Many Canadians in their 30s, 40s not saving enough for retirement

[Sylvanfan]

Originally Posted by Hesla

^ We take a few vacations a year... All-inclusives. What we have found is the 1500 to 2000 each we spend there helps us be more productive while we are working.

To me... the vacations are a requirement in our lives to keep the stress levels low and the productivity high.

For me I determined that I'd rather take a nice vacation once a year and deal with having to go to work for a few more years than sit at home for the rest of my life hoping I don't outlive my savings.

[Kybosh]

I have a very hard time making any RRSP contributions right now because I'm playing the academic research game. In between all my bills/mortgage and so on there just isn't anything left for any investing. Basically my only entertainment money goes towards a climbing gym membership and coffee. Hopefully I'll be able to sell out and get into industry as soon as possible. As an aside, I want to slap single people that are making $60,000+ per year and complain about it.

Also, I agree with Hesla about vacations being a requirement. I'm not into the all inclusives but my trips are usually pretty inexpensive because I travel cheap.

[return to the red]

I've always been taught growing up to get rid of my debt as quick as possible, I'm sure not all people will agree with this but the way I figure it the quicker I get rid of my large debts the easier it is for me to take that extra cash and start saving for retirement.

[Ozy_Flame]

Some simple rules to living that has saved me lots of money and enables me more financial leeway than a lot of my friends:

1) Never get into credit card debt, loans or lease payments unless it will bring you a higher return at the end of the payment. A house is a good thing to lease / own; a car most certainly is not. Interest is the death of society.

2) Accept that there are services available to the public that are cheaper. Don't like public transit? Try taking it to work everyday instead for one month. I guarantee it's not as bad as everyone says it is, it's healthier for the environment, and you'll have more money in your pocket. Walking / biking is even better. And if you can't get away from the luxuries of a personal vehicle, then carpool - I bet you someone on your block is heading the same direction as you in the morning.

3) Never be afraid to use coupon books when necessary. You know those 2 for 1 deals to fast food restaurants and discounts on groceries? Do it up. Every little bit counts. Always buy food that's on sale too; it doesn't always have to be the 'freshest' food around just to sound like you're a pro at healthy eating in front of your friends.

4) You're not going to get sexed up any more with a pair of $400 jeans than you would a pair of $100 jeans. High-end merchandise for the purpose of self-gratification will drain your account faster than a surplus toilet. Quality, good looking clothes do not have to be bought at the Armani Exchange or Holt Renfrew.

5) Get in the habit of turning off lights and using minimal water. It's not just good for the environment; you'll notice small differences on your utilities bills. 10 minute showers aren't necessary. By CFL's for better long-term savings.

6) Hand-me-downs from parents and relatives in terms of house items, such as kitchen appliances that still work are a great way to save some bucks.

7) You don't need five-star hotels and luxury getaways. If you're an able, fit, young twenty-something, try hostels or camping. You're more in tune with nature, you meet more people, and you get a better experience at the minor inconvinience of having a smaller bed. Young adults from Western countries feel they need to have luxury vacations, when it's just not necessary at all. And besides - why pay for a fancy hotel if you're going to be out doing other things all day?

8) Swipe office supplies, such as stationery. A pencil works the same at your house as it does at work. I'm serious here. Besides, they probably don't pay you enough anyways, so you're just leveling the playing field.

9) Set up a daily budget. I tell myself I can spend $20 per day in fun stuff. If I spend $30, then I have $10 the next day. That way you can have a clear disposable income budget per month without going overboard. Over time, it gets easier to follow - you might even feel guilty for going your daily limit even if you're still within the monthly budget. This is a good thing.

10) Automatically deduct 10% of your paycheque and assume it's just not there anymore. Have it automatically transfered to a TFSA or an RRSP and don't touch it. You're saving for retirement even without thinking about it. When you know the bank is managing your money for you, you aren't as tempted to spend extra because you know you have to have a minimum amount in your account.

Whereas most of my friends have high levels of debt or little to no disposable income, I am debt-free, own a house and have money to enjoy with friends.

Self-discipline is the key. You have to - HAVE TO - stick to it.

[SeeGeeWhy]

How many people even have emergency savings or equivalent on hand in the event of something unfortunate happening such as sickness in family, flood in house, job loss, etc?

Most people live for today... this figure is not surprising.

Do you think this would change if the Canadian public education system did a better job of teaching people some basics about economics and personal finance? I think it would probably help.

[Sylvanfan]

Originally Posted by fotze

I agree to a point with what you are saying, but Sylfan is a long serving member and it does come across dicky (even with a disclaimer).

Also need to remember that us being engineers, some of us begin to clear six digits a couple years after graduation, then you throw in matching savings, options and incentives. If you place is like mine they give you 8-15% of salary matching in RRSP. Its pretty easy to save in that case.

