Top 5 Excuses for Not Contributing to Your Retirement

Posted: 15 Feb 2012 04:24 AM PST

A recent poll by the TD Retirement Savings Poll showed that a third (32%) of Canadians in their 40s don't have an RRSP.

With RRSP deadlines coming up, it is more important than ever to create an RRSP account and start contributing to your retirement.

These are the top 5 excuses used not to contribute to retirement funds.

1. I Don’t Make Enough

This is a common excuse people give for not making contributions and the fact is everyone can contribute a little bit. The trick is that once you start making contributions, you don’t stop!

If you are currently making $15 per hour, create an account that takes just $10 per week from your cheque into a retirement savings vehicle. You can ask your financial institution to set it up automatically for you and transfer the specified amount directly to your 401K/RRSP account.

As you slowly get raises throughout your career, you can start to increase your contributions. To make things easier you can often ask your payroll department to contribute your raises to your retirement account.

Remember the sooner that you contribute the more your money can accumulate with compound interest.

2. I Have a Great Public Pension Plan.

The fact is that most citizens will have a public pension but do you know how much you will be receiving?

Here is a summary table that shows the current Old Age Security and Guaranteed Income Supplement Benefits:

Recipient(s)	OAS per month	GIS per month	Total OAS/GIS average benefits
Single Person	$540.12	$732.36	$1,272.48 per month $15,269.76 per year
Each Spouse	$540.12	$485.61	$1,025.73 per month $12,308.76 per year

(Source: Service Canada: Old Age Security Benefit Payment Rates, Jan-Mar 2012)

Can you live off $15,269.76 or if you were married $24,617.52 as a couple? With current levels of government deficit do you really want to depend your golden years on the public pension system?

3. I Will Live Minimally Once I Retire

Are you sure about that?

More on Retirement

What about visiting your children and grandchildren, playing sports, taking new classes, or travelling?

Bottom line is that you don’t have to live minimally in retirement. You have spent all your life working hard, this is a time for your to enjoy and do the things you couldn’t do in your working years. Delaying a small amount of current consumption for future your retirement life can make all the difference.

Numerous studies indicate that people need from 70-80% of the money they earned while working to live the lifestyle they anticipate in retirement.

4. I Have too Many Bills Each Month

You need to take a step back and analyze all your bills and start to budget. I suggest using a tool like Mint.com or a simple Excel spreadsheet and track where every dollar goes.

Once a review has taken place of all the monthly payments you make, see what you can cut.

One recommendation I have is to try and use more coupons for your variable expenses. My wife and I have saved over $3,500 in 18 months using coupons. At our marginal tax rate of 38.29%, I would have had to make $9,140 to make up for those savings. This coupon savings has personally has allowed my family to top up its retirement contributions.

You will find that even small discounts in your cable, insurance, and grocery bill will slowly add up.

5. I Don't Know Where to Begin Investing.

It could be a challenge but if you are reading this article, you have already started!

You could always find a certified financial planner to create a retirement plan for you or contact your local bank or credit union.

Investigate your financial institutions low-cost ETFs or low-MER mutual funds for investing ideas. One mistake individuals make too often is delaying investing and then try to make up for it by taking unnecessary investment risk in the future. This strategy will only jeopardize your retirement even more. Start investing early and avoid unnecessary risk.

I hope this article encourages some people to start contributing to their retirement!

Any other tips you could think of that would encourage people that haven't started yet?

This post has been written by Steven Zussino, blogger behind GroceryAlerts.ca and Canadian Personal Finance. He shares ideas on budgeting, earning more money, investing, and saving money in Canada.

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