How to Save for Retirement in Your 20’s, 30’s, and 40’s


A few weeks ago, Statistics Canada reported that, for the first time ever, there are now more people over the age of 65 in Canada than there are people under age 15. Not only that, but the population of seniors in this country is growing four times faster than the population at large. Other studies carried out in the past few years have found that 1 in 3 seniors in Canada are carrying debt into retirement, seniors carry more credit card debt than any other age group in the country, and indebtedness among seniors is growing faster than indebtedness among any other population group.

Because of these reports, the topic of saving for retirement has been on a lot of people’s minds lately – even for those who aren’t yet nearing that 65-plus age bracket. Of course, saving for retirement will look different depending on which stage of life you’re currently in, so we’ve broken down some of the best advice on retirement saving into three categories targeted at different age brackets.

Millennials with high debt levels may be better suited to pay down that debt before they worry about RRSPs.

Retirement Saving for 20-somethings: Not Your Parents’ Retirement Plan

If you’re in your 20s right now, there’s a good chance that retirement savings aren’t a high priority for you. As it turns out, this might not be as bad as some would expect. While some people focus on starting an RRSP as soon as possible, this might not actually be very beneficial for a recent college graduate, as the tax deferral that RRSPs offer really only becomes a benefit when you reach a higher income bracket.

Instead, Millennials with high debt levels may be better suited to pay down that debt before they worry about RRSPs. With interest rates as low as they are right now, it’s often easier to pay off debts like credit card bills or student debts than it is to build wealth through low-risk investments. Paying off your debt before you start investing in your retirement could actually set you up to contribute more later, as long as you’re committed to start saving when you become debt free.

In addition, Millennials shouldn’t expect that their retirement plan will look the same as their parents’. While many current retirees have relied successfully on government programs like the Canada Pension Plan, there’s no knowing what the government’s approach to the CPP will look like when you retire. Many 20-somethings have also stayed away from the corporate world and are self-employed or work as contractors, which makes the idea of self-reliance even more important. So rather than betting that your government or employer retirement plan will come through for you in the end, it may be safer to build up your own savings instead.

Retirement Saving for 30-somethings: Time to Review or Play Catch-up

If your retirement savings plan is already in full swing by the time you hit your 30s, this marks a good time to review your retirement plan, as the plan you set up when you first entered the workforce might no longer make sense for you. Depending on where your income level and savings, this could be a good time to modify your approach or increase your contributions.

With a $250 monthly contribution, for example, you could end up with over $280,000 socked away by the time you hit 65 based on a 5% yield on your investments.

If, on the other hand, you’re in your 30s and haven’t thought about a retirement savings plan yet, now is the time to start. As long as debt is no longer a major concern for you, it’s not too late to set up a healthy retirement savings plan in your 30s. With a $250 monthly contribution, for example, you could end up with over $280,000 socked away by the time you hit 65 based on a 5% yield on your investments.

Retirement Saving for 40-somethings: It’s Not Too Late to Start Saving

According to recent retirement polls, it’s estimated that Canadians should spend a minimum of 25 years contributing to their retirement fund in order to ensure a safe retirement. So if you’re just starting to save at age 40, it’s not too late to set up a plan that will allow you to retire at age 65 (as long as you contribute consistently for the next 25 years). However, starting to save in your 40s might mean that you need to increase your monthly contributions over what someone in their 20s or 30s might contribute. This might not be as bad as it sounds, however, if you consider that most people in their 40s earn a much higher wage than they did in their 20s.

So even if you have to contribute double what you would have contributed 10 or 20 years ago to catch up, these payments might be a lot easier to handle now than they would have been a decade or so ago. If we double the $250 investment made by someone in their 30s to $500 per month for someone in their 40s, that 40-year old could still end up with close to $300,000 in savings assuming the same 5% yield on their investments.

No matter what your age, the best way to make sure you have a safe retirement plan is to talk to a Certified Financial Planner and come up with a plan that’s suited to your unique financial situation. Our financial planning services are designed to help our clients in the short, medium, and long term, so you know that your financial portfolio will be healthy next year, in 15 years, and a few decades down the road when you’re ready for retirement.

Born and raised in Alberta, Tyler is married to Tammy and they have two daughters, Megan & Hallie. When you ask him what takes up most of his time... he…

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