Asian couple meeting financial adviser for investment planning.
© sjenner13 / 123RF Stock Photo

For younger Canadians juggling student loans, mortgages, credit card bills and the high cost of living, saving for retirement might seem like a stretch. And a reasonable target – say, $1 million by age 65 – could feel completely out of reach. But by sharing some numbers and exploring some options, you may encourage these 20- and 30-somethings to start saving now, reach that $1 million goal and, when the time comes, retire comfortably.

Numbers speak volumes

The numbers in this chart show what it takes – per year, month and week – for Canadians ages 18 to 50 to reach $1 million by age 65.

Age Yearly Monthly Weekly
18 $2,919 $248 $57
25 $4,672 $396 $92
30 $6,636 $563 $130
35 $9,597 $814 $188
40 $14,233 $1,207 $279
50 $35,915 $3,046 $704

The numbers in this chart assume a growth rate of 6% indexed to get to $1 million, and 2% inflation.

Clearly, the sooner they start, the better. If they take advantage of direct withdrawals, they may not even miss that money. And if they can afford to put even more away, a $1 million goal could feasibly grow to $1.5 or $2 million.

Among the options

One investment vehicle your younger clients may want to consider is the tax-free savings account (TFSA). In addition to tax-free growth and withdrawals, TFSAs can effectively address current and future income needs because they allow withdrawals to be re-contributed.

Investments providing guaranteed lifetime income can also be purchased through TFSAs, adding another layer of ease for those seeking growth and, in time, a stable income. Just remind clients that taking money out of investments when markets are down and asset values are low can significantly deplete their savings. Whenever possible, encourage them to time their withdrawals for when markets are strong.

Registered retirement savings plans (RRSPs) also warrant discussion, particularly for clients who want to:

  • save money for retirement and be able to deduct their contributions from this year’s income,
  • reinvest their tax savings, and
  • use their tax savings to pay down non-tax-deductible debt, like a mortgage.

Ultimately, it’s important to have candid conversations with these clients, not just about investment options but their desired retirement lifestyle and spending expectations, tax situation, investment style and risk tolerance – well before they retire. This includes their short- and long-term goals and financial needs, both the expected (a new car or condo) and unexpected (a job loss, divorce, illness).

According to the 2015 Sun Life Canadian Unretirement Index:

  • 28% of working Canadians said there was a serious risk they could outlive their retirement savings, while 34% were unsure.
  • overall, 62% don’t feel confident that their retirement savings will last

The sooner you talk with clients about their savings, the better.

Starting the conversation

Sun Life Financial’s Money for Life approach can help you start planning conversations with clients in any life stage. This approach considers 5 risks every client can face and 5 needs they should address as they plan.

Retirement risks Retirement needs
Inflation – Money buys less over time Basic living – Money for necessities like food and housing
Health – Current health conditions may worsen and new ones can emerge over time Health – Money for medical expenses not covered by provincial plans
Longevity – Outliving your money Savings – Money set aside regularly or invested for future needs
Market – Losing money due to market performance Lifestyle and growth – Money for things to do or invest for growth potential
Mortality – Untimely death of a spouse or partner Legacy – Money to leave behind or to provide a living legacy

To learn more about Money for Life and for information on other investment vehicles, contact a member of your Sun Life wealth sales team. And for effective ways to start conversations with your clients, check out these resources:

Click here to contact your Sun Life sales director.

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