Pattie Lovett-Reid’s Retirement Savings Tips for Millennials

Start saving early and save often.

I know you’ve heard this before, but I think it bears repeating, and here’s why: This is the best financial advice I’ve ever received.

The good news? This isn’t just sound advice, it works. However, knowing what I know today, I would add a twist. Saving for retirement is essential, but it’s only one part of the much bigger picture of retirement. What I lacked at the time was the lifestyle element. In other words, the lifestyle I hoped to enjoy in retirement. What I’ve realized is that the retirement lifestyle you dream of today can be a powerful incentive that boosts your retirement savings for the future.

Now, to be fair, I don’t expect anyone in their 20s or 30s to get excited about saving for retirement and I don’t want you to compromise your life today either. today to the point of suffering financially for a future retirement. But what I hope is that you think about what you want to enjoy in 40 years. Think about it. Are you hoping to travel, volunteer or turn a passion into an income generating business? What I mean is, even if it’s only once a year during RRSP season, you stop rethinking your spending strategies and wonder if saving a little now would make a huge difference to your lifestyle in the years to come?

Maybe if you knew the numbers, it would lead you to do things differently.

As we approach the end of the 2021 tax year and the March 1 deadline for RRSP contributions, the decision of whether and how much to save is fast approaching.

It’s a simple calculation on the back of the envelope that will be different for each household, depending on the differences in sources of income, for example. However, as a rough guide, if you lived in Ontario and earned $75,000 a year, paid $22,200 in taxes, and contributed $7,500 to an RRSP, according to Turbo Tax, you’d get an estimated refund of $9,783.

Rather than wasting that money now, you can take advantage of the time and how it can make your money work for you.

You can take advantage of the power of compound interest if you take that money and invest it in the market while enjoying delayed growth in your retirement savings plan. Assume you are 30 years old, have a pre-tax income of $75,000 per year, and continue to make annual contributions of $7,500 until age 65. Say you live to age 95 and have an annual rate of return of 5.77% while you’re working and 2% are retired, the power of time and funding translates into a retirement nest egg of $557,753 which would translate to an annual pre-tax income of $24,903.

If you do nothing, you get nothing and you are no better off – financially speaking. So while saving $7,500 would be overkill, play with the numbers, set a goal, and realize that no one will care more about your retirement lifestyle than you do.

Something to keep in mind: You may think you’ll never retire, but it may not be your decision. Your employer, your health, the economy could dictate otherwise.

The bottom line for all millennials who think your golden years are right now: recognize the golden opportunity for your future if you decide to embrace it.

About Kristina McManus

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