Are you on track to reach your retirement savings goals?
Two studies came out recently that highlighted how Canadians feel that they aren’t saving enough for retirement.
A study from RBC found that Boomers have a significant savings shortfall, especially those who hadn’t done much saving at all. Those with less than $100,000 saved for retirement, for example, had hoped to save $574,000, but were about $500,000 short of that. Meanwhile, an ATB report found that only 30% of women in Alberta thought they were saving enough for retirement. Details on the studies are here.
The big problem, as an accountant friend of mine likes to point out, is that Hope is not a Plan. Hoping to save more doesn’t work any better than hoping to improve your fitness, grow a garden or have your beer magically get cold before you drink it. You actually need to do something about it.
So you have a choice to make – and you can make that right now: 1) Say “Yup, that’s me.” and get on with your day. 2) Start to pay yourself first.
If you’re going with choice 2), good for you! But do it right away, or you can bet that before you know it you’ll be looking at next year’s version of this study and saying, “Yeah, I never got around to that”.
Paying yourself first
The biggest hurdle to people saving money? They try to do it with what’s left over. And what’s usually left over? Nothing.
Paying yourself first means putting saving money first – before you're buying things. Most of the time we notice what’s left over in our bank account when we’re deciding whether to spend money. Make sure it comes out automatically right when you get paid.
How to do this?
If you have a Group RRSP, in most cases you can actually do this through your Payroll Department. Your RRSP contribution gets taken off pre-tax from your paycheque – and you get your tax savings back right away. See how this works here. The sign up sheet to get this started is here
If you don’t have access to this through Payroll Deduction, that's ok, there is good news for you! You can set up automatic payments to yourself through Pre-Authorized Debit or through Recurring Payments. With Pre-Authorized Debit, you’re basically telling your bank, “Ok, bank, automatically help me pay myself every month by moving 'this much' per month into this investment account.” (Eg. $100 / month.) With Recurring Payments, you can set it up just like paying a bill – just set it up to pay a set amount to your RRSP every month. For instructions on how to do this with your Group RRSP, contact us.
And boom! There you go, you’re saving for the future and you can just get on with your day. Wasn’t that easy?
Stay tuned for next month's issue of the Capital Newswire blog - there's always something new coming up!
Want to read our earlier posts? Read more here.