When it comes to personal financial goals, saving enough money to live comfortably during retirement is one of the most critical, yet many Canadians don’t believe they’re saving enough. According to a 2020 Scotiabank Retirement Survey, 68 percent are saving for retirement, but 70 percent are worried that they're not on track.

The earlier you start preparing, the easier it is to reach your saving goal. Let’s look at when you should start planning for retirement and what you can do if you haven't begun already.

At what age should you start planning for retirement?

There’s no such thing as too early. A lot of people are focused on other financial goals in their 20s and 30s, and even in their 40s. When you’re paying off student debts, saving up to buy your first home, or starting a family, it’s easy to overlook retirement planning. However, this is the best time to start.

The reason is, the more time you give your retirement savings to grow, the more you can benefit from compound interest. As a basic example, when you deposit money in an interest-bearing account, you earn interest on your principal, but you also earn interest on interest. This creates a snowball effect where your initial savings keeps growing on its own at a faster rate.

The same concept applies to other saving and investment tools such as stocks and bonds. Keep in mind, risk is part of the equation as well. The value of your equity investments can decrease, so you won’t always earn more. However, historically, stock market values tend to increase, especially if you’re using a sound investment approach.

What happens when you start early?

To illustrate this point, consider two individuals who invest $5K every year until they retire at 58. The first starts at age 28 and invests $150K over 30 years. The second starts at age 18 and invests a total of $200K over 40 years. Assuming a 7% annual return on their investment, the person who started at 18 will have $1,142,811 when they retire. The one who began at age 28 will have $580,741. That’s a difference of over $600K!

What if you don’t have a retirement plan yet?

If you didn’t start planning for retirement as a teenager, or even in your 20s, 30s, or 40s, don’t worry. Remember, your financial journey is yours. And, you always have opportunities ahead of you.

To support your future, the best thing you can do is to start now. Use our retirement calculator to see if you’re ready. Create a plan that reflects your current situation, your goals, and your risk tolerance. Our experienced team of advisors can help you develop a plan that works for you, no matter how many years you have left before you retire.

Ready to get started? Let’s talk.