Why Millennials Should Be Saving for Retirement Now
Millennials – those born between the early 1980s and mid-1990s – are often thought of as the generation that has it the hardest. Many are struggling with high levels of student debt, skyrocketing housing costs, and precarious employment, all of which can make it hard to think about saving for retirement. But as a Canadian millennial, it’s important to understand that saving for retirement now is crucial for your financial well-being in the long run. Here’s why:
Time Is On Your Side If You Start To Invest For Retirement Now
One of the biggest advantages of starting to save for retirement at a young age is that you have more time to let your money grow. The earlier you start saving, the more time your money has to compound and earn returns, which can significantly increase the size of your retirement nest egg. For example, if you start saving $200 per month at the age of 25, by the time you retire at 65, you could have around $525,000 saved up, assuming an annual return of 7%. But if you wait until you’re 35 to start saving, you’ll only have around $245,000 saved up by the time you retire, even if you save the same amount each month.
You’ll Be Able To Retire Earlier If You Start Saving Now
Saving for retirement now also gives you the opportunity to retire earlier if you want to. By starting to save at a young age, you’ll be able to reach your retirement savings goals more quickly, which means you’ll be able to retire earlier if you choose to. This can give you the freedom to pursue other interests or travel, or simply enjoy your golden years without the stress of work.
You’ll Have A Better Retirement If You Start Saving Early
Even if you’re not ready to retire early, starting to save for retirement now will give you a better retirement overall. By saving now, you’ll be able to retire with a larger nest egg, which will give you more financial security and allow you to enjoy a higher standard of living in retirement. You’ll also be better able to weather any financial storms that may come your way, such as unexpected expenses or market downturns.
You’ll Be Taking Advantage Of Government Programs
In Canada, we have several government programs designed to help Canadians save for retirement, such as the Canada Pension Plan (CPP) and the Registered Retirement Savings Plan (RRSP). By starting to save for retirement now, you’ll be able to take advantage of these programs and the tax benefits they offer. For example, with an RRSP, you can contribute up to 18% of your earned income each year, and the contributions you make are tax-deductible. This means you’ll be able to reduce your taxable income and potentially pay less in taxes.
How Much Should I Have Saved If I’m 35 Today?
Popular knowledge says that by age 35, you should have saved 1x to 1.5x of your yearly salary. We think that ideally, you should have put away 2x your yearly by now. Don’t despair if you have not, but start playing catch up now!
You’ll Have More Options If You Start Early
Finally, starting to save for retirement now gives you more options in the long run. If you wait until later to start saving, you may be limited in terms of the investments you can make or the retirement lifestyle you can afford. By starting to save now, you’ll have more time to research and consider your options, and you’ll have more flexibility to make decisions that align with your long-term financial goals.
It’s understandable that saving for retirement may not be a top priority when you’re dealing with other financial challenges, but it’s important to remember that your future self will thank you for taking the time to save now. By starting to save for retirement at a young age, you’ll be setting yourself up for a better financial future and the opportunity to retire on your own terms. So if you’re a Canadian millennial, don’t put off saving for retirement – start now and give yourself the gift of financial security in the long run.