When should I start investing? Investing early in your career is one of the best ways to build your retirement fund. Consider Mary who contributes $5000 per year to her RRSP for the first 7 years of her career from age 25 to age 32. She makes no more contributions and retires at age 65. Her initial investment of $35,000 grows at 10% per year to a value of $1,333,063.
Her best friend Jane contributes nothing to her RRSP until she reaches age 32. She then contributes $5000 in each of the next 34 years until she retires at age 65. Jane’s RRSP, also earning 10% per year, grows to $1,350,122 or about 8 times more than her total investment of $170,000.
That compares to Mary’s RRSP, which has grown to $1,333,063 or about 38 times, more than her original investment of $35,000.
The earlier you start, the greater the effect of long-term compounding on your RRSP portfolio.