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Calculating your retirement: Start planning now

Sure, you’re still young, but that doesn’t mean you shouldn’t start thinking today about what kind of retirement you’re going to have in the future.

couple going over budget

When you think of your retirement, what comes to mind? Sandy white beaches and a cool margarita in hand? Maybe you’ve always wanted to purchase your very own cottage up north? Or maybe it’s something as simple as finally getting to spend quality time in your garden all summer.

It doesn’t matter whether your plans are big or small; calculating how much you need for your retirement is crucial in making your dreams a reality, and it can mean the difference between living a life of luxury or debt in your later years.

An RRSP (registered retirement savings plan) is an account funded by your own earnings that, if accumulated properly over the years, helps to provide financial security and income during retirement. Opening one offers you two main benefits: Your money will grow — tax-free — until it’s time for you to withdraw it, and contributions help lower your yearly income tax bill, as they are tax deductible. And though starting one may seem intimidating at first, with these simple steps, contributing to your RRSP account will become second-nature.

Start early

Planning for your retirement can start at any age, but as with most things, the sooner you start doing it, the better off you will be. TD Direct Investing offers a useful tool that can help you determine your retirement needs and the savings required to reach your retirement goals. By playing around with the TD retirement savings calculator, you can input your age and different contribution amounts to determine how much you should invest yearly, monthly and quarterly to make your retirement dreams a reality.

Get in the right mindset

RRSPs should become a habit that lasts you a lifetime. Instead of looking at RRSPs as once-a-year investments, you should speak with a financial advisor and figure out how much is feasible for you to contribute monthly or quarterly. Keep in mind that by the time you reach your 30s, you should be putting aside at least 10 per cent of your income toward your retirement.

Reaching your goals

Reaching your goals isn’t as hard as you may think it is if you remain realistic. Starting as early as you can and contributing as much as you can regularly will be better for you in the long run. Remember to keep in mind the type of lifestyle you live now and the type you want to live when you retire, and then cater to those ideals.

Get rid of debt

The four-letter word we all hate — debt. If you’re in debt now, think about reducing that debt before investing money into an RRSP savings account. This also goes for individuals who don’t have emergency funds set up.

Remember the deadline

Don’t forget: The deadline to contribute to your 2013 RRSP (for the 2012 year) is Friday, March 1, 2013.

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