RETIREMENT IS DECADES AWAY FOR MILLENNIALS — AND THAT’S WHY NOW IS THE TIME TO START SAVING

The Financial Post – By Danielle Kubes

Retirement may seem ages away for millennials — and it is — but there’s no better time to start investing for it than now.

Both the Registered Retirement Savings Plan and the tax-free savings account have their distinct benefits and drawbacks, but far more essential than which registered account you choose, is that you contribute to one (or both) sooner rather than later.

“The younger they are the more they should invest,” says Ngoc Day, a fee-only financial adviser at Vancouver-based Macdonald, Shymko and Co. Ltd. “Time and compounding are their best friends.”

Take $100, invested by a 25-year-old, that earns five per cent annually. By the time our young adult is ready to retire at 65, the funds will have grown to $704. The same $100 made by a 35-year-old will have only grown to $432.19 — about 63 per cent less.

Or, to put it another way, let’s say you estimate you need $1 million to retire comfortably. If you start at 25, you’ll only need to make annual contributions of around $8,280 at a five per cent annual return. If you don’t start saving until 35, you’ll need to contribute $15,050 every year!

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