There are two big mistakes that can quietly erode your retirement savings. These aren’t flashy or complex mistakes, but they can cost you hundreds of thousands of dollars if left unchecked.
Let’s look at a real-world example that highlights both of these issues and shows how a few smart adjustments can dramatically improve your long-term outcomes.
1. Poor retirement portfolio construction
Christie came to us unsure whether she could afford to retire. She had been working with an advisor but only heard from him once a year. Her investments were all in the same balanced fund — across her RRSP, TFSA, and non-registered accounts.
At first glance, the mix looked reasonable. About 60 percent stocks, 30 percent bonds, and the rest in cash. But digging deeper, we found two problems.
First, her portfolio was heavily concentrated in Canada. Over 80 percent of her equities were in Canadian companies, even though Canada only makes up about 3 percent of the global stock market. This lack of diversification limited her growth potential.
Second, her fees were higher than expected. She was paying 1.25 percent to her advisor, but her investment funds also had internal fees. In total, she was paying 1.85 percent per year — without much service or communication.
2. Not aligning your portfolio with your withdrawal plan
We ran two retirement strategies for Christie. The first used her TFSA and non-registered funds early, then her RRSP later. This left her with an estimated estate of $178,000.
In the second plan, we optimized for tax efficiency by targeting a consistent $73,000 in taxable income each year. This meant drawing from her RRSP sooner and letting her TFSA grow. That increased her projected estate to $380,000.
We then went one step further. We adjusted her portfolio by account. Since she wouldn’t need her TFSA for many years, we invested it more aggressively. Her RRSP and non-registered accounts, which would be used earlier, were invested more conservatively.
This small adjustment pushed her projected estate to $570,000, a difference of $190,000.
Final thoughts
These mistakes are common, but they’re avoidable. Make sure your portfolio is globally diversified, your fees are transparent, and your investment strategy matches your withdrawal plan.
For more tax-efficient retirement tips, check out our website and book an appointment with us.