I actually feel bad coming across as dink in the original post because I had not really seen others perspectives before (which is why I made the thread). The biggest reason I can save is because I have been pretty fortunate.

I will say this...years ago when I was a single guy able to work a lot of OT and make an okay wage, things were cheap. I could buy a nice house for $150 grand, or I could share accomodation for $350 a month with all my utilities paid. It was pretty easy to put away money for retirement.

Fast forward a few years with a wife, kids...etc. Working 60+hours a week isn't that easy, and unfortunately the cost of the things required is quite a bit more today. When that $3500 a year you were hoping to get is pulled from under your feet, it's hard to come up with that extra money when you're already living pretty tight.

If I'm falling short of meeting retirement goals I would hazzard to guess I'm not alone. If everyone in North America was as cheap as I am...the recession would go on for decades.

[Bring_Back_Shantz]

Originally Posted by Sylvanfan

Look dude....I am trying to save for retirement. But to put aside 2 grand of the 4500 I take home every month plus support my wife and kid, live in a decent place, have a vehicle....it's just not that easy. I found that I can not save enough to have a lesser lifestyle than I currently have when I turn 60 and keep that life style for 30 years. My guess is that if I'm not making it work than all those other people with stuff that I sure as hell don't have like new homes, boats, cars, RV's, and way nicer crap than I have aren't going to make it either.

My point was that 80% of private companies no longer provide programs to help their employees create a pension for themselves. When you don't have the benefit of a pension you better be putting away about 40% of your take home pay, and for a lot of people with families that is hard to do. Even if you've been a cheapskate who did watch his money.

Look, I understand your point, and yes, it is difficult to save. Sometimes you've got to make choices between saving, and running the family.
I'm lucky, I'm relatively young, with no family, and work at a job where the company does some matching of RRSP contributions, but I don't understand how your example of a company not matching RRSP contributions is a reason to save less. I contribute enough that the company doesn't match any more of what I contribute, but I've increased what I contribute every year, and the fact that the company doesn't match any of it doesn't have much bearing on my decision.

I can understand that if you were to get twice the benefit when you retire you'd be willing to make a sacrafice now (ex. you'd go from $13000-16000/year if you got an extra $4000 from the company). But that scenario is pretty unrealistic.

I mean is a company really going to match just the last $3000? Probably not, which means you'd have already gotten that benefit without the extra $3000. In fact, based on what you say you contribute, and what you take home, I think getting a company to match >100% on that high of a percentage of your salary is way beyond any sort of matching plan I've ever heard of. If you did work for a company with any sort of matching then you'd likely be in the same postion I'm in, where any additional contributions aren't matched.

So is the extra $3000/year sacrafice worth not having to work longer? That's a presonal choice. You've got to do what you think is best for your family, and that's not for me to say anything about. Though for the record, I think choosing to work longer so you can provide a better quality of life for your family is a good choice.

The part that I thought was silly is that you were making the point that part of the reason you weren't increasing your savings becasue you weren't being given an incentive to. I think that's the reason/mentality behind why a lot of people who can and should be putting more away for retirement (not people like yourself who are putting away what they can), are in the group that is not saving enough for retirement. Your point about how it'd be worth putting in an extra $3000 if you got another $4000 from your employer is the kind of thing I'd expect to come out of the mouth of one of those younger generation types who older folks are so fond of saying have a sense of entitlement, and are too concerned with living off of credit for stuff they can't afford. That's obviously not the postion you're in, but I think you illustrated the kind of thinking (though in this case not necessarily applicable to you) that is the reason people who can/should be saving more aren't.

[Bring_Back_Shantz]

Originally Posted by fotze

I agree to a point with what you are saying, but Sylfan is a long serving member and it does come across dicky (even with a disclaimer).

Also need to remember that us being engineers, some of us begin to clear six digits a couple years after graduation, then you throw in matching savings, options and incentives. If you place is like mine they give you 8-15% of salary matching in RRSP. Its pretty easy to save in that case.

I actually feel bad coming across as dink in the original post because I had not really seen others perspectives before (which is why I made the thread). The biggest reason I can save is because I have been pretty fortunate.

I 100% agree, and withough knowing his sitution, I may have jumped the gun, but even still, the company matching or not is kind of irrelevant to how much he puts away. He's doing as much as he can, and that's great, especially considering he has a family.

I don't mean any disrespect to Sylfan, and I don't think he's the kind of person that the thread is about. But the statement he made about not saving more becasue the company isn't giving him more, I think is a great example of the thinking of the people that this thread IS about. Namely those people who can save more, but instead feel that they're entitled to a better standard of living so they don't think of the future.

Does that group include Sylfan? Clearly not. But the statement he made (if not the reasoning or sentiment behind it), was a pretty sterotypcial example of the kind of things that folks in that group would say.
At least I think so.

