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

[Eric Vail]

I have a 800 square foot 1 bedroom condo overlooking Olympic Plaza with downtown parking in a concrete building that I could sell for around $220,000.

You don't have to start with a $300,000 townhouse.

[Phanuthier]

Originally Posted by SeeGeeWhy

People used to retire at 60 - 65 because a majority of jobs were hard labour based and your employers would literally work you as long as they could before you kicked the bucket. Retirement probably lasted 2 - 5 years in this scenario.

These days, retiring at 60 means you've got to 'self-fund' for probably 20+ years. Life expectancy in Canada is high and is getting higher.

What I think this means is that a person's mentality about retirement needs to change. Probably means you amass a mixture of assets that includes your own human/mental capital (skills) along with equity, debt, real estate, etc so you can continue to bank on all of it well into your golden years.

What does it mean to you? That's the real question.

I guess talking about myself personally, I may be fortunate in this, but I plan to work as long as I want to work. I've done jobs that I hated going to work every morning, and that doesn't sound appealing to me. Some might call it entitlement, so be it; at the moment, I'm pretty optimistic about the career I am pursuing so I'm really in no rush to retire (obviously since I'm young) but I also don't ever see myself looking to retire in Hawaii or whatever, that just doesn't sound appealing to me. Which leads to my "solution" of sorts, why not just stay on as a consultant? At least thats my plan.

I have to admit, I really have no tax plan or estate plan or anything like that (I'm also 25). For the most part, I manage my own finances - I have no debt, I do have some investments and they're doing ok, I have a TSFA and max it out but I have no RRSP (I guess I should? I really got to figure that out since I don't have any plans in the forseeable future to return to Canada). My spending habits the past 2 months scare me a little bit, but such is life. I guess at some time when I am "settled" in life, I do have to go find one of those financial guys and start dealing with that.

[afc wimbledon]

I used to think $100 jeans and $200 nikes were a sign that the world had gone mad, then one of my foster kids worked all summer to buy a $400 sweat shirt that looks like it was puked on by a shiny paint factory.

I have become my grandfather.

[blankall]

Originally Posted by ma-skis.com

There are lots of careers without university, it's just that society has played up university to be some kind of magic wand for people to find a career, so you have people languishing in school building up debt and trying to find jobs in markets that don't need their skills. Even working at earls can be lucrative. Head chefs and Restaurant Leaders can clear 100k. People choose to mess around at earls because they don't have the foresight to plan appropriately.

I would imagine after doing a short apprenticeship where you can get paid and then moving immediately into the workforce would be a much more practical plan for many people at this point in time. Instead we have people playing grown up living on their own, taking a masters in degrees with little job prospects. All of which adds up to debt.

People forget that university isn't the only route in life.

Plumber high school education --> after 2 years you're clearing 60k

Electrician High school education (without even math 30) --> clearning 60 after 2 years...

There's plenty of jobs out there for people, it's just that there's too many people who feel they are "too good" for certain types of work. or deserve something they deem as "better"

you have much to learn young grasshopper

I suppose my view of real estate is skewed, but I do live in Vancouver. Calgary does seem to have gotten a little bit more reasonable.

As for the trades, yes I agree that is a good option for many. But internships in lucrative trades take longer than you are letting on and can be a lot harder to get than you are letting on.

During boom times the trades are lucrative, but during busts (ie now), not so much. Furhtermore, if a substantial amount of people at university dropped out and joined the trades, you would just have more competition for those jobs, and a transfer of the underlying demographic problem.

This idea that there are excess trade jobs is total BS and has nothing to do with people thinking they are too good for certain jobs. During housing booms we require extra trades people. During the other 90% of the times those people struggle for work just like everyone else. If you expect peolpe to train for a trade that there is no work in, in the event that another boom is on the way... well that just doesn't work.

Not only is it impractical since you actually need to secure a job and have soeone take you on to become a tradesman, but purposely investing time in an industry you know can't provide for you is ridiculous...even more ridiculous than going to university, because yes an education does have intrinsic value in itself.

