Getting started on the road to retirement savings is often a daunting task. But it doesn’t have to be. Below is a list of five simple tasks to get you started on the road to retirement bliss.
1. Pay Yourself First with Only $100 a Month
Too many people spend years trying to pay down their debt and by the time they are in their late thirties or early forties, have no savings. There is a common misconception that you should pay off all your debt first, but for many that is just not a realistic goal. Treat your savings as bills: Pay yourself every month – no matter what.
And time is your biggest ally. Ideally you want to be no older than 25 when you start to save.
Leading financial advisor and author of Winning the Tax Game, Tim Cestnick says, “Saving should never be sacrificed because you have some debt -- especially student debt because student loans offer tax credit, so it’s actually not a bad kind of debt...it offers you some tax savings.”
So, regardless of your financial woes, put aside a minimum of $100 every month, or 10% of your wage, and invest in your future.
2. Invest in RRSPs with a Minimum Return Rate of Four Percent
There are two key benefits to investing in an RRSP. First is that you don’t pay taxes on the money that you put in the plan. And second is that the money can grow inside the plan tax free. Inside your RRSP you can hold all kinds of investments; secure and not so secure. You can hold GICs, stocks and mutual funds. Almost anything you want except for real estate.
A perk to starting to invest when you’re younger is that you don’t have to take chances with your money to make it grow. Cestnick says a return rate of between 4-7% should be just fine.
But he mentions if you are starting to invest later in life you are going to need to be riskier with your money to compound it at a faster rate of 10-15%, hopefully making up for lost time.
3. At $20,000 Find a Private Investment Planner
Once you hit that 20 grand marker it’s time to take that hard earned cash to a private financial planner who can give you more thorough advice and personalized care.
Some questions to ask yourself when choosing an advisor are:
- Are they qualified to give you advice?
- How long have they been in the industry?
- Can they supply you with referrals from satisfied clients?
- How have they been enumerated?
4. Diversify Your Investments
Don’t put all of your eggs in one basket. Use the investment resources available to you by your local bank or financial planner and see what investment options suit your saving style, and choose a couple of them.
5. And Don’t Touch!
Lastly, and perhaps most importantly, forget about them. Well not entirely! Stay abreast of how well your money is working for you, but be patient and do not spend.
In following these simple steps, by the time you are 65 you should have a retirement savings holding of about a million dollars. This may look like a lot of money at first glance, but it actually roughly translates into a comfortable 20 years' annual income of $ 50,000.
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