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Start Early
Even if retirement seems light years away, open your RSP as soon as possible so you can maximize the combined benefits of deductible contributions and tax-sheltered compounding.
Consider this comparison. George contributes $5,000 per year to his RSP from age 20 through 30 inclusively. His contributions total $55,000. Carol starts contributing $5,000 yearly when she reaches age 31, and continues through age 65. Her contributions total $175,000. Assuming an average annual return of 6%, George will have accumulated $609,888 in his RSP, while Carol will have $590,604. Carol contributes more than three times as much to her RSP than George, but he ends up with a larger nest egg. Why? Because George’s funds compounded for 11 additional years.
This table shows how a delayed start can significantly reduce the capital available at retirement.
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$5,000 Annual Contribution, 8% Return
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|
Savings
start at age
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Years of compounding
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Cumulative contributions
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Value at
age 65
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Growth
per $1*
|
|
30
|
35
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$175,000
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$590,604
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$3.37
|
|
35
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30
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150,000
|
419,008
|
2.79
|
|
40
|
25
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125,000
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290,782
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2.33
|
|
45
|
20
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100,000
|
194,964
|
1.95
|
|
50
|
15
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75,000
|
123,363
|
1.64
|
|
55
|
10
|
50,000
|
69,858
|
1.40
|
| |
* Overall average amount of growth for each dollar invested.
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