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May 26, 2022

Starting your retirement savings: Answers to your top questions

Your career is kicking into gear, and your finances are gaining momentum. Here’s how to drive toward a great financial future

Physicians have a unique path to retirement. While you typically earn a higher income, you also have fewer working years to save. You may have competing financial priorities, such as paying student debt, buying your first home or maybe starting a family. Setting aside money regularly is a good first step, but to turn that habit into a solid strategy, there are a few key questions to address.

How much will I need to save?

A good rule of thumb for higher earners is that you’ll need 60 per cent of your pre-retirement income to maintain your current lifestyle after you stop working.

The Advantages Retirement Plan™ includes a personalized planning feature that estimates how much you’ll need to save based on your age, income, current savings and desired retirement age. For example, if you earned $200,000 a year and started saving at age 35 with a goal to retire at age 70, you’d need to save just over $2,800 a month to generate a retirement income of $10,000 a month, including government benefits[1]. Try our retirement calculator to crunch your own numbers and see how this could look for you.

Should I use an RRSP or a TFSA?

RRSPs and TFSAs both help you minimize taxes, but work in different ways. When you’re first getting started, you might prioritize maximizing your income tax deductions by saving in your RRSP. Once you’ve maximized your RRSP contribution limit, you could contribute to your TFSA, which provides tax-free growth on after-tax dollars. The Advantages Retirement Plan™ includes both types of accounts and makes suggestions on which one to use first.

How will I manage investment risk?

Not all investments do well at the same time, so it’s essential to minimize your investment risk by choosing a mix of asset types and rebalancing your portfolio regularly. When you save with the Advantages Retirement Plan™, your money is invested in target-date funds that are designed to automatically rebalance and reduce risk as you approach your expected retirement age.

How much will investments cost me?

When starting to invest, many Canadians use mutual funds because they’re convenient and offer built-in diversification. The downside is they typically come with high fees, averaging two per cent of your net-asset value, which can eat up a significant amount of your investment growth over time. Advantages Retirement Plan™ members pay fees of 0.6 per cent, plus $10 per month, which provide significant cost savings compared to mutual funds. Learn more about our fees and what they cover.

How can I increase my savings over time?

While you’re balancing retirement with other financial priorities, you can get started with the Advantages Retirement Plan™ by saving as little as $50/month and increase your regular contributions as your income increases. One of the plan’s unique features is the auto-escalation tool, which can automatically increase your monthly contribution later to keep up with your income growth.

The sooner you start, the more options you’ll have

Retirement saving is a marathon, not a sprint. Even if you start small, your savings will benefit from long-term compound growth.

To get momentum with your retirement savings, book a free consultation with our team of retirement specialists.

[1]Calculations assume that investment rates of return are net of fees, 4.95 per cent pre-retirement and 3.35 per cent post-retirement.