The 10% saving rule doesn’t always apply

When you start saving in your 40s, the 10% saving rule doesn’t always apply.

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From the April 2014 issue of the magazine.

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The10ruleEven with a modest salary, you can save a million dollars for retirement. You need to start in your 20s and put 10% of yearly net income into an RRSP and reinvest the tax refunds. But even if you wait till your mid-40s, you can still go from zero to a million, provided you’re debt-free. Saving 28% of net income in RRSPs and reinvesting refunds in the last 20 years of your career achieves the same result as saving 10% for 40 years.

Both scenarios assume a starting salary of $40,000 at age 25, with an annual 3% wage increase and a 6% rate of return on investments.

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