Five ways to boost your retirement savings

Even if your retirement is decades away, it’s a good idea to start planning now.

Although your retirement may be years down the road, it’s never too early to start planning and saving. By investing regularly in an RRSP, you can move steadily towards your financial goals and the retirement lifestyle you want.

Here are five ways to better save for your retirement:

1. Start early

It may not seem like much now, but starting to invest 10 years earlier can have a dramatic impact on your long-term returns.

Let’s look at the investments of two investors within the S&P/TSX Composite Total Return Index:

  • Investor A began investing $2,000 each year on January 1, 1995. After 10 years, Investor A stopped contributing, but allowed the investment to grow for the next 10 years.
  • Investor B waited for 10 years and, at the end of December 2004, began investing $4,000 each year for 10 years.

By starting early and taking advantage of compounding returns, Investor A accumulated $4,667 more than Investor B, even though $20,000 less was invested.

Source: Morningstar Direct. Data from January 1, 1994 to December 31, 2015. The information provided is for illustrative purposes only and is not meant to provide investment advice. You cannot invest directly in an index.

2. Start a pre-authorized contribution plan (PAC)

Setting up a PAC, i.e., a regularly scheduled contribution to your RRSP that comes right off your paycheck or out of your bank account, can help build your savings with minimal effort. You’ll pay yourself first and benefit from compounding growth.

3. Understand how tax sheltering works

Your investments grow tax-free within your RRSP, providing the potential for increased growth opportunities. You can enjoy immediate tax savings because an RRSP allows you to deduct the amount of contribution from your income on your tax return.

4. Adjust your contribution as you earn more

Don’t forget to increase your PAC or contribution amounts as you receive raises and get promotions. That way, you’ll always be investing as much as you can.

5. Make use of your company benefits

Many companies offer employee savings or contribution matching plans. Check with your Human Resources department to see if you can take advantage of any employee programs that will help you build RRSP savings faster.

RRSPs are one of the best ways to save for your retirement and a financial advisor can help you choose the right investments for yours.


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