If your so convinced about the trades, I think you should take a walk down towards your local EI or Welfare office and see exactly who is line there.

As for people making money at Earl's that is an illusion. 2 people in the restaurant make money. The head chef and the head of the front of house. The problem is neither of those jobs offer any security and you will be let go if: you are too old (anyone who doesn't fit their youth model is automatically let go), the restaurant suffers a loss for any reason, the staff becomes disgruntled for any reason (there is a lot to be disgruntled about there), etc... etc... You are basically the fall guy for the baby boomer who owns the restaurant franchise and the stock holders in the company.

Following and during university I worked in just about every industry there is. I observed how the people 10 years senior were living and what their prospects were. They simply were not very good. Hard work had nothing to do with it.

[blankall]

Originally Posted by afc wimbledon

I used to think $100 jeans and $200 nikes were a sign that the world had gone mad, then one of my foster kids worked all summer to buy a $400 sweat shirt that looks like it was puked on by a shiny paint factory.

I have become my grandfather.

You don't have to be a grandfather to know that Ed Hardy is hideous. Unless you are an 80s rock star turned yuppie, you definitely should not be wearing that crap.

[blankall]

Originally Posted by Eric Vail

I have a 800 square foot 1 bedroom condo overlooking Olympic Plaza with downtown parking in a concrete building that I could sell for around $220,000.

You don't have to start with a $300,000 townhouse.

My kids will sleep in the cupboards....great.

[Sliver]

Originally Posted by KTown

Easy, as Donald Trump says you have to spend money to make money. Instead of blowing my cash in my early 20's I bought a house at a good price. I paid more than I could afford at the time which was a stretch off the salary I was making back then. Then I started paying off the mortgage faster than normal, got my house re-appraised and took the equity out of my house and put a downpayment on houses in Regina before it boomed there.

I could have bought a lexus or something like that instead of driving my crapbox from high school back then and rent like some of my other friends did but I started investing my money, first investment was buying my house. It's a tax free investment if you think about it. I also started an RRSP when I was in college, I started at 18 throwing in $50 a month, its not hard. Its just living comfortably within your means and not getting suckered into living on credit and buying every nice new thing you see.

Originally Posted by KTown

Never got a dime from anyone for any of the things I got. My parents wouldn't give me money, they wanted to retire early and as soon as I finished college dad said move out or pay rent. So I moved out, being smart with your money is not hard. Driving a 96 Ford Escort for 14 years was hard, while all my friends where driving there nice trucks, BMW's, etc.

There is no way you are disclosing everything here...if your story is true and you haven't left out some material information then I'm pretty sure you live in the land of make believe.

[Slava]

[QUOTE=macker;2459795]

Originally Posted by ken0042

What would you consider "long term", and how much of an investment would one need to put in? Would it be something that the average person could add hundreds per month into?


If you look at the last 10 year period of time the S&P/TSX Composite (Canadian) total return index was up 6.2% for the 10 year period ending June 30, 2009. The S&P 500 (US) total return index was down 4.4% hence the "lost decade". The World Markets excluding the US total return index was down 0.3% over the past 10 years. This is before considering that MER's in Canada are the highest in the world and take off 2.5% - 3% off the index returns quoted above. I would also note that 75% - 80% of fund managers can't beat the index and even a 1% MER is significant over a 10 year period of time. If you aren't convinced then build your portfolio to include actively managed funds and passively managed etfs or index funds and compare over time. It is very hard to argue with the couch potato portfolio for most lazy investors. If you have time use the passive etf's/index funds actively to play trends and stay on top of things. Diversify your assets and your investment style.

Weird. I did a very quick search and found 326 funds that were equal to or over your 6.2% rate for the last decade. I'm not sure how many index funds could make that claim? I also think that a lot of the ETF studies are flawed to being with. The MERs in some cases are low, but there are acquisition costs that are not factored in or the comparison is against the index as a whole that no one can buy for free.

