What to do in your twenties to “boost” your retirement
There are gestures, some daring, others simple, which one can pose in the twenties to greatly improve his wool stockings for retirement. Here they are.
Surf on compound interest
You know the legend of the Sissa chessboard? A king had promised a sumptuous reward to him who would offer him a satisfactory distraction. A wise man presented him with a game of chess and the sovereign asked him what he wanted as a gift in return. His request: nothing more than a grain of rice on the first square, two on the second, four on the third, and so on, to fill the whole chessboard. The king accepted.
Error! The rice crops of the kingdom for the year have all gone!
What is your relationship with retirement, will you ask? This is the principle of compound interest. “The younger you save, the more the saved amount will swell quickly,” said Fabien Major, senior partner at Major Gestion Privée / Assante. So if I put $ 10,000 aside at 20 years at an interest rate of 7%, it will have almost doubled to 30 years and so on for every 10 years. ”
Talk about saving in terms of goals
The term “retirement” does not mean much when you begin your adult life. “What we want at this age is to achieve financial autonomy to realize his personal projects,” says Fabien Major. It is also necessary to know its objectives: buying a house or a car, going back to school, etc.
Then, you have to rank your dreams in order of importance by indicating the number of years, then translating them into financial goals. If you put $ 100 per side pay at 2% interest, how much does it cost after one year, five years or ten years? A financial advisor can help you get a fair picture of the situation.
Discover your savings capacity
To achieve financial self-sufficiency, surpluses must be generated and, therefore, debt paid. Where is your money going? Financial institutions offer tools to identify your discretionary expenses, ie those that are not necessary for your survival and your current obligations.
The three-drawer approach helps to prepare its projects. “The first must include reserves to pay its financial obligations for 3 to 6 months in the event of unexpected,” says Fabien Major. The second receives funds for short- and medium-term projects. And the third is longer-term financial self-sufficiency, such as an RRSP. ”
“Our savings vehicle – TFSAs, RRSPs, stocks or other – will depend on the timing of our project,” adds Sarah Mathieu, financial security advisor and Mutual Funds Representative for Groupe Mathieu Turgeon. For example, if you are considering shares, you should not count on these amounts before 10 years. ”
Consider each surplus as an investment
You renegotiate your bank charges or phone plan and you save a total of $ 50 a month? “If we managed to live without this amount before, putting it aside would not give us the impression of depriving us,” says Sarah Mathieu. The same reasoning applies to salary increases and tax refunds.
Take advantage of the benefits offered by your employer
If your employer offers a pension plan in which he pays a dollar each time you invest one, jump at the opportunity. This is a 100% yield.
“Some people sometimes propose to contribute to RRSPs with a tax rebate at the source,” explains Sarah Mathieu. The tax refund is then not made at the end of the year, but instead is paid to each pay, which reduces RRSP contributions on a regular basis. ”
Better save late than ever, some say. What is even more true is that it is never too early to start.