Should I change my RRSP investments as I age?

The make-up of your RRSP portfolio should change as you age.

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Yes. As a general rule, the closer you are to retirement, the safer your portfolio should be. When you’re in your 20s, 30s and 40s, it’s fine to have up to 60% of your money in equities, because if the stock market tanks, there’s time to recover. But in your 50s and 60s, one bad year in the market can do serious harm.

One useful rule is to subtract your age from 100 and invest no more than that amount in stocks. So if you’re 40, you can put 60% of your portfolio in stocks, but if you’re 60, you should have no more than 40% in stocks. There are several life-cycle funds on the market that will automatically do this for you.

Tina Di Vito, director of retirement strategies at BMO, also suggests that as you get closer to retirement you start building up a buffer. How much? Just calculate what annual retirement income you’ll need and multiply it by three. If you think you’ll need to withdraw $20,000 a year, then in the years before you retire, build up a $60,000 buffer in ultra-safe investments, such as money market funds or GICs.

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