# 30yo and want to consider my first thoughts about retirement, where to start?



## cutchemist42 (Oct 15, 2012)

Basically, Im a 30yo who has never once really thought about his retirement. Ive only recently started trying to save 10-15% of my gross income after reading the Wealthy Barber.

Looking at my current paycheque bi-weekly, it looks like:

$2077 bi-weekly

Before-Tax deductions:
-Employer (city government) pension plan 197
-Union dues-32

Income Tax-352
CPP-97
EI-40

It then also says Employer paid benefits consist of 197 for my pension. This means the job also pays that much towards my pension? Should I include what is deducted from my paycheque already on my gross income for the pension as part of my savings rate? I've also read the pension is based on your best 5-year average. How much more info do I need?

Thanks for leaning more towards the right directions!


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## My Own Advisor (Sep 24, 2012)

Funny...because I just wrote about the best budgeting rule of thumb - to save at least 10% of your net income. Do that for a few decades, and you will retire early.
http://www.myownadvisor.ca/the-best-budgeting-rule-of-thumb/

As it relates to your employer paid benefits, yes, it sounds like $197 is being contributed by your employer. There is likely an employee paid benefit as well.

Depending upon your defined benefit plan, your benefits could be Best Five Year Average Wages x Years of Service x 2%.

Personally, I would avoid including what is deducted from your paycheque - for your savings rate. Technically, you could include that but the flipside is, that employer contribution is not really your money. Save 10% of your net income (that means $207.70 bi-weekly) and never stop. You're future self will thank you.


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## CalgaryPotato (Mar 7, 2015)

Depending on the exact details of your pension plan it should be enough to retire on, or very close to it. When you factor in that you don't need to pay for your pension, CPP & EAI in retirement you are getting pretty close to the 70% it will pay out. 

Of course the assumption is that you will stay with your current employer for the next 30 years. So to be on the safe side, it is also good to try to do some savings on your own. The TFSA might be a great compliment for you, if you can keep that full it offers you a lot of flexibility. Because the one thing with a company pension is you can't draw down from it early in case of an emergency. 

But the reality is you pay a big chunk of your cheque already to your pension. To totally discount that as part of your savings rate might not be wise either, because while it's better to over save, you don't want to live in poverty now, just to have a bunch of excess money in retirement.


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## TomB19 (Sep 24, 2015)

I would put $5K per year into your RRSP, regardless of the pension. Particularly if you're a single man, it's probably the only deduction you will have other than charity and union dues.

Get used to the $5K RRSP contribution and $1700 tax refund. That combination will take you far, over the years.


If you really want to do well, learn how to invest. Start reading anything you can get hold of, including this site, and educate yourself. You should probably start with a GIC ladder or Couch Potato until you feel comfortable moving into something else.


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## peterk (May 16, 2010)

My Own Advisor said:


> Personally, I would avoid including what is deducted from your paycheque - for your savings rate. Technically, you could include that but the flipside is, that employer contribution is not really your money. Save 10% of your net income (that means $207.70 bi-weekly) and never stop. You're future self will thank you.


Pshh, sure it is! If he's vested that's his money right away, if not, then maybe he has to wait a little while longer.

I think it is 2077 gross bi-weekly, we are looking at:

Gross: $2,077
Withholdings: $718
Employer pension contributions: $197
Net: $1,359
Pension savings: $394

Is that right, cutchemist?

First thing, it would be nice to know what your financial status is right now. Do you have any savings? Do you have any debts or loans? Do you own a house or rent?


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## cutchemist42 (Oct 15, 2012)

My Own Advisor said:


> Funny...because I just wrote about the best budgeting rule of thumb - to save at least 10% of your net income. Do that for a few decades, and you will retire early.
> http://www.myownadvisor.ca/the-best-budgeting-rule-of-thumb/
> 
> As it relates to your employer paid benefits, yes, it sounds like $197 is being contributed by your employer. There is likely an employee paid benefit as well.
> ...


