How much to Your RRSP?
Are you planning on contributing to your RRSP for 2011? According to the Stats Man, only 31% of those eligible made a contribution in 2007, which totally blows my mind. The government is standing there waiting to hand you back the money you paid in taxes so you can pay down your debt, make a payment against your mortgage, fund your TFSA, or go on a family vacation and you’re going to let them keep it? Really?
Sometimes people think that if they can’t dump a lot of money into their RRSPs, it’s not even worth thinking about. Not true. Every penny you save today, is a penny plus growth that you’ll have when it comes time to punch out at work.
Put $25 a month into an RRSP, and give your money 25 years to grow at just 5% and you’ll almost double your money: you’ll have put away $7,500 but you’ll end up with $14,888.
Give yourself more time, and the results are even better. Let’s say you start contributing at 30 and do so until the normal retirement age of 65, you’ll have $28,402 just be socking away $300 a year. Com’on, you can find $300 a year.
If you can up your contribution to 2007 median RRSP contribution of $2780 and you give yourself 35 years, you’ll have $263,573. Yup, if you can trim your expenses back so that you can find $232 a month for your retirement savings, that’s how much money you’ll end up with. Not a b’zillion dollars… but nothing to sneeze at either.
And what if you were a little more adventurous and could earn even 1% more on your money? Well you’d end up with almost $67,000 more!
Don’t be sad about how little you can save today. And don’t let a small contribution stop you from starting. Find the first $25 a month, and grow your contribution from there. You can use your tax refund, part of your next raise, or the money you were wasting on some stupid habit to build a future. Plan now to start next month, and this time next year you’ll be all paid up!