The Savvy Millennial's Guide to Saving for Retirement

As a millennial, saving for retirement may seem like a distant goal. After all, retirement is decades away, and there are more immediate financial concerns to deal with, such as student loans, rent, and credit card debt. However, it's never too early to start planning for retirement. In fact, the earlier you start, the easier it is to save for retirement. Here is a list of tips and examples for savvy millennials in Canada to help them start saving for retirement:

Start with a budget

The first step to saving for retirement is creating a budget. List all of your income and expenses, including retirement savings contributions. This will help you identify areas where you can cut back and free up money for retirement savings. Use online tools or apps like Mint, YNAB, or Personal Capital to help you manage your budget.

Prioritize high-interest debt

If you have high-interest debt like credit card debt, prioritize paying it off first. The interest rates on credit cards can be as high as 20%, which can eat into your retirement savings. Consider consolidating your debt with a low-interest personal loan or balance transfer credit card to save on interest and pay off debt faster.

Take advantage of employer-sponsored retirement plans

If your employer offers a retirement plan like a 401(k) or a Registered Pension Plan (RPP), contribute at least enough to get the full employer match. This is free money that can add up over time. These contributions are tax-deductible, which can also lower your taxable income.

Consider a Registered Retirement Savings Plan (RRSP)

An RRSP is a tax-advantaged account designed for retirement savings. Contributions to an RRSP are tax-deductible, and the investments inside the account grow tax-free until you withdraw the money in retirement. Consider contributing to an RRSP if you have extra money after paying off high-interest debt and contributing to an employer-sponsored retirement plan. The contribution limit for 2021 is 18% of your previous year's earned income or $27,830, whichever is lower.

Invest in a Tax-Free Savings Account (TFSA)

A TFSA is another tax-advantaged account that can be used for retirement savings. Contributions to a TFSA are not tax-deductible, but the investments inside the account grow tax-free, and withdrawals are also tax-free. The contribution limit for 2021 is $6,000, and unused contribution room can be carried forward to future years.

Automate your savings

One of the easiest ways to save for retirement is to automate your savings. Set up automatic contributions to your retirement accounts, so you don't have to remember to transfer money each month. You can also set up automatic increases to your contributions each year.

Take calculated risks

While it's important to be cautious with your retirement savings, taking calculated risks can also be beneficial. Consider investing in a diversified portfolio of stocks and bonds, and avoid making emotional decisions based on short-term market fluctuations.

Why the Savvy Millennials Guide?

This is the savvy millennial's guide to saving for retirement because millennials have unique financial challenges and opportunities. For example, many millennials have high levels of student debt, which can make it difficult to save for retirement. However, millennials also have the advantage of time, which means that even small contributions to retirement accounts can compound over decades. By being savvy with their finances and taking advantage of all available opportunities, millennials can set themselves up for a comfortable retirement.

Saving for retirement is essential for long-term financial stability, and it's never too early to start planning. By following these tips and examples, savvy millennials in Canada can start building a solid foundation for their future.