Is there such a thing as “too early”? Should millennials be starting now?
May seem strange to start thinking about saving for retirement in your 20s and making it a priority, but it really is best to start saving as soon as possible.
An RRSP Account
There is no doubt about it: saving money is tough, especially when you have student loans or lines of credit, rent, car payments, and kids to worry about too.
It is all about moderation and budgeting. That is where a Registered Retirement Savings Plan (RRSP) comes in. Any little bit of money you can spare can be put into this account, even if it is just a few dollars here and there. Whenever you receive a paycheck, you can set up automatic transfers so each time you are paid, a certain amount will go into your RRSP account. Set it to a limit you are comfortable with. Even $20-$50 is helpful.
Start To Save Early
As soon as you snag a full-time job open an RRSP account. The sooner the better. It will start adding up a lot quicker than you think. Make sure you are setting a realistic budget though. Crackdown on your spending habits too so you can budget between all your other payments as well as depositing money into your savings.
It may be tempting to spend all the money you get back at tax time, or the bonus rewarded to you at work, but getting in the habit of saving any extra cash you receive will be good for your savings account.
Saving as early as possible also helps ensure a comfortable lifestyle once you have actually retired. It is hard to think about when you are young, but it is important.
Withdrawing From Your RRSP
Within a year, you are allowed to invest 18% of your income into your RRSP, although most people have a hard time reaching that percentage.
At any point you decide to withdraw money from your RRSP, you will be taxed on it, but if you decide to withdraw money for a down payment (which you are allowed up to $25,000) you will not be taxed on it unless you pay it back within the next 15 years. You must be considered a first-time buyer to do this, which means you cannot have owned a home within the last four years.
When you are (finally!) retired and decide to take the money out all at once, it will be considered taxable income.
Start Thinking About Retirement Savings
It is hard to think about starting to save for retirement, especially as a 20-year-old who is just starting college or university and has to worry about student loans and how to afford groceries and rent. But it is definitely an important investment and will have you living more comfortably in the future so you do not have to worry about working at 65! Ask for help from your parents or talk to a financial advisor at your local bank to set up an RRSP. Even if you cannot contribute 18% of your yearly income to your savings, any little bit helps.