Adjust your Savings Plan as you Age

by Achieva Financial
Jun June 14

Your savings strategy shouldn’t stay the same throughout your life; as you journey through life you should be looking at your savings plan regularly and making changes to match your goals and life stage.

While everyone should do their best to save at least 20% of their income, this is not always possible, especially in the earlier stages of adulthood. During this stage in life, expenses such as a mortgage and the cost of raising a family often take priority over saving for the future. Nevertheless, younger adults should aim to save as much as possible, because the money saved in this stage of life will benefit from the power of compound interest over a longer period of time than money saved in your 40s or 50s. A good way to maximize your savings is to “pay yourself first” by setting up a pre-authorized transfer to your savings account every pay day. This amount can be increased whenever you receive a raise. If your workplace offers a matching RRSP contribution or pension, take part in it as soon as you’re eligible to do so, as the amount your employer matches is a 100% return on your investment!

Once your mortgage has been paid off, and any children have left the nest, you will likely have freed up more income to devote to your savings. This will allow you to take advantage of unused RRSP room to max out your retirement savings. Try to devote the amount you would have been putting towards your mortgage to your savings in order to max out both your RRSP and TFSA. A GIC laddering strategy is a great way to maximize your returns in a safe manner. 

As a bonus, if you’re contributing a large sum of money to your RRSP, you may also benefit from large tax returns, which you can then contribute to your RRSP or TFSA.

Looking to get a sense of your retirement readiness? Try out Achieva’s retirement calculator to see if your retirement plan is on track.