A common rule of thumb in the personal finance industry says you will need at least 75% of your pre-retirement income to retire comfortably.
And while we could argue for days about whether that’s the right number, the truth is that most Canadian aren’t even close to reaching that goal.
So, let’s talk about the five most common excuses for not saving for retirement.
1) “I don’t make enough money to save.”
Frankly, I don’t know anyone who thinks they make too much money. Do you?
This year, you can put up to $27,230 in your RRSP. Yet an average Canadian earns less than $55,000 per year. For most people, putting nearly half of their paycheck into an RRSP plan is out of the question!
But even if you can’t “max out” your contributions, you should still participate in a retirement savings plan. Especially if your company offers RRSP match, which is like getting free money. If you can only afford to put $100 a month into your RRSP, do that — as opposed to saving nothing. Every little bit adds up over time.
2) “The Government will take care of me.”
Many people think they can rely on Government Pensions to take care of them in retirement. But these benefits weren’t designed to replace full pre-retirement income.
The average monthly CPP benefit is less than $620. Could you afford to live on that amount now? If not, then you definitely won’t be able to afford it later thanks to inflation.
3) “I’m already struggling to pay my bills.”
If you’re living paycheck to paycheck, it may seem impossible to save for retirement.
But you can swing it — if you cut your bills. This might mean spending less on eating out, cable TV, or other non-essential expenses. Or not signing your kids up for every extracurricular activity under the sun. Or skipping expensive vacations and finding fun, low-cost alternatives closer to home.
It may feel like a sacrifice now. Yet making small short-term sacrifices will pay off in the long run. Especially if it means not having to rely on family, friends, or the government later.
4) “I’m saving for my kids’ college education.”
As a parent, you may feel obligated to help your children pay for college.
However, there’s a lot of ways to help them cover educational expenses. Scholarships, grants, work-study programs, and student loans to name just a few. Even if your children incur the dreaded student loan debt, they will have many years to pay it back.
But there are no loans to finance your retirement. Do you want to be a burden on your children after you stop working? Probably not. So that means YOU must provide for yourself.
If you want to contribute to your children’s college education, great! But remember to pay yourself (by saving for retirement) first.
5) “It’s too late to start saving.”
There’s an obvious advantage to saving over decades of your working life. But these days, people are staying in the workforce longer, which means more time to save.
Do any of these excuses sound familiar? If so, don’t feel bad. It’s not impossible to save for retirement, no matter what your situation is. The most important thing is that you take action as soon as you can.
Your Ottawa Financial Planner at MDL Financial can help you optimize the way you save for retirement — and get rid of these excuses, once and for all! Give us a call today 613-416-9649.
