Don’t Delay, Start Today. Retirement’s Not That Far Away!

Retirement planning often feels like a distant concern—something to think about “later.” But later comes faster than most expect. The truth is, time is the single most valuable resource in investing, and starting early can transform your financial future. Here’s why delaying could cost you more than you realize.

1. Harness the Power of Compounding

 

Compounding is often called the “eighth wonder of the world” for a reason. It’s not just growth—it’s growth on growth. Two examples show why starting early matters:

 

Example 1: Lump Sum Investment

Investing $10,000 at 7% annual return until age 65:

• Start at 25, and you could have $149,000.
• Wait until 35, and you’ll drop to $76,000.
• Wait until 45, and you’ll have only $38,000.
• Delay until 55, and you end up with $19,000.

 

 

Example 2: Monthly Contributions

Even small, consistent contributions make a huge difference. Investing $100 per month at 7% annual return until age 65:

• Start at 25, and you could accumulate $262,000.
• Wait until 35, and you’ll be left with $121,000.
• Wait until 45, and you’ll have only $52,000.
• Delay until 55, and you end up with just $17,000.

 

 

 

2. Inflation and Longevity: The Silent Challenges

 

Living longer is a blessing, but it comes with financial implications. Canadians are retiring earlier and living 20–30 years post-retirement. Add inflation—historically averaging 2–3%—and your purchasing power erodes over time. Starting early helps you build a buffer against these silent wealth killers.

3. Tax Efficiency: Your Hidden Advantage

 

Tax planning is one of the most overlooked aspects of wealth building, yet it can significantly impact your long-term returns:

• RRSP (Registered Retirement Savings Plan): Contributions are tax-deductible, reducing your taxable income today. Investments inside your RRSP grow tax-deferred, so you don’t pay taxes on gains until withdrawal—usually when you’re in a lower tax bracket during retirement.
• TFSA (Tax-Free Savings Account): Contributions are made with after-tax dollars, but all growth and withdrawals are completely tax-free. This makes TFSAs ideal for long-term compounding without future tax liability.
• Strategic Use: Combining RRSP and TFSA contributions allows you to balance current tax savings with future tax-free withdrawals.
• Impact Over Time: Tax savings reinvested can compound just like investment returns. Over decades, this can add tens of thousands of dollars to your portfolio.

4. Behavioral Benefits: Building Discipline

 

Investing early isn’t just about numbers—it’s about habits and psychology:

• Automation Reduces Procrastination: Setting up automatic contributions ensures consistency.
• Dollar-Cost Averaging: Regular contributions smooth out market volatility.
• Emotional Resilience: Investors who start early and automate tend to stay invested during downturns.
• Behavioral Edge: Early savers develop a mindset of delayed gratification and long-term thinking—critical traits for financial success.

Checklist: How to Start Today

 

• ✅ Define Your Retirement Number: Estimate future expenses and lifestyle goals.
• ✅ Start Small, Scale Up: Begin with what you can—$100/month grows significantly over time.
• ✅ Leverage Tax-Advantaged Accounts: Maximize RRSP and TFSA contributions.
• ✅ Automate Savings: Set recurring transfers to eliminate procrastination.
• ✅ Diversify Wisely: Balance risk with a mix of equities, fixed income, and alternatives.
• ✅ Review and Adjust Annually: Life changes—so should your plan.
• ✅ Start a Retirement Plan with the Mah Investment Group: We have the tools and expertise to help create a dynamic plan to visualize and optimize solutions that fit you and your lifestyle.

Bottom Line

 

Retirement isn’t as far away as it seems. Every year you delay, you sacrifice the most powerful force in investing—time. Start today, and let compounding, tax efficiency, and disciplined habits work in your favor.