If you are a 20/30 something it is understandable why you may feel that your retirement is far away. The reality is that such a view is extremely short sighted. Right now we will consider 4 compelling reason why now is the time to start saving.
- The uncertain future of government safety nets. As of 2014 the maximum that the Canada Pension Plan paid was a little over $1000 a month and Old Age Security a little over $550. This already leaves things really tight. But it is also uncertain of what will happen to these provisions in 30-40 years time. It is prudent to start saving for your retirement now.
- Pensions are disappearing. It is becoming increasingly difficult to land a job with a pension plan. Even if you are one of the fortunate ones, there are no guarantees if that pension will be there when you retire. Even if it is there, how much will be there? It is wise to have a backup plan in order to be prepared for a potentially shrinking or disappearing pension.
- Increased life expectancy. According to Stats Canada, back in 1930 the average life expectancy in Canada was around 60 years of age. Now it is over 80 years. By investing early in your life you will have the necessary funds to live comfortably in your later years.
- The benefits of compound interest. Ponder over this example provided from Money Magazine: If you were to start investing $5000 a year at 25 years you could have a little over $1 million saved by the time you hit 65. If you wait until you are 35 that number decreases to a little over $500,000. These stats are based on an average annual return of 7%, invested in a tax advantaged account.
The following 4 reasons clearly highlight that it is never too early to start saving for the future. To further drive this point home, consider the following: in a 2012 survey of retirees conducted by Bankers Life and Casualty’s Center for a Secure Retirement, the number one piece of advice offered by respondents was “save for the future”. In connection with this 93% stated that the most important financial advice that they could offer is to start saving early. Heeding these words of wisdom now will help secure your future later.