RRSP - How much?

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maxwell_smart007

maxwell_smart007

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I'm getting up there - 32 by last count...:smile:

My wife and I have been paying down our debt - only one student loan to go (5 degrees between the two of us).

We're 'occassional' workers, meaning that we're not on contract, and only get paid by the day, if we get called in.

That being said, it's time to start saving for retirement (we should have started sooner, but hindsight...we do pay into a plan on a day-by-day basis at work, again for the days that we've worked...)

I've read many sources, but I cannot find a concensus as to how much to put toward a Registered Retirement Savings Plan (I think you call it 401k? in the states?) We call them RRSP's up here...

How much should we be squirreling away?
 
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Max limit is 18% contribution of your taxable income. If you can, maximize your contribution. If you can't, you can carry forward and contribute more when you have more money. I like to maximize and 'squirrel' away so that I may retire early. I am now 56 and plan an early retirement by 60. Perhaps by then I will have more free time than I do today and should be able to do a 'few' more pens before He 'calls' for me. My RRSP contributions should see me through until my CPP kicks in.
 
Not an easy question to answer but use that figure at the bottom of your income tax assessment notice to work with. Assuming you haven't been making huge contributions through work so that sum might be quite large. Gradually try and reduce that down so that your contributions for the year are equal to that figure. No,use socking away more than that since that is all you get credit fro come tax time and if you get too carried away they can make you pay a penalty. Whatever you can put away really does make a huge difference on your income tax.

Michael
 
wood-of-1kind said:
Max limit is 18% contribution of your taxable income. If you can, maximize your contribution. If you can't, you can carry forward and contribute more when you have more money. I like to maximize and 'squirrel' away so that I may retire early. I am now 56 and plan an early retirement by 60. Perhaps by then I will have more free time than I do today and should be able to do a 'few' more pens before He 'calls' for me. My RRSP contributions should see me through until my CPP kicks in.
Click to expand...

Andrew...

If possible, maximize your RRSP limit every year. Putting as much now into your RRSP will pay off in 20-25 years. Also, you may want to seek out an independent financial planner. Guidance from a good financial planner is worth the little bit of money it costs for his professional advice.

Wade
 
Philosophy...

Andrew, folks will tell you that by the time you retire, 23 years if you do it at age 55, you'll need a couple of million salted away to "maintain" your life style. Well, you won't. You won't need as much nor will you want as much.

Get your home paid for so you don't have rent -- you will have taxes but you can probably find areas where they are quite low (I don't have enough information about your taxes to say that for sure) so don't lock yourself into a "I must live here." attitude. Canada is a big country and there are lots of places that can be pretty decent places to live.

I don't know if you have children, but if you do, let them go. Buy them books, send them to school, feed them, clothe them, put a roof over their heads and when they finish a bachlor's degree, invite them to come home for a visit - let them stay as long as they like (I just told mine - my house, my rules and they wanted to move out) but when they leave make sure they know that you'll love to have them visit but they are not moving in. That is hard but if they want to be adults, then they have to be adults.

Then adjust your life to live within your means, it might not be easy. Both my 68 yearold wife and I (I'm 74) still produce some income besides the Social Security and my pension. We have a small amount in our IRA accounts - I use mine to pay the income taxes and she doesn't touch hers yet.

I am a believer in God's Grace and I have complete faith that if I need it He will provide it. So far he's never let me down.
 
Don't over look the Tax Free Savings Account either, you can do an additional $5000 per year per person and top up previous years where you didn't contribute the max amount. You can add and remove whenever you want, all tax free. While not a replacement for an RRSP, it does augment it and give you other benefits.

Tax Free Savings Account (TFSA)
 
This is kind of like asking what lathe should I get or how to do a CA finish. Lots and lots of correct answers that may or may not fit your situation.

I fixated on what that number was for me for several years and adjusted as income went up and children came along and markets went up and down. I now think there is no "magic number". For me there are two things I am looking for - income replacement and diversity. Factor in any work pensions, personal retirement plans, social security and after tax assets to come up with income replacement. I don't put all my eggs in the same basket. Look at trends in the market you are going to invest in and try to position yourself in that market at a low spot. Right now I am buying real estate at twenty year ago prices and historically low interest rates. A house can bring in $500 a month positive cash flow and you own it in 15 years. Gold is, again my opinion, near its high and will come down significantly in the next three years. Timing is everything.

Bottom line, decide your own goals and risk tolerances, understand the markets you are about to invest in and start while you are still young and stay dedicated to your future. You will be amazed at the results.
 
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