Yet Crupi isn’t neglecting retirement. He’s maxing out his tax-free savings account (TFSA) and registered retirement savings plan (RRSP) contribution room to save for all of his long-term financial goals, including life in his golden years. In fact, Crupi’s been putting away money since he started working, and let it slowly accumulate across his various accounts. “There’s nothing better than the power of compounding,” he says. “The more you put away in your 20s and 30s, the more it can build and build and build for you.”
That said, saving for retirement in your 30s can be tricky. The average couple ties the knot for the first time at 35 years oldand pays anywhere from $22,000 to $30,000 for a wedding. First-time home buyers typically take possession at the age of 36 of homes averaging around $718,700 nationwide. And the average age of a parent giving birth for the first time is 29.4 years old. When you break down the total cost of raising a child until the age of 17, it comes out to anywhere from $14,000 to $17,000 a year. Plus, many 30-somethings simply aren’t making enough money to aggressively save for retirement.
Personal finance experts say putting aside money for retirement in your 30s is totally possible, even for someone saving for a house, a wedding or children. “Be kind to yourself. You can’t do it all,” wrote Janet Gray, an advice-only Certified Financial Planner with Money Coaches Canada, in an email. “But you can control your spending at all stages of life to allow you to save for what could be a third of your life in retirement.”
Rule #1: Don’t wait
The easiest way to build up a retirement nest egg in your 30s, with no workplace pension, is to start early. Evan Parubets, head of Steadyhand’s advisory services team, was putting money into his RRSP every month in his 20s. There is no magic number for how much someone should save, but Parubets suggested as much as 10% to 20% of all income. “It may sound excessively high,” Parubets says, “but it’s the only opportunity you’re really going to get to be able to save without having other expenses get in the way.”
By the end of his 30s, Parubets had gotten married, bought a house, and had children—all expensive endeavours. Still, after years of financial discipline, Parubets was able to continue contributing to his future retirement, even if he couldn’t sock away quite as much of his income as he had in his earlier career. That drop in savings rate isn’t unusual, especially after having kids. “Your savings rate is going to fall and fall and fall,” Parubets says. “That’s OK, again, if you started saving early.”
Another factor for a 30-something to consider when planning their retirement is how their personal circumstances map up with their savings goals. As much as getting married or buying a house in one’s 30s is considered normal, it isn’t universal. People get married later than they used to—or not at all—and may have very different attitudes around home ownership, children and even retirement itself.
“You probably should have a very good sense, by your early 30s, what it is you want,” Parubets says. “You need almost a decade to accomplish a lot of these things.”
Even if you haven’t yet bought a home and want to, one trick Parubets recommends is to calculate the difference between the amount you’re spending on rent and the amount it’ll cost to pay for a home every month, including expenses like property taxes, hydro and utilities. All of that excess money you aren’t spending right away on housing could go into saving for a down payment—or retirement.
GIPHY App Key not set. Please check settings