[1stLand]

I am of the opinion that people should buy income producing assets. Best bet there is - Real Estate.

An up-down basement suite in an older neighbourhood instead of buying that new house in a new development in the outskirts of town is a good decision if you would like to reduce your living expenses and build up equity in the future.

Basement suites (separate entrance / separate laundry) usually rent from anywhere between $700-1,000 a month. That extra income you have coming in will help cut your mortgage in half, or you can simply slap that on the principal and pay down your mortgage quicker.

I love new houses, but the sad reality is that they offer little benefit in the form of rental income, whether it is by renting out rooms for roommates or renting them out to families, simply for the reason they are usually far away from transit and the city core.

[Jonrox]

Originally Posted by Ryan Coke

Yeah, the front line people I work with often have the 'it's so hard to get by' attitude, while wearing their $200 jeans and talking on their new cell phone 10000 minutes a month planning their next trip to Hawaii. I've worked 20 years to get to the point where I can afford all that comfortably, but when I didn't have the money, I just couldn't do it.

It just seems like some people feel they are entitled to a certain standard of living, and if their income can't support it then they 'have' to use up credit to live the way they feel they should.

To be clear, this is not a 'young people these days' comment. There are many motivated, hard working, responsible people that are in their teens or twenties, and lazy entitled people at any age.

This. A lot of people would rather spend their money (or others' money) at an early age at a time when they feel they can really enjoy it, rather than miss out on a lot of experiences for 20 years until they can comfortably afford it. Example: the experiences someone can have going to Mexico and Vegas at 21 years old are much different than the experiences they'd have at 50 years old.

I'm about finding a balance somewhere between spending now and saving for later. A lot of enjoyment at the expense of a little uncomfort is often totally worth it.

For a lot of people, happiness is judged by the good times spent with friends and family, not on the amount of money they saved when they were young. So if it takes the accumulation of debt for a lifetime of memories, so be it. I wouldn't judge them.

[1stLand]

Originally Posted by Jonrox

This. A lot of people would rather spend their money (or others' money) at an early age at a time when they feel they can really enjoy it, rather than miss out on a lot of experiences for 20 years until they can comfortably afford it. Example: the experiences someone can have going to Mexico and Vegas at 21 years old are much different than the experiences they'd have at 50 years old.

I'm about finding a balance somewhere between spending now and saving for later. A lot of enjoyment at the expense of a little uncomfort is often totally worth it.

For a lot of people, happiness is judged by the good times spent with friends and family, not on the amount of money they saved when they were young. So if it takes the accumulation of debt for a lifetime of memories, so be it. I wouldn't judge them.

I agree, Vegas and Mexico are most often times better experienced at the age of 21 as oppossed to 51.

However, that same 21 year old that feels the need to go on 2 vacations a year at an expense of $5,000 per annum shouldnt complain if they have no money to devote to a personal residence and in later years, a decent retirement nest egg.

[Jonrox]

Originally Posted by 1stLand

I agree, Vegas and Mexico are most often times better experienced at the age of 21 as oppossed to 51.

However, that same 21 year old that feels the need to go on 2 vacations a year at an expense of $5,000 per annum shouldnt complain if they have no money to devote to a personal residence and in later years, a decent retirement nest egg.

True. I should have ended my post with "Just don't come crying later on in life when the well has run dry." Again, it's about finding the balance.

[Sylvanfan]

Originally Posted by Bring_Back_Shantz

Does that group include Sylfan? Clearly not. But the statement he made (if not the reasoning or sentiment behind it), was a pretty sterotypcial example of the kind of things that folks in that group would say.
At least I think so.

I do think you have a good point where some people rather than get up and start doing this on their own are waiting for someone else to kick them in the arse and get going. Not to mention a lot of people my age are tragically uneducated when it comes to money. But I do think private companies could help out here if more of them did offer some type of RRSP matching for their employees. I think a lot of people who currently don't put anything aside would suddenly come up with $1500 a year if they knew their company was matching that contribution. Doesn't excuse them for not doing it right now, but sometimes that's what is required to get peoples attention.

[V]

Originally Posted by Bring_Back_Shantz

The part that I thought was silly is that you were making the point that part of the reason you weren't increasing your savings becasue you weren't being given an incentive to. I think that's the reason/mentality behind why a lot of people who can and should be putting more away for retirement (not people like yourself who are putting away what they can), are in the group that is not saving enough for retirement. Your point about how it'd be worth putting in an extra $3000 if you got another $4000 from your employer is the kind of thing I'd expect to come out of the mouth of one of those younger generation types who older folks are so fond of saying have a sense of entitlement, and are too concerned with living off of credit for stuff they can't afford. That's obviously not the postion you're in, but I think you illustrated the kind of thinking (though in this case not necessarily applicable to you) that is the reason people who can/should be saving more aren't.

