Individuals in their 20’s and 30’s will do well to focus on
reducing debt than making large contributions religiously to their retirement
accounts, according to an opinion
piece on CTV. Paying off high interest credit card debt makes more
financial sense than saving funds for a retirement account which has an 8-10%
return.
If you are in a high tax bracket, contribution to RRSP will
lower taxable income. But if you belong to a low tax bracket, there is not much
benefit in putting funds into RRSPs.
It is better to concentrate on preserving capital in your
early years. This is the time when you need funds to purchase a home, vehicle or
pay for wedding costs. Putting away 10% of your income into a savings account
each month makes more sense than making large contributions to your early
retirement account.
You should have free cash for important investments during
this period of your life instead of locking up funds in your retirement
account. A savings account will help you meet unexpected expenses and provide a
cash cushion for future years. It is easier to determine your requirements a
few years from now as opposed to determining your possible expenses after
twenty or thirty years.
In your 20’s and 30’s you have enough time left to save
money for your retirement years. If you have a mortgage or a home equity loan,
then you should concentrate on paying down these debts first. Repaying all your
debts will contribute to a secure financial future.
