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Lifehack: Make retirement saving easy

Posted by Massimo Satira February 5, 2020 • 5 min read

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  • Why you should make this year’s contribution
  • How to save automatically by setting up a PAD
  • Reasons to invest money instead of parking it
retirement-lifehack-makes-it-easy

Time. There’s never enough of it. That’s why we order in dinner from an app, shop online and constantly watch for ways to do things quicker and more easily.

It’s called lifehacking, and it’s all about efficiency so you can spend less time on mundane essentials and more time on the fun parts of life.

Today we’re going to look at how you can lifehack your retirement savings so you can get on with all the interesting living you plan to do before you get there.

Why this year is the best time to start contributing

Like so many things in life, the first step to saving for retirement is simply making the decision to do it. If you’ve already made the decision to make an RRSP contribution, and plan to do so this year, skip to the next section. (This is a lifehack after all—it’s supposed to save you time!)

If you’re not yet convinced, think about your reasons for putting off saving for retirement.

Many people think they can’t afford to contribute because they have to pay down debt or cover other costs. Setting aside even a small amount while you’re focusing on paying down debt will help a lot in the long term. And, once it’s paid off, you can direct those debt payments into your retirement savings account as well.

Others plan to carry forward their unused RRSP contribution room and start saving in future years. But as all that contribution room accumulates, it often gets harder and harder to use it all up. It’s better to start contributing now.

The sooner you contribute, the more time your money has to accumulate and harness the power of compounding. If you put off contributing until next year (or the year after, or the year after that), you’re missing out on a year’s (or two year’s, or three year’s) compounded earnings.

Here's a quick look at how much wealthier you could be, simply by making this year’s contribution. You can see from this graph how a one-time $5,000 deposit at 3% is worth in 30 years. But if you delay that contribution by 5 years, it has less time to compound—and it’s worth nearly $2,000 less.

savings vs investing

Now that we’ve looked at some of the reasons why you should make this year’s RRSP contribution, let’s look at how to make it easier.

Lifehack 1: Make RRSP saving automatic

Some people go through this decision-making process of deciding whether and how much to contribute every single year. Yikes!

Fortunately, there’s a lifehack to avoid this: Make your RRSP saving automatic. How? By setting up a pre-authorized deposit (PAD) to have money transferred from your bank account into your RRSP.

It’s a “set it and forget it” solution, and here’s how it works.

You decide how much you want to transfer from your everyday account into your RRSP account and how often you want to move the money. Then you set up the PAD through your financial institution.

Many people choose every payday or the first of the month. Because the money comes out as soon as you get paid, after a couple of pay cheques you don’t even miss it.

A PAD takes the guesswork and the decision-making pain out of the equation. It also eliminates the possibility that you’ll forget, miss the annual deadline or simply not have enough left over to make a contribution.

Make your RRSP work harder

So, to recap, you made a decision to contribute to your RRSP—great.

And you made it easier to do so by setting up an PAD—even better!

Now there’s a third step: invest.

Too many people “park” their money in no-interest or low-interest accounts until they “figure out” what to do with it. They lose out because all those years of compounding have very little fuel to work with.

Investing has the potential to dial up the volume on your compounding savings in a way that can make a huge difference. How much? Let’s look at a contribution of $250 a month in three possible scenarios. In the first one, you �park it” in a low-interest account earning just 1.25%. In scenario two, you invest it and earn 3% after fees. In scenario three, you invest it and earn 6%.

savings vs investing

See the difference low fees can have on your investments with our calculator. You’ll be surprised at how much your savings could grow.

Lifehack 2: Make investing easier

You might be thinking, “this is all great, but investing is complicated.”

Well, there’s a lifehack for that too: Questwealth Portfolios.

These are portfolios of exchange traded funds (ETFs). These funds invest in the market like a mutual fund but with much lower fees. And Questwealth Portfolios have some of the lowest fees around — as little as 0.20%. Saving on fees can make a huge difference to your retirement savings.

Getting started couldn’t be easier. You simply answer some questions about your investment goals and risk tolerance level and you’ll be invested in a portfolio that works for you. In one simple action, you’ll have a carefully planned, diversified portfolio that’s monitored and rebalanced. Yet another “set it and forget it” solution that can make your life easier.

Once you open your Questwealth Portfolios RRSP account, you can set up your automatic savings plan to deposit whatever amount you wish directly into your investment account. (You can also open other types of registered accounts, like a TFSA, as well as non-registered accounts.)

Ready to open an account? Start here.

You’ve just lifehacked your RRSP!

Congratulations! You’ve just lifehacked your retirement savings.

You’ve made the decision to contribute now and each year. You’ve made it automatic so you’ll never have to worry again. And you’re investing your money with a simple, care-free investment with ultra-low fees to help you accumulate as much retirement wealth for your retirement as possible.

Now you can focus on enjoying pre-retirement life.

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The information in this blog is for informational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade, Inc., its affiliates or any other person to its accuracy.

Questwealth Portfolios is a service provided by Questrade Wealth Management Inc. Questrade Wealth Management Inc. is a registered Portfolio Manager, Investment Fund Manager, and Exempt Market Dealer.

Questrade, Inc. provides administrative, trade execution, custodial, and reporting services for all Questwealth accounts.