Well when I look at my paycheque, it also appears that $197 is taken from my net pay as well, and the employer matches that amount if Im reading it correctly.


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## cutchemist42 (Oct 15, 2012)

peterk said:


> Pshh, sure it is! If he's vested that's his money right away, if not, then maybe he has to wait a little while longer.
> 
> I think it is 2077 gross bi-weekly, we are looking at:
> 
> ...


Ill just type out exactly whats on the paycheque because Im probably confusing this...

Regular Earnings: 2077

*Taxes*
CIT 352
CPP 96
EI 39

*Before Tax Deductions*
Pension 197
Union 32

*After Tax Deductions*
Healthplan 19
Life Insurance 5

*Employed Paid Benefits*
Life Insurance 5
Pension 197


Total Gross: 2077
CIT Taxable Gross: 1854
Total Taxes: 487
Total Deductions: 254
Net Pay: 1336


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## cutchemist42 (Oct 15, 2012)

peterk said:


> Pshh, sure it is! If he's vested that's his money right away, if not, then maybe he has to wait a little while longer.
> 
> I think it is 2077 gross bi-weekly, we are looking at:
> 
> ...


As well, Im currently debt free and renting for about $580 a month. I was in debt for a while but paid it all off with my last tax return. I currently have $1100 in my Questrade RRSP and $950 in my Questrade TFSA.


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## CalgaryPotato (Mar 7, 2015)

I know others will disagree with me, but like I said earlier $400 is a huge percentage compared to the fact you are only getting $1336 in net pay. It really all depends on your goals in life, but I'd really hesitate to completely disregard the pension when looking at your savings rate. 

I'd also really consider the TFSA over the RRSP for two reasons, 1) you are early in your career and your tax savings won't be as much as it will be later in your career. 2) Flexibility, since again you are so young, you are still renting and you made no mention of a family, there may be a lot of major expenses you experience in life long before you get to retirement.


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## canew90 (Jul 13, 2016)

At 30 so putting aside $100 per paycheque may be difficult depending upon your other expenses. Check out MyOwnAdvisor's site. But I'd definitely try to put $50 per pay into savings. My choice would be to start a DRIP (which I've posted in 2 parts at http://www.myownadvisor.ca/try-this-average-retirement-plan-to-wealth-part-1/, also check http://www.dripprimer.ca/aboutdrips )

Combine the drip with a tfsa to minimize your taxes. In fact with your $50k income your dividend taxes will almost be nil.


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## cutchemist42 (Oct 15, 2012)

Talked to my pension contact and shes sending me all the info about what I've accumulated so far, and how to predict what the pension might be later on. She warned it would not as accurate so far out.


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## CalgaryPotato (Mar 7, 2015)

Yeah it won't have much meaning at this point for 2 main reasons. Since you are towards the start of your career, the money hasn't had any chance to grow yet, and if the eventual benefit will be paid out based on your highest earning years, well, that will be at the end of your career, not at the start of it.


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## janus10 (Nov 7, 2013)

CalgaryPotato said:


> I know others will disagree with me, but like I said earlier $400 is a huge percentage compared to the fact you are only getting $1336 in net pay. It really all depends on your goals in life, but I'd really hesitate to completely disregard the pension when looking at your savings rate.



I wouldn't say I disagree exactly, but if you can be happy saving, for rounding sake, an additional $5,000 per year on top of work pension, then that benefit will multiply over time.

First, you'd have more money compounding earlier and during your efforts to gather info, cut chemist, you'll see examples of math that show contributing a set amount for a decade when you are young and never contributing again nets you more money at retirement than if you waited for that decade to pass and contributed for much longer.

Secondly, ingraining a frugal lifestyle, rather than a temporary phase, early on will make it easier to leave below your means even if your means are not substantial. 

In essence, don't think of the 10℅ rule as a ceiling, but rather a floor to what you can contribute. Personally, I think it is more impressive and admirable if someone can put away 20-30℅ on a lower than median income than someone in the 1℅ of highest earners.

I wholeheartedly agree with CP on TFSA first, RRSP second.


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