Most of us dream of becoming a millionaire. But how many of us actually put a plan in place to make it happen? Here’s a simple plan almost anyone can follow if they’re serious about becoming financially secure.
The good news is that much of the planning you need to do is already in place—for instance, a TFSA (Tax-Free Saving Account). Since 2009, anyone over 18 can contribute to a TFSA and earn investment income tax-free. Even better, you can take advantage of unused contribution room from the past. So if you’re just getting started investing now, you can max out all the previous TFSA years you missed, which in 2016 amounts to $46,500. Given an average annual stock market return of 8%, even if you invested just that $46,500 over 30 years, you’d end up with over $460,000! Of course, if you topped that up yearly with the current $5,500 allowable TFSA contribution, you’d end up with over a million dollars in 30 years!
But there’s another wealth-producing plan just waiting to be used too: an RRSP (Registered Retirement Saving Plan). One of its biggest advantages is the yearly tax refund, which can be used to increase the following year’s contribution. On top of that, many employers match an employee’s contribution, up to 1-5% of salary. If you’re earning $50,000 per year and your employer gives you a 2% match, that amounts to a free $1,000 per year invested for you.
The overall strategy for becoming a millionaire is to start setting aside 15% of your income as early in life as you can. Let’s say you’re 30 and earning $50,000. That means setting aside $7,500 per year. Do that every year until you’re 70, and (based on the average 8% return), you’ll end up with over $2 million!
If you’d like help customizing a plan to your needs and goals, I’d be happy to refer you to one of my trusted local financial advisors. Call us today!
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