Five ways to boost your retirement savings

By investing regularly, 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. 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.

Tax Sheltering

Source: AGF Taxation and Canada Revenue Agency. Based on a marginal tax rate of 46.41%. Deferred taxes will need to be paid when they retire and withdraw the amount from the RRSP, potentially in a lower marginal tax bracket. This chart is for illustrative purposes only using a hypothetical rate of return of 5% .

2. Start early

It may not seem like much now, but starting to invest 10 or 20 years earlier can have a dramatic impact on your long-term returns.

Start Early

This chart represents the growth of a hypothetical investment, assuming the stated annual nominal rate of return compounded monthly, over a specific time period. This example does not take inflation or applicable fees/deferred sales charges into account and should not be considered to be representative of the performance of any specific investment product or investment strategy. The chart is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of a specific investment or returns on investment in a specific investment.

3. 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 paycheque or out of your bank account, can help build your savings with minimal effort. 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 while also benefiting from compounding growth.

Year $100 PAC (5% return) $200 PAC (5% return) $500 PAC (5% return) $1,000 PAC (5% return)
0 $0 $0 $0 $0
2 $2,516 $5,032 $12,579 $25,159
4 $5,290 $10,579 $26,448 $52,896
8 $11,719 $23,438 $58,596 $117,192
12 $19,534 $39,069 $97,672 $195,344
16 $29,034 $58,068 $145,169 $290,338
20 $40,580 $81,161 $202,902 $405,804
The table represents the hypothetical growth of the investment, based on the hypothetical rate of return. For illustrative purpose only. Source: Globe HySales, based on monthly PAC contributions every year over the period. 

4. 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.

5. Consider a TFSA as well

In 2009, the government introduced the Tax-Free Savings Account (TFSA) as an additional, tax-advantaged way for Canadians to save better. While investors contribute to a TFSA using after-tax dollars, whatever growth they generate in their account is tax-free, as are any withdrawals made. TFSAs can be a smart supplement to the RRSP when saving for retirement, but they can also be used to save for shorter-term goals such as a home, vehicle or vacation.

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. To learn more about RRSPs and saving for retirement, talk to one of our investment specialists.

The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

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