Hi Friends!
Although this pandemic has been so hard for so many people, I also think that there has been a lot of good to come from it. One thing being that it has opened people’s eyes to the importance of savings for a rainy day. Specifically, I wanted to talk about saving for your retirement fund. Although we’re not completely debt free yet (Dave Ramsey says to become debt free + save 3-6 months of savings before starting to save for retirement) we have started saving for retirement. In order to save money we opened up a TFSA, a RRSP and a Wealthsimple account, however we quickly realized that only our RRSP savings account worked for us, because as much as we love budgeting, we SUCK at saving money.
We started contributing to our Registered Retirement Savings Plan (RRSP) before we were married because we knew that we wanted to buy a house within the next few years and wanted to take part in the first time Home Buyer’s Plan. When we bought the house we withdrew approximately $35,000 from our RRSPs to put towards our house and we’ll repay it over the next 15 years. Side Note: It is not worth paying it back faster than that because you would lose the tax advantage that RRSPS do offer, therefore we allocate only the amount needed to the Home Buyer’s plan when we do our taxes and then the rest of our RRSP contributions are allocated like normal. Your accountant will be able to help you with this.
For more information on the Home Buyers Plan visit the link at the bottom of the post.
So why do we use RRSPs for our retirement savings when the TFSA would be more beneficial for our tax bracket. Well to put it simply, we can’t be trusted with a TFSA account! Every time we’ve had money saved away in our TFSA, we have somehow spent it on something. Whether it be an emergency, a trip or even debt repayment – we somehow always found a way to justify spending it. After realizing that this wouldn’t work for us in retirement, we focused on solely saving for our retirement via our RRSPs. This way we knew that the money we had saved for retirement would be off limits or else we’d risk huge penalties for withdrawing the money early which we definitely did not want. However, we use 2 different vehicles for RRSP contributions. One of us contributes to our RRSP account via the bank, and one of us contributes via an investing firm. That way our assets are varied and we don’t have all of our eggs in one basket. Eventually I would like to start contributing to my company’s pension plan where they match my contributions up to a certain percentage, but financially we haven’t been able to do that. The goal is to be able to start that within the next year or 2.
There are so many ways to save for retirement and although our way might not financially make sense, (we’d probably end up with more money based on math if we used our TFSAs) this is what works for us. That’s why it’s called PERSONAL finance. I’d also like to mention that we’re not putting away piles of money away every month, but every little bit helps! The thing that is important is that you just start saving. I don’t care if you’re 20 years old or 50, retirement is coming and the earlier you start saving for it the better.
What do you use for your retirement savings?
Love, Talia
Saving Pennies for Peanuts 