There have been two Moneyville articles that really caught my eye recently. There was one called How $100 a month can make you a millionaire by Madhavi Acharya-Tom Yew, as well as Can anyone really save $1 million?, by Allison Grifiths.
In Madhavi’s article, she begins by telling readers that we can all become millionaires in 40 years just by starting off with saving $100 a month. As you get older, you increase the amount you contribute. Going from $100, $250, $500, $750 and finally with $1,000/month. The numbers are based on a 6.8% average return over the life of the RRSP or TFSA. A lot of comments on those articles were about how a 6.8% average return was too high. But according to an article by MoneySense.ca in response to those two Moneyville articles, a balanced portfolio can reasonably expect a 6-7% return.
While saving $100 or $250/month might be feasible for most of us, $750 or $1,000/month might seem like a ridiculous amount of money for a lot of people. But consider this: by the time you are in your 50’s and 60’s, you might be nearing the end of your mortgage – and your salary will most likely have increased over the years. So when that money frees up, you will be able to apply it to your Retirement Portfolio instead. Or, if you contribute more when you’re younger, you won’t have to contribute as much when you’re older. For example, I make an average salary, and have average expenses. But I am making saving for retirement a priority right now, because I know that once I start a family, I probably won’t be able to save as aggressively as I am right now.
There IS truth to what both Madhavi and Allison are saying. You CAN become a millionaire by the time you retire if you want to be. But for most of us, it takes discipline and hard work, and you really have to want it. And I guess that’s the problem. With so many 20-somethings struggling with student and credit card debt, trying to start a family, saving for a down payment, planning a wedding, and spending money on other things, saving for retirement just isn’t a priority. In fact, I can see why it’s so hard to save anything these days – especially an amount as daunting as $1 million.
In Allison’s article, she quotes a TD Canada Trust poll, where 75% of those aged 18-34 do not believe they could ever save $1 million, and 1/3 of respondents felt they had a better chance at winning $1 million in the lottery, than saving it themselves. That thought of hopelessness makes me sad, because while it isn’t the dream or goal of some people to save that much for retirement, it is my ultimate financial dream. I want to retire early at age 55 with over $1 million in the bank. And reading the comments on those two articles was hard. Most commenters were full of negativity. But, that just fuels my fire to prove them wrong.
Whatever your savings goal is, we all have one common goal in mind: to save for retirement. And the key is to start as soon as you can. The harder you work now, the easier it will be in the future.
What do you think? Do you believe that you can save $1 million by the time you retire?
I started saving for retirement again. Luckily I only lost 6 weeks, but even then … with all the savings goals I have this year, I don’t think I can make that time up. But anyway, starting this Friday I’ll be putting away $300 bi-weekly.
$50 Money Market
$50 CDN Bond Index
$50 European Index
$50 International Index
$25 CDN Index
$25 US Index
$25 ING Direct (3%)
$25 PC Financial (2%)
According to the pay stub I received yesterday, I’ll be bringing in approximately $1,380 bi-weekly after taxes. So my Retirement Porfolio savings represents almost 22% of my net income. And based on the TD Canada Trust RRSP calculator at an average rate of return of 7%, if I keep saving at the rate I am, I can retire at age 55 (my goal retirement age) and will have $1.1 million in my Retirement Portfolio. That doesn’t even take into consideration the fact that I would increase my savings amount with any increase in salary over the years. So I’m feeling really good about the future, and I’m so glad that I took saving for my RRSPs seriously during my 20’s.
I woke up in the middle of the night with a panic attack. I was dreaming that I didn’t have enough money to retire, and was living on the streets as an old woman. BF was with me too. I guess he didn’t have enough money to retire either. So I guess it wasn’t so much a dream, than an absolute nightmare.
It must be a sign. I need to start saving more into my Retirement Portfolio. Right now I’m contributing $550/month. I’m going to step that up to $600/month and see how that goes. $50/month extra isn’t a lot, but it’s a start.
Also, I got to thinking that since I definitely want to retire early (maybe 55-60?), and since I can’t touch my RRSPs until I reach the age of retirement, I’m going to have to seriously beef up my TFSA to make sure I’ve got money in there to last me.
I’m so jealous of my friends who work for companies who RSP match! Free money like that would be glorious.