Once you’ve created a budget, it may be time to think about your retirement – even if it’s far, far away.
Retirement savings are an important part of a healthy financial plan. We share some tips to help you build towards your future.
Pick a number.
Review your budget. Think of an amount you can set aside for tomorrow that would have minimal impact on your life today. Then, commit to regularly transferring a small, fixed amount from each paycheque into a savings or investment account like a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA). The earlier you start saving, the longer your money can earn interest and grow.
Tip: Look into whether your employer offers RRSP matching through a group retirement savings plan, or if you’re eligible for a pension.
Think about your goals.
Picture your retirement – how much do you think you’ll need to retire the way you want? How much time do you need to meet your financial goals? Be realistic.
Tip: If you own a home and you want to use it as a source of income through retirement, you may be able to use the equity you’ve built up with a reverse mortgage, or you could free up some money by downsizing. Visit the Financial Consumer Agency’s website to learn more.
Take advantage of tax breaks.
The immediate benefit of contributing to an RRSP is that it can give you a tax break on your annual income taxes, improving your chances of receiving a return. If you receive a return, treat yourself to a celebratory meal at your favourite restaurant, and sock away the rest into your emergency fund or regular savings.
Tip: Keep an eye on your RRSP and TFSA annual contribution limits! You can be charged a penalty for going over.
Most importantly, we recommend speaking to a retirement planning expert for guidance. You can contact your financial institution to find out what kind of retirement services they offer.
Check out our article on building an emergency fund.