You’re young and retirement is still decades away. It can be tempting to put off retirement planning while you focus on saving for your next vacation or paying off student debt. But financial advisors from Envision Financial say the earlier you start planning, the better off you’ll be.
On average, retired Canadians are spending $2,800 a month, which means they’ll spend nearly a million dollars between ages 60 and 85. That’s a scary number, but just a little bit of planning in your 20s and 30s can make a BIG difference to your future.
1. Saving doesn’t have to mean cutting spending
Most financial experts recommend saving about 10 per cent of your income, but when you’re at the low end of your earning potential and still paying off student debt, 10 per cent can feel like a huge sacrifice. Instead of cutting back, learn more about your spending habits.
Audit credit card statements for streaming services you don’t watch or gym memberships you don’t visit. Make sure you’re on the right cell phone plan to avoid expensive data overages and check your bank statements to avoid unnecessary fees. With the Simply Free Account® from Envision Financial you get $0 monthly fees, free unlimited Interac e-Transfers®, and $0 at any ding free® ATM. If you’re paying $20 a month for a chequing account, that’s $240 a year that could go towards retirement.
Don’t forget to also take advantage of Envision Financial’s BIGChange® program, which rounds up your purchases to the nearest dollar and deposits the difference in your savings account.
2. Tap into benefits from your employer
If your employer offers a group RRSP, opt in. Why?
- It’s automatic: Typically these contributions come right off your paycheque, so you won’t notice it’s gone. You get the benefits of saving for retirement without even thinking about it!
- Free money: Many employers match contributions, so if you contribute three to six per cent of your paycheque they’ll put in the same — for free. If you make $55,000 per year and contribute three per cent, your employer will contribute the same. That’s $1,650 a year of free money!
- It grows tax free: Annual contributions to an RRSP are tax deductible, which can reduce the amount of income tax you pay. You can also open a Tax-Free Savings Account, where withdrawals are non-taxable and can be made at any time without restrictions.
3. Understand your credit
Do your best to manage debt and build a budget to pay loans off on time to avoid paying extra interest. An advisor can help you build a custom budget plan and understand your credit score — building a strong credit history now can help you with big purchases in the future. Owning your own home is a big asset, and a mortgage can be a great way to continue investing in your future.
Find more money advice at envisionfinancial.ca, or book an appointment at a branch near you.
Envision Financial is a division of First West Credit Union.