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Is it Too Late to Start an RRSP?

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It can be incredibly easy to feel as though you’re falling behind when investing. Every day just adds on to the thousands of other days that went by without you putting away money for retirement.

So, not only does it feel easy to fall behind, it can also feel easy to just give up on investing.

But whether you’re 20, 40, or 60, it’s never too late to start investing, and that includes a Registered Retirement Savings Plan (RRSP).

The bottom line is that when you start putting money aside for investing, you do it on a regular basis. The main difference between being a 20-year-old investor and a 60-year-old investor comes down to the types of investments you choose to create your RRSP.

If you’re a 20-year-old, you have time. You can choose riskier stocks that could see huge growth over the next few decades and couple them with steadier stocks that will see you through those decades. That way, you can see immense growth, while also feeling secure in your investment.

The 60-year-old investor, however, has to play it a bit safer. Hopefully, you’re looking to retire as soon as possible. On the one hand, that deadline is fast approaching, and that can seem daunting. On the other, you have the ability to put more aside. You’ve already paid off those life goals of buying a house, getting married and having kids; all of it is done. Now you can focus on you and your retirement.

So, just because you have to make safer investments, doesn’t mean you can’t make some great cash in the short term. What that will mean is you should be making larger automatic payments into a RRSP. That will give you the best chance of creating a large retirement nest egg.

In either case, young or old, there are a few great choices I would make when starting a RRSP right now. First off, there’s Royal Bank of Canada. Royal Bank trades at about $102 at the time of writing, with a fair value closer to $112 per share according to analysts. The bank also offers a nice dividend of 4.33% right now, which was recently increased by the bank after another earnings report that beat analyst expectations.

If you’re a 20-year-old looking at the past 20 years, investing $10,000, adding $100 per month, and reinvesting dividends, that would put you at whopping $211,558.18 by the time you reach 40.

As a 60-year-old, if you have some more money to put away, then things can get interesting fast. Say you put $50,000 away, adding $1,000 per month and reinvesting dividends, you would reach $327,523.43 in just 10 years! Suffice it to say, that’s not bad for starting off right before you retire.

Now, of course, all this is based on today’s current market. But that market is on quite a dip and should rebound back to pre-dip prices in the next few months. I would always recommend doing your own research before putting the funds I’ve suggested away, but there is one thing I can say for sure. No matter what age you are, it’s never too late to start a RRSP.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe owns shares of ROYAL BANK OF CANADA.

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