4 ways to help Gen Y plan for retirement

For Gen Y clients, retirement planning might seem like a concern for the distant future—but it shouldn’t be.

The average single Canadian who wants to retire at age 65 with 90% of their pre-retirement income needs about $1.2 million dollars in savings, finds Envision Financial.

Read: Involve all clients in long term planning

Yet Statistics Canada reports in 2010, less than six million tax filers contributed to an RRSP, and only 5.1% of the total room available was used up.

“The reality is that few Canadians, and even fewer people in their 30s, are adequately preparing for retirement,” says Steven Gillespie, investment advisor at Envision Financial.

Read: Use these free tools to educate clients

He adds, “When you take increased life expectancies into account, the amount Canadians will need to save goes up dramatically. Unfortunately, many will find financing retirement very difficult.”

Read: Set-and-forget investments

Here are some tips to help younger clients.

1. Start now: “The key to getting the most out of your savings is the power of compounding,” says Gillespie. “Someone starting to save in their 30’s will have to put a lot less aside each month compared to someone who starts saving at age 45—and the sooner you get started, the better.”

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2. Set up pre-authorized contributions: “At the end of the year they’ll have a fairly large sum put away in RRSPs,” he says. “It’s a simple way to save money without thinking about it. If they didn’t even notice the money coming out of their account, I push my clients to increase the amount even higher next year.”

3. RRSP vs. TFSA: “If you’re early in your income earning years and anticipate earning a much higher income several years down the road, it may be more beneficial to invest in a TFSA for the time being,” says Gillespie. “That way, you can save your RRSP room for a time when you are earning a higher income and need a bigger tax break.”

Read: Investment strategies for age and stage 4. Save extra income: Unexpected income or windfalls (e.g. from a tax refund, bursary or estate) should be invested for the future rather than spent on purchases or vacations.

Read: 5 hurdles for young female clients

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.