Should you start saving for retirement now, despite the frightening student loans and credit card bills?
Yes, yes, and yes is my answer.
1. Even if you start putting $100 per month away today, you'll still be better off by retirement then if you save $200 per month starting 10 years from now. You’ll invest that money (which we’ll cover in another post), earning a return, so essentially, it’ll be worth a whole lot more once you retire.
2. There are many tax advantages to saving (specifically for retirement). In Canada, we have a Registered Retirement Savings Plan (RRSP), which basically deducts any savings from your taxable income, making your total taxes less, and your refund bigger! Every Canadian has an RRSP contribution limit per year, which is equal to 18% of your previous year’s income, to a max of $25,370. So here’s how it works: let’s say you saved $100, and your average tax rate was 20%. By saving that $100 and putting it into an RRSP, you would get $20 back in your refund. It’s a pretty great way to save. I'll go into more details about RRSPs in another post, so that you know exactly how to use it.
I’ll also talk about other tax-effective ways to save, how much you need to save for retirement, saving for retirement vs. paying off student debt, and how to invest your money in posts to come!