Monday Morning Money Moment: July 24, 2017
Why You Should Get Started Saving for Retirement
Welcome back to my Monday Morning Money Moment and I hope you all had a great weekend. Today’s post kicks off Retirement Week here at Budget Boss. It might be the most exciting and yet most scary word that exists in the dictionary. Saving for retirement may also be one of the most confusing things people do with their monthly budget. A lot of people don’t understand what it’s all about and even worse the importance of saving for their retirement. This week here at Budget Boss is going to try to alleviate some of the confusion and get back to basics. It doesn’t have to be confusing and it doesn’t have to be a daunting task. My job as a financial advisor is to educate but also inspire. I have many clients that have either started or ramped up their retirement savings program since we have met and that definitely makes me happy. My post today will be about why you should get started saving for retirement. It is my humble opinion that EVERYONE should be putting away something for their future. People have become great at coming up with excuses for why they don’t save for the future and this post will be about why you should focus harder on saving than excuse making.
1) The Government is well……the government
If you are counting on our great country of Canada to take care of you during retirement you might be sadly mistaken. While the welfare system does provide money for those who are retired it may not be as much as you think. Canadian Pension Plan (CPP) and Old Age Security (OAS) have limits to what you can receive and eligibility requirements could affect you. These two programs weren’t meant to be your sole source of retirement income but more of a supplement. With the decline of employer sponsored pension plans, it has become more and more important for people to plan for their own retirement. Another reason why these plans are not all they are cracked up to be is due to the fact that they are a pen stroke away from being altered. With every new administration we have in this country, comes new ideas on spending. Tinkering with retirement income is always on their minds. Don’t let the government dictate your future.
2) This is one of the best habits you can develop…..period
Saving for retirement often gets pushed to the side because the immediate benefits aren’t seen. You can see the sand beneath your feet in Cuba. You can see the new dresses in your closet after a sale. You can see the new driver in your golf bag. You can’t see what your retirement will look like if you don’t save. Correction, you can see it. Go down to your local Boys and Girls Club or Kiwanis Club during the day and see what many seniors on low incomes do. It can be a struggle to survive on the low income the government provides you in retirement. Developing good habits can save you from living in poverty during retirement. Stuff you own is just that, stuff. The money you save is worth much more, it allows for freedom. Sacking away money for retirement, money for insurance, money for an emergency account is not all that sexy. Well, it is to me but maybe not to you. It should be sexy to you because it will allow you to do the sexy things later in life. Building home equity, saving for retirement, building emergency savings and being properly insured are all “inanimate goals.” You can’t hold them, wear them, or drink them. What they are is ideas. Planning for an idea, that idea being financial freedom, is the best habit you can have.
3) It actually saves you money
You might ask, “How can saving money, save you money? It costs you money to save you money right?” Wrong!! Like I mentioned in the last paragraph, saving for your future is one of the best habits you can have. It is also one of the most cost-effective. The reason is taxes. CPP and OAS are both considered taxable income. Your Registered Retirement Savings Plan (RRSP) is also taxable income. The good thing about the RRSP is that you get a tax deduction every year you contribute. That right there is instant savings every time you file your taxes. That in itself is worth the effort to save your money. Saving money is a Tax-Free Savings Account is even better because you don’t pay taxes when you withdraw your money. That also allows for you to not have claw backs on your OAS payments. More savings right there. Allowing your money to grow tax-free in these accounts is also a form of savings. Things you buy depreciate in value whereas investments you make grow in value. It is absolutely true that a penny saved, is a penny earned.
Many people plan their retirement savings for next month, or next year or when I get a chance. The truth is that waiting just makes it tougher in the longer run. While I believe at any and every age you should be saving for the future, starting earlier makes it a lot easier on you. It allows your money to grow over a longer period of time which makes the compounding effects that much greater. The habit of doing it becomes a lifelong habit that will make your life better as well. The habit of being self-sufficient is an admirable one that prevents the government from affecting your retirement livelihood. A comprehensive financial plan always includes retirement savings so the sooner you can start the better. Getting started isn’t as complex as you might think either. All it requires is a little education and a little discipline. Tomorrow I will go over some methods of saving for your retirement that anyone can do. Thanks for reading friends and have an amazing day!
“Whether you are just entering the workforce or nearing retirement age, planning for the future is critical.” – Ron Lewis
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca.