You may have a long way to go until retirement, so you might think there’s no point saving for it now.
Alternatively, you might be closer to that time, panicking and thinking, whoa, I haven’t started saving yet! Am I sunk?
The good news is, you’re not too late! And you’re also never too early.
Ernest Mpaata, Wealth Advisor for Cambrian and Aviso Wealth, has a few pointers about retirement planning.
Here we go:
If you’re 18 or older, start today.
Open a Registered Retirement Savings Plan (RRSP) as soon as possible. Start contributing a set amount to that account per month. Forming that habit early will help you in the long run.
“You want to see your money grow and work for you,” says Ernest. “It doesn’t matter if it’s $10 or $20 a month, just start. Small amounts add up over time and help set you up for retirement and your financial goals.”
Remember, an RRSP itself is just an account, and not an investment product. To see your money grow, not only will you make regular contributions—you also should invest the money. Starting early in that aspect is important too.
Ernest’s analogy: “It’s winter now, but you’d rather buy a lawnmower over a snowblower. Why? Because a lawnmower is cheaper in winter. When summer comes and demand is higher, that same lawnmower costs more.”
“It’s similar for investing,” says Ernest. “When you’re young, you can ‘buy’ into the markets when prices are low. Over time, as markets rise, you benefit from the growth because you started early.”
Financial planning lesson: Success is not about timing the market, but time spent in the market.
“Do not wait for the perfect season. If you wait for the sun to shine to start your retirement plan, then you have missed out on the ‘clearance sale’ when markets are low. Starting now maximizes the power of compounding growth and provides greater long-term financial security,” says Ernest.
Although starting early is great, starting closer to retirement is still absolutely worth your while.
“If you’re close to retirement, you’re often in your highest income years, so in a higher tax bracket,” says Ernest. “This means RRSP contributions can significantly reduce your tax burden. You can then with draw that money in retirement when you’re in a lower tax bracket.”
“We have financial planners who can help create a tax-efficient withdrawal plan, especially when it comes to RRSPs,” says Ernest.
The money you contribute to your RRSP is tax-free, so it reduces your taxable income.
For example, if your salary is $60,000 and you contribute $1,200 to your RRSP that year, your taxable income goes down to $58,800, so you only pay tax on that $58,800!
Take full advantage of tax-free savings like in an RRSP, and you’ll be set.
You can also open a Tax-Free Savings Account (TFSA) for this purpose—read about the advantages of and differences between RRSPs and TFSAs here.
Check in about your retirement plan at least once a year.
Ernest suggests members circle back annually in order to:
“There is a lot to fear out there, but facts matter,” says Ernest. “If the Canadian economy struggles, retirements could be impacted, so let’s talk about it every year.”
“Overall, financial planning is a very important part of life,” says Ernest. “It’s not embarrassing, and it’s not complicated. Ignore the noise and misinformation out there.”
“I firmly believe it’s never too late,” says Ernest. “At Cambrian and Aviso Wealth, our doors are open. We take our members’ success very seriously. We wake up every day for that purpose. Come see us. We’re here to help and to set you up for success.”
Book an appointment with one of our Aviso Wealth advisors at Cambrian today!
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc.
We would be happy to discuss your unique situation with you.
Our goal is to make complex topics like this one, simple.
