Have you ever given much thought about retirement?  If so, do you know what steps you have to take to get there? 

Truth is, many Canadians are waiting until it’s too late to properly prepare for retirement.  Are you going to let that be you or would you be willing to take a series of small, manageable steps to put yourself in a better financial position?  You may even be able to retire earlier than you initially thought.

If you’re smart, you’ve realized the importance of making regular commitments to your retirement savings program by adding weekly, biweekly or even monthly contributions to your RRSP or TFSA plan.  This goes a long way.  However, most people “set it and forget it” and ignore the importance of increasing their contribution amounts as time goes on to keep pace with inflation and to reflect increases in income.

So what difference would it make to increase your contribution amounts regularly vs doing nothing?

Consider this example:

Sylvia & Doug are 33 and 41 respectively.  They don’t have any children but have 2 dogs that keep them busy.  Dating back 8 years ago, Sylvia & Doug were earning $120,000 of family income with no employer pensions.  Their financial advisor helped them set-up regular monthly RRSP contributions totalling 10% of their earned income (or $12,000), but they’ve neglected to increase their contributions since they set this up.  Consequently, Sylvia & Doug actually never increase their contributions and keep saving $12,000 for 30 years.

Barbara & Michael are 32 and 34 respectively.  They have 2 children ages 5 and 8.  Money is tight and there are always many priorities with their money.  However, they understand the importance of regular contributions to their RRSP program.  They also earn family income of $120,000 with no employer pensions and have committed 10% of their earned income (or $12,000) into their RRSPs each year.  However, they have taken their financial advisor’s advice and increase their annual contributions each year by 2.5% to keep pace with increases in income and inflation.

For the sake of this example, both families saved for exactly 30 years and achieved an average compound rate of return equal to 5% on their money.  The question is – how much farther ahead was Barbara & Michael for increasing their contributions by 2.5% each year?

The difference is a retirement savings nest egg of 134% greater than Sylvia & Doug equalling $283,995 more dollars.

Interestingly, Barbara & Michael never noticed the 2.5% increase in savings each year.  It barely impacted their cash flow and they never noticed the extra money leave their bank accounts.  By taking such a small step, they put themselves in a greater position of financial strength to have flexibilities to consider options that may have never existed; such as a greater retirement nest egg or maybe even early retirement.

The time to make wise choices is now. This is the key.  Before you know it, time slips by and opportunity melts away.

Let us help you write your retirement success story by taking a small step today towards a more promising financial future.