30 and no pension: What are your options?

Yet Crupi isn’t neglecting retirement. He’s maxing out his tax-free savings account (TFSA) and registered retirement savings plan (RRSP) contribution room to save for all of his long-term financial goals, including life in his golden years. In fact, Crupi’s been putting away money since he started working, and let it slowly accumulate across his various accounts. “There’s nothing better than the power of compounding,” he says. “The more you put away in your 20s and 30s, the more it can build and build and build for you.” 

That said, saving for retirement in your 30s can be tricky. The average couple ties the knot for the first time at 35 years old, and pays anywhere from $22,000 to $30,000 for a wedding. First-time home buyers typically take possession at the age of 36 of homes averaging around $718,700 nationwide. And the average age of a parent giving birth for the first time is 29.4 years old. When you break down the total cost of raising a child until the age of 17, it comes out to anywhere from $14,000 to $17,000 a year. Plus, many 30-somethings simply aren’t making enough money to aggressively save for retirement. 

Personal finance experts say putting aside money for retirement in your 30s is totally possible, even for someone saving for a house, a wedding or children. “Be kind to yourself. You can’t do it all,” wrote Janet Gray, an advice-only Certified Financial Planner with Money Coaches Canada, in an email. “But you can control your spending at all stages of life to allow you to save for what could be a third of your life in retirement.” 

Rule #1: Don’t wait

The easiest way to build up a retirement nest egg in your 30s, with no workplace pension, is to start early. Evan Parubets, head of Steadyhand’s advisory services team, was putting money into his RRSP every month in his 20s. There is no magic number for how much someone should save, but Parubets suggested as much as 10% to 20% of all income. “It may sound excessively high,” Parubets says, “but it’s the only opportunity you’re really going to get to be able to save without having other expenses get in the way.” 

By the end of his 30s, Parubets had gotten married, bought a house, and had children—all expensive endeavours. Still, after years of financial discipline, Parubets was able to continue contributing to his future retirement, even if he couldn’t sock away quite as much of his income as he had in his earlier career. That drop in savings rate isn’t unusual, especially after having kids. “Your savings rate is going to fall and fall and fall,” Parubets says. “That’s OK, again, if you started saving early.”

Another factor for a 30-something to consider when planning their retirement is how their personal circumstances map up with their savings goals. As much as getting married or buying a house in one’s 30s is considered normal, it isn’t universal. People get married later than they used to—or not at all—and may have very different attitudes around home ownership, children and even retirement itself. 

“You probably should have a very good sense, by your early 30s, what it is you want,” Parubets says. “You need almost a decade to accomplish a lot of these things.” 

Even if you haven’t yet bought a home and want to, one trick Parubets recommends is to calculate the difference between the amount you’re spending on rent and the amount it’ll cost to pay for a home every month, including expenses like property taxes, hydro and utilities. All of that excess money you aren’t spending right away on housing could go into saving for a down payment—or retirement. 

The best tools for saving in your 30s

From there, anyone in their 30s building their retirement savings should make use of every financial tool available to them. Plenty of employees these days don’t have workplace pensions, but some (including Crupi’s employer, Steadyhand) boast RRSP matching programs. Take advantage of it. 

“I maxed that out so I could use it for retirement payments,” Crupi says. 

Then there is what Parubets calls the alphabet soup of registered accounts—the TFSA, RRSP and FHSA (first home savings account) among them. Each of them has its pros and cons, and Parubets recommends looking into the tax advantages of all of them before investing. But Parubets says the FHSA is particularly useful for 30-somethings who plan to buy a home. 

You can contribute up to $40,000, getting an income tax deduction on your contributions as well as tax-free growth thereafter, but if it isn’t used to buy a house in 15 years, the entire account goes into your RRSP. “If you don’t buy a house in 15 years, technically, you’re getting $40,000 more room than someone who does have a house,” Parubets says. In other words, that money could be a way to pinch-hit for either a down payment or a retirement nest egg—whichever makes the most sense. 

Of course, plenty of 30-somethings haven’t taken any of the steps above. They haven’t saved a penny for retirement, or opened an RRSP, or even thought about their retirement plan at all. Some might not be able to afford to save any money between food, rent and gas money. Parubets says people in that situation should be extremely aggressive about saving and be willing to compromise on expensive goals. That might mean a smaller wedding, a longer wait for a house or perhaps even renting for good. “You’ve got to play catch-up for all of the years that you missed.” 

More on retiring without a pension:

• Self-employed and no pension
• 30 and no pension
• 40 and no pension
• New to Canada and no pension

About Brennan Doherty

Brennan Doherty is a Toronto-based writer. His work regularly appears in the Toronto Star, Globe and Mail, BBC Worklife, The Local, and elsewhere.

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