Comfortable lifestyle

I haven’t been in the workforce for that long but I’m already thinking about retirement. My dream would be to retire by the age of forty but I’m not sure I can save that much right now to reach that goal. Instead, I’ll do what others are doing and plan for retirement at the age of sixty five. According to my present savings, I’m right on track to reach my goal.

When it comes time to retire, I would like to receive an income which is equivalent to the income that I’m presently making. I’m currently saving up my retirement with three different banks: Royal Bank of Canada (RBC), ING Direct and Sun Life Financial (SLF). At present, I think I’m saving up a lot more than I should be at this stage so that means that I’m ahead of schedule.

I started my retirement savings plans with RBC in 1999 which was during my last year of high school. One of the tellers asked if I wanted to start one up and I agreed. I didn’t know what an RRSP was but I was looking to save some money and I really wanted to save. With an RRSP, my money was sort of locked away and I couldn’t touch it. Technically, I can take it out when I want but I’ll be taxed on the amount that I withdraw and I didn’t want that.

I was working at Burger King at the time so I couldn’t afford to put too much into my RRSP. I decided to contribute twenty five dollars a month from my pay cheque to my RRSP. It wasn’t much but it was a start.

I didn’t pay too much attention to my RRSP. Throughout the year, my bank was automatically withdrawing twenty five dollars from my chequing account and depositing it into my RRSP account. One day, I checked my RRSP account and saw that I had well over doubled the amount that should be in there.

As I moved from job to job, my pay started to increase and so did my contribution to my RRSP. When I got a full time job, I increased my contribution from twenty five dollars a month to five dollars a month. Eventually, I started to notice that I was making a bit more so I saved even more. I upped the contribution to one hundred dollars a month.

Then one year, during tax season I decided to take a two thousand dollar loan from ING Direct. I took all of that money and opened up an ING Direct RRSP account. Before taking out this loan, I did my homework and some research. By taking a thousand dollar loan, I would be charged approximately sixty dollars in interest. I wanted to pay off this loan as quickly as possible to reduce the amount of interest and maximize the amount of investment. The loan was supposed to gain eighty dollars in interest so basically, it was a win-win situation for me. This account has climbed up pretty well since I was making bi-weekly contribution to it. I only have three hundred dollars left from the loan which should be paid off by next month.

The last of my RRSP account is with Sun Life Financial. This account was opened when I started working at my new job. They had a very good retirement savings plan and I jumped in as soon as I could. The deal was, whatever I contributed each month, the company will match seventy five percentage of it. Before I opened up the account, I decided to contribute about ten percentage of my bi-weekly pay. With the contribution that the company makes, it’s as if I’m contribution seventeen percent of my pay to my RRSP on a bi-weekly basis.

SLF has a small application that helps me see if my goal is being met with my current savings. I just have to answer a few questions and they’ll show me some charts and project my balance at the time I retire. And all it took was fifteen minutes of my time.

Based on my current saving habits, it is likely that I will have the desired retirement income. Every month, I put nearly $1000 into my retirement savings plan. I’m trying to save up so that I can retire with an annual income of $75,000. To make sure that I stay on track, SLF suggests that I monitor my investments to ensure that it doesn’t deviate from my current risk profile. I have to make sure that my investment returns meet my performance criteria and take any actions necessary if it goes off track.

I’m hoping to retirement at the age of sixty five. If I continue to save the same amount that I’m saving now, I’d save up over $900,000.And thanks to compound interest I’ll have close to two million dollars to spend when I retire. If the rate of return is good, my investment can climb to six million but if it doesn’t do too well, I’ll have less than a million dollars. The two million dollar mark is a projection of what I’ll have if things remain the same.

To be realistic, I’m not sure if I’ll reach the one million dollar mark. I hope I can but there are going to be bumps along the way and I’ll need to dip into my savings in order to get through. They say that the first million is the hardest to get. After that point, reaching the next million is fairly easy, thanks to compound interest. At present, I’m trying to get rid of some debts, which aren’t even mind. Since I’m contributing so much towards my RRSP, I’m hoping to use my tax return to pay off these days. I was hoping to use that tax return to buy a new car but I need to get rid of this debt first.