The earlier you invest in your RRSP, the better

Jul 21, 2021

Start early to leverage the power of compounding

The sooner you make it a priority to invest for your retirement goals, the better.

When time is on your side, it’s a huge ally. The earlier you start, the more you benefit from the power of compounding. Compounding occurs when the returns that your investments earn begin to generate a return.

In an RSP, compounding is unhindered. You can reinvest your gains, including your dividend and interest income, without paying any tax, as long as the funds remain within the plan.

The chart below shows the incredible impact that compounding has on your RSP savings, and why it’s better to start investing as early as you can.

Starting at different ages, monthly investments required to reach $500,000 by age 65
Start at age 25 Start at age 35 Start at age 45
Monthly investments $288 $548 $1,150
Value at age 65 $501,419 $500,659 $500,971
Portion from compound growth $363,179 $303,379 $224,971

Source: Credential Qtrade Securities Inc. Scenarios assume an average 5.5% annual rate of return. For illustrative purposes only.

Invest regularly

To leverage the power of compounding, it’s a good idea to hardwire the habit of saving and investing. Set up a regular contribution plan to move a set amount of money automatically every month from your banking account to your self-directed RSP, and invest that money to get it working on your behalf. You’ll quickly adjust your budget and your lifestyle around that monthly commitment, and you’ll avoid the stress of coming up with a single lump-sum contribution at the RSP deadline.

Re-invest dividends automatically

Keep your money invested, re-invested and compounding, by setting up a dividend reinvestment plan (“DRIP”) for dividend-paying stocks that you own. With a DRIP, stock dividend payments are automatically used to buy more shares in the company. In a Qtrade Direct Investing™ online brokerage account, no trade commissions are charged for DRIP share purchases.

To find out more about regular contribution plans or DRIPs for your RRSP or other Qtrade accounts, speak to us today. Learn more.

Online brokerage services are offered through Qtrade Direct Investing, a division of Credential Qtrade Securities Inc. Qtrade, Qtrade Direct Investing and Write your own future are trade names and/or trademarks of Aviso Wealth.

Recent Posts

Aviso Weekly Market Pulse: November 21st – November 25th

Market developments Equities: The S&P 500 ended the shortened holiday week up 1.5% and closed above 4000 for the first time since September, while the Nasdaq still sits below the key 12,000 level. Markets will focus on consumer spending as Black Friday kicked off...

NEI Monthly Market Insights: October 2022

Is bad news good news? October saw most global financial assets rebound, following weak performance in the prior two months. The market responded positively to soft economic data such as downward revisions to global growth and weakening manufacturing PMIs, as a sign...

Aviso Weekly Market Pulse: November 14th – November 18th

Market developments Equities: The lower-than-expected PPI data drove the S&P 500 above 4000, before James Bullard’s comments pushed rates higher and the U.S market lower. The S&P 500 ended the week down less than 1% and didn’t have more than 1% +/- move any...

Aviso Weekly Market Pulse: October 31st – November 4th

Market developments Equities: The U.S. market broke with its positive trend after an FOMC message that was more hawkish than expected. In addition, the latest labour data confirmed that the U.S. job market continues to be strong. Consequently, the market expects the...

Aviso Weekly Market Pulse: October 24th – October 28th

Market developments Equities: The U.S market resumed its trend from last Friday, climbing over 2.5% in the first two trading days as 10yr yields continued to retreat from the highs and back towards 4.0%. Earnings released midweek from Microsoft, Alphabet and Meta...

Aviso Weekly Market Pulse: October 10th – October 14th

Market developments Equities: The stock market had another negative week, erasing last week's gains. On Thursday, the market briefly rallied due to technical factors, but this was not enough to overcome the inflationary pressures pushing the Fed to continue its...