Start saving for retirement

Start now. Do it.

Hi Friend,

My parents both had jobs with pensions for most of their careers. My mom was a teacher, retired at around 65 and had a pension. My dad worked at a mill for most of his life but lost his job due to mill restructuring. They paid out his pension when that happened.

Me, bounding my way into retirement Photo by Bruce Galpin on Unsplash

All that to say, pensions were things that happened to my parents. Money was taken off their paycheque (I think they had to opt into it, but after that, they didn’t have to think about it), matched by their employer, and invested so they could “live” off it in their retirement years.

As a freelancer, that doesn’t happen for me. Every cent contributed is contributed by me. I have no employer to match anything I set aside. As a single woman (in the eyes of Revenue Canada and for all financial intents and purposes) I don’t have a spouse’s pension to rely on, either.

I’m responsible for determining how much to put aside for retirement and following through.

For many years, I didn’t. At first, I was focused on paying off debt (first student loans, then a mortgage and credit cards), covering my business expenses (including some hefty income tax bills), and surviving.

Truth be told, not all my money went to surviving. I took trips, bought more clothes than I needed, and ate out more times than I probably needed to. Because working from home is isolating and I need to get out sometimes.

Then I started reading about how far behind I was when it came to retirement savings. By age 30 you’re supposed to have what amounts to the GDP of a small European country saved up. I was still trying to pay off student loans. I felt overwhelmed. Rather than spurring me to action, learning I was behind depressed me. So adopted a “future Heidi can worry about that” attitude.

Luckily for not-quite-as-far-in-the-future-Heidi, current Heidi is taking control of her financial situation. And thinking about retirement.

I may not ever fully retire

It’s only been in recent years that I’ve started to grow concerned about my retirement, as my years of experience approaches 20 and the number of “useful years left” (a friend’s term, not mine) starts to decrease.

Part of my not thinking about retirement is that I don’t plan on ever fully retiring. Unlike my parents, I work from home in a career that isn’t physically taxing. I set my own hours and take on projects I determine work well for me. I picture myself as an (obviously adorable) old lady, developing content strategies and writing brilliant financial blog posts on her computer in the late morning, then going for appetizers and cocktails with her friends once the workday is done.

Probably we’ll also be solving crimes, because I picture myself as a Jessica Fletcher type, but with better style. (For an updated reference, I can’t recommend “The Thursday Murder Club” series highly enough. It is engaging, fun, and a joy to read.)

But being willing to work in retirement isn’t the same thing as wanting to work full-time. I want to be able to take off somewhere tropical at a moment’s notice or go for two weeks (or more) without looking at my computer. I don’t want to still feel like I’m hustling for every dollar when all my retired friends are drinking mai tais while sunning themselves in Costa Rica (which is how I imagine all Canadians retire).

I want to work on my terms.

And that means I need retirement savings, even if I never fully retire.

So a few years ago, I started an RRSP. Over the months, I’ve watched money slowly build up in the account. I’m nowhere near where I would be if I had started in my 20s. But I’m getting there. Each month, the total amount grows and I breathe a little easier at the thought of my retirement years.

If you haven’t started your retirement account, do it. Even if, like me, you plan on earning an income until your age begins with a 7 (or an 8!). And even if you don’t think you can afford to. Start now, even with just $10 a month.

Here’s why you should start saving now

The money really does build over time.

Even putting aside just $10 a month over 20 years can grow into $20,000. That might not seem like a lot, but it’s a few months of expenses. And it’s more than you’ll have if you keep spending the money on dinners out.

Additionally, the interest compounds. Let’s say you put in $10 and that month earn $0.50 interest. Now you’re earning interest on $10.50 (not just $10). And if you invest another $10 the next month and earn .51 in interest, you’ll now be earning interest on $21.01.

You can start small and build.

Even if you can only afford $10 a month now, you can always add more. I started my account with $100 a month (automatically removed from my chequing account) and then increased the monthly amount as I could afford to. Additionally, when an unexpected project comes in or I earn a bit extra in a month, I add that to my RRSP. It all adds up over time.

Starting small helps you build the habit.

It’s difficult to go from saving nothing to saving hundreds of dollars a month. That requires a huge mindset shift. But for many people, saving $10 a month doesn’t require a significant lifestyle change. Once you’re used to going without that $10 a month, it’s easier to increase the amount you save monthly because you’re used to having some money put aside. Maybe after 6 months at $10 a month, you feel comfortable contributing $15 monthly.

Goatley, living that retired goat lifestyle (© David Fuchs and Goatley)

It’s a tax deduction

One year, I saved $1,000 on my taxes by putting an additional $3,000 in my RRSP. It’s not a dollar-for-dollar deduction, but as long as you stay within your contribution limit, you can claim RRSP contributions on your taxes (at least, you can in Canada—I can’t speak for what goes on in the US). And, if you’re like me and didn’t contribute for many years, your annual contribution allowance has likely built up to an astronomical amount. I could probably contribute massive amounts for the next 10 years and still not max out my contributions.

It’s easy.

There are many ways to open an RRSP. You can go into your bank and have them open it for you. You can do it online. I opened my RRSPs using Wealthsimple. My RRSPs are managed, so I don’t have to think about them, other than making sure I have enough to cover the automatic deduction and adding extra amounts where I can.

*Managed means Wealthsimple is responsible for investing the money, not me. You can learn more about managed vs self-directed investing (and RRSPs). Note, I’m not paid to mention Wealthsimple—it’s simply the platform I’ve chosen for my RRSPs, but there are others you can use.

For more on money and freelancing, see my previous articles:

I’ve been doing business finance all wrong

The most important tool to give you control in client relationships

How to make money at 10 cents a word

How are my RRSPs set up?