I don't completely agree. The fact is, if my employer is willing to match whatever I put in, I will put away more than otherwise. The reason being that the money will return 100% instantly and go from there. If the employer is not going to match, I will probably invest less, because the 300 bucks a month I can put away will not provide enough of an impact on my retirement savings to take away from some comfort that I can enjoy now.

There is definitely a balance there, because you really do need to put something away for the future, but it is not beyond comprehension that someone would pay more into RRSPs if it was matched by the employer. I know that I'd put more away if my employer matched more.

[shermanator]

Originally Posted by return to the red

I've always been taught growing up to get rid of my debt as quick as possible, I'm sure not all people will agree with this but the way I figure it the quicker I get rid of my large debts the easier it is for me to take that extra cash and start saving for retirement.

I'll agree with this 100%. Any money I save up gets either thrown towards the principal on my mortgage, or towards potential upgrades to my house so that when I do decide to sell, it's worth more than if I hadn't.

[Antithesis]

Definitely makes me happy to have the pension I do through my employer; I make retirement contributions without even thinking about it. Also, as things are right now, retired teachers can substitute teach to a maximum of 100 days/school year and still collect pension benefits, so both my wife and I plan to do that. It's in areas like this where my lower earning potential seems like not such a bad trade-off ...

I have read a fair bit about retirement and other financial issues, and my understanding is that people in their 30s have this huge guilt complex ("I should be saving more") about retirement savings when we just don't have the same savings potential (paying for daycare, child expenses, lower income relative to the rest of your career, etc) as people do later in life. Apparently, if your net worth is increasing slowly but steadily throughout your 30s you are actually doing OK.

As to CPP and OAS, I thought there had been some recent-ish changes to them that have led these programs to be a lot more stable than people seem to think they are (equating issues with Social Security in the USA to our government retirement plans). If I understand right, a person who works until they are 65 should expect (in today's money) about $13,000 between CPP and OAS - so if you are a couple, that's $26,000 right there - which goes a long way to many people's retirement goals.

As Canadians, for a long, long time, we've been led to believe that we need 80% of our current income to retire to even a reasonable manner when that's just not true ... lots of info I have seen suggests most people are OK in that 40-50% range as you are generally no longer paying for your house or child-related expenses. I think almost everyone in Canada has this goal of a $1,000,000 retirement nest egg when they just don't need that much.

[SeeGeeWhy]

Originally Posted by Sylvanfan

I will say this...years ago when I was a single guy able to work a lot of OT and make an okay wage, things were cheap. I could buy a nice house for $150 grand, or I could share accomodation for $350 a month with all my utilities paid. It was pretty easy to put away money for retirement.

Fast forward a few years with a wife, kids...etc. Working 60+hours a week isn't that easy, and unfortunately the cost of the things required is quite a bit more today. When that $3500 a year you were hoping to get is pulled from under your feet, it's hard to come up with that extra money when you're already living pretty tight.

If I'm falling short of meeting retirement goals I would hazzard to guess I'm not alone. If everyone in North America was as cheap as I am...the recession would go on for decades.

To be fair, you live in one of the nicest places in one of the best countries in the world. You're already half way to what many people consider retirement look like.

[CGYTransplant]

Originally Posted by troutman

At least we don`t have crippling student loans like young professionals in the US.

Um...I went to a Canadian university, in Alberta, and I graduated in 2005 with a Bachelor of Science and $45,000 in student loans. That's pretty damn crippling to me.

[Table 5]

Originally Posted by Sylvanfan

But I do think private companies could help out here if more of them did offer some type of RRSP matching for their employees. I think a lot of people who currently don't put anything aside would suddenly come up with $1500 a year if they knew their company was matching that contribution. Doesn't excuse them for not doing it right now, but sometimes that's what is required to get peoples attention.

At the end of the day though, nobody should ever expect their employer to plan their financial future and kick-start retirement plans. They are in the business of making money, not being a financial advisor.

It's funny how when someone wants to buy a tv or a car, they will spend weeks researching online for the right model, shopping around, and looking at various options....but when it comes to ensuring their own financial future, people always seem to put it off or wait for somebody else to make a decision for them.

I used to be pretty ignorant about money matters (mostly because I didn't have any), but I found that reading up on even the basics has been a real help. I still have a lot to learn and I still don't have a lot of money, but now I feel like I have understanding of how things work and feel empowered by the knowledge. It's a pretty good feeling being in charge of my future, instead of just hoping some magical finance fairy gets things done.

[Frank MetaMusil]

If people reading this thread are feeling bad about their retirement, I strongly suggest you read this book:



Now if you are single, this book:


Both are very quick reads and definitely put things into perspective as to where you can save significant amounts quickly.