Retirement by the numbers

When should you start saving for retirement?

Even if you're in debt, it's important to start saving money for retirement as soon as you can. Why? Largely because people are living longer than ever, which means you'll need to build a larger nest egg to fund a healthy lifestyle when you're no longer working.

RSPs and financial accounts like them will help you maintain a certain standard of living in the future. They also help reduce your annual taxable income — the more you contribute, the less income tax you'll end up paying now.

How much money will you need?

Much like diets and sleep requirements, everyone's retirement needs are different. To figure out how much money you'll need, ask yourself these questions:

• What kind of lifestyle do you want to lead? If you want your non-working life to resemble the one you currently lead, you'll need to save more money in the long term.
• What's your retirement budget? Think about all the weekly expenses you currently incur (from insurance to electricity bills), and add everything up. What other big-ticket items will you need to purchase down the road? This will help you figure out how much money you need to live on and therefore save.
• How long will you be retired for? If you plan to retire at 65 instead of, say, 75, you'll have to stash more money in RSPs now.
• Where will your retirement salary come from? Will you receive money from a pension? Will you continue to work? Are you investing in the stock market? Talk to a financial adviser to discuss your options.
• Where will you live? Living in cities is typically more expensive than living in rural areas or the suburbs.

Use a savings calculator

Another good idea is to play around with a retirement savings calculator like the one offered by TD. These tools help you calculate how much money you'll need down the road.

Here's a sample breakdown the company gives on its website:

If you invest $500 in RSPs every year for 40 years starting today, you can accumulate more than twice as much as the person who waits 20 years and then invests $1,000 a year for 20 years. The total amount invested is the same, but the results are different:

Total RSP balance after 40 years of $500 annual contributions equals $77,381.

Total RSP balance after 20 years of $1,000 annual contributions equals $36,786.

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