One of my 27 year old clients said to me today: “I could have made an extra RRSP contribution before the deadline but I didn’t because, I don’t care….really, I’m serious, I really don’t care!”
For all of you 27 years old out there, let me just say that it is totally normal or ok to not care at this time in your life but I can guarantee that you will care later when you get to 60. So, I thought I would design an “I don’t care plan” for you! This plan is simply a way for the young and carefree individuals to make things happen automatically without having to talk about it, think about it or even care about it!
Here is the “I don’t care plan” that I prepared for her. After factoring her employer Group RRSP contributions, her retirement income need based on current income plus inflation, I figured that she would need a retirement fund of about $875k at age 60. Based on an 8% rate of return, she will need to save an extra $1600 per year. Yep! That’s all. Can you imagine having to save only $1600 per year?? If she waits to age 50, she will have to save a whooping $27,000 a year!!! Ouch! That is a lot of pub nights!
If she ask s her employer to increase her RRSP contribution by $66 per pay, the net difference on her paycheque will only be $46 (she is in a 30% tax bracket).
$4000 a year seems like a lot but if you work out the numbers, look at your situation and divide the figure per pay cheque, $46 is a lot more manageable! The best part is that you won’t have to give up a lot of pub nights, think about it, talk about it or even “care about it”!!
She looked at me, smiled and said, I can do that! I think she liked her new “I don’t care plan”. She left my office after signing the form to adjust her Group RRSP plan, smiling and went straight to the pub!