Dec 6: BEST FROM THE BLOGOSPHERE

December 6, 2021

Students should take advantage of retirement saving and its tax advantages: The Varsity

We all look back fondly at our days as students, whether in regular or post-secondary school. At no time does this writer ever remember any friend or classmate talking seriously about the need to save for retirement. There were many other things to worry about, including passing courses and looking for a job.

But an article in the University of Toronto’s The Varsity newspaper says even students should be thinking about life after the jobs they are about to find.

“As a student, investing in a (registered) retirement savings plan early can prove to have long-term benefits like tax-deductible contributions,” the article begins. “This means that the amount you put into your RRSP for the year is deducted from your taxable yearly income. Further, investments are tax-deferred, which means that taxes on the growth of your investments are not paid until you withdraw the funds from your RRSP account,” the article explains.

The article makes the point that while the tax-free savings account (TFSA) allows money to grow without taxation, contributions made to it are not tax-deductible like RRSP contributions. As well – and a key point if you are thinking of the money being like a piggy bank for the future – is that withdrawing money from an RRSP is more difficult. The RRSP piggy bank is much harder to raid than a TFSA, the article explains.

“The idea of saving for retirement while having to pay outstanding debts like credit card statements or mortgages can be overwhelming,” The Varsity notes. “Everyone has a different financial scenario and students must evaluate what works best for them, even if it means only putting small amounts of money aside in their RRSP every month,” the newspaper adds.

The article also looked at the idea of starting retirement savings early.

Citing a recent study, The Varsity reports that folks in the Gen Z cohort start saving at 19; millennials at age 25 and Gen Xers at 30.

And some great news from The Varsity article is that younger people are getting the message about the importance of getting a head start on retirement savings.

“It appears that starting to save at a younger age has been a message that has trickled down across generations, since the oldest members of Gen Z are only 24 years old. Gen X and baby boomers have been found to contribute an average of 14 to 15 per cent of their income into their retirement fund, while Gen Z and millennials invest, on average, 16 per cent of their income in their retirement savings,” The Varsity reports.

Other points made in the article include the idea that as living costs continue to rise, many households “will need to continue working past the age of 65 in order to afford retirement.” Citing recent research from the Healthcare of Ontario Pension Plan, the Varsity notes that 67 per cent of Canadians “think that Canada will be facing a retirement crisis;” that same study found that 77 per cent of workers liked the idea of their employers offering retirement savings plans.

The Varsity article concludes by saying that if you are young, you should be asking and talking about getting an early start on retirement saving.

If your employer does offer a retirement program, be sure to join it and contribute as much as you can. If you don’t, you need a do-it-yourself retirement plan. The Saskatchewan Pension Plan provides exactly what you need to get rolling. You can contribute up to $6,600 per year to SPP, and like an RRSP, SPP contributions are tax-deductible. Check out SPP, celebrating 35 years of operations, today!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.

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