500 would grow to $521,600. Meaning, a 30-year-old couple would be able to retire with over $1 Million by the time they reach 65.
What stocks should I buy?
Since you are dealing with your retirement savings, it is probably a good idea to stay on the lower-risk side of the spectrum. Invest in blue-chip stocks with a long history of company stability and growth.
If you invested $10,000 in TD Bank in March of 1995, you would now have over $180,000.
If you invested $10,000 in Canadian National Railway in March of 1997, your investment would now be worth over $250,000.
Fortis, Inc. (TSX: FTS)
If you invested $10,000 in Fortis, Inc in March of 1995, your investment would now be worth over $120,000
These calculations include the reinvestment of dividends, but even without reinvesting, the gains are substantial.
As you can see, there are still ways for millennials to retire financially wealthy, you just need to start young.
Please note: I am not an investment advisor. This post should not be perceived as investment advice; it is based solely on material facts, not speculation. Please consult an investment advisor before making investment decisions.