Originally Posted by MoneyGuy

I'm going to get a little personal here. I'm in the middle of the boomer generation and have seen a lot. I have a bleak view of people in their 20s and 30s. Not all of them, but many. My generation left high school and immediately went to university, trade school or whatever and then started careers. Yes, some of us went to Europe but then we got on with our lives. We were very determined and focused. I know many boomers who screwed up also, but lots of us did the right things. I'm not at a point in my life where I have lots of money and can do almost anything I want (as long as the wife agrees).

Ah, those folks in their 20s and 30s again. I hope not to offend anyone here, but I'll be blunt. I shouldn't offend you anyway because I know very few of you and you may be exceptions. Many of that generation want everything now and are willing to forsake good financial decisions and into debt for it. The biggest mortgage I ever had was $65,000 and now I have young clients (I'm a financial planner) who have 400,000-plus mortgages. I bought a starter house, but see lots of people of my kids' generation who are willing to do that. I built equity more slowly, but not so the 20s and 30s. I just recently bought a 50-inch screen; most of you have had them for a long time. It's not that I couldn't afford it, because I certainly can but I carefull consider big purchases both as wants and also what makes financial success. My RRSPs are totally maxed out, as are my wife's. Our TFSAs are also maxed out and we have a tonne of non-reg investments.

If I because disabled and couldn't work for a year, I could do it easily. I'm insured and have other financial resources. How many of you could withstand a few months without devastating your finances?

I'm not alone. We have friends who are similar positions. If we wanted to drop $10K for a trip to Europe or anywhere, we can do it. I'm revealing this not to boast, but in the hope that my story can inspire some young folks to do the right things. Talk to your parents (assuming they're financially successful) and ask what they did. Do more things as they did and less like what your generation is doing and you'll reap the rewards down the reward and many of your friends will be envious. Having said that, many of your parents' generation are also in dire financial need also, so maybe your parents are not the best model for you.

I know young people who are absolutely stupid financially (just as I know people of my generation who are the same) and some very smart young people. Which will you be?

In short, make good decisions (use your head and not your heart) and you can be financially successful, build a moat around yourself and your family and achieve wonderful things. If not, well all bets are off. Good luck.

Edit: ETFs are not the cure-all many people think. Compare properly and mutual funds and stocks stack up a lot better than you're led to believe.

Good post and I actually agree with most of this. As a member of the younger generation though I do get tired of hearing the boomers ahead of me. (Here is where I better note that I am about the make some sweeping generalizations about the boomers....I know that this doesn't apply to everyone!)

Were/are the boomers fiscally conservative? Not a chance! This was a generation that begged, borrowed and stole from the next generation. In general they don't want to pay tax at all (who does!), but they still feel entitled to the services that come from those very taxes. How many levels of government are running on fumes these days? That my friend, has everything to do with the fiscal mismanagement of the generation ahead of us! The younger people in their 20s and 30s didn't pursue that course of action. I know that this is not going to be a popular thing for that generation to read...but seriously it was your fault.

The argument is that personally they are in great shape though. They had low mortgages and they always run a tight ship in their own cheque books. Was that always the case though? Even for the clients I have who are doing well these days I often wonder about where they were at 25 years of age. The boomers ahead of us did the same thing as they accuse the youth of doing today; they borrowed more than they could afford to pay, bought things that they didn't need to buy and thought that they knew better than their parents ahead of them. For every person today with a phenomenal savings account that they've worked really hard for there is a another person who will be relying on a $18k locked in pension from a job they once held and CPP/OAS. That $18k will generate somewhere around $1000/yr before tax for them to live on....if they are lucky!

The boomer generation now blogs and sends out emails saying how tough their life was and how they can't understand kids these days wasting money on "a, b,c and d". (I end up reading these items because my caring father in law makes sure I realise how difficult a retirees life is these days!) Their mom and dad couldn't understand why they would buy a car with an 8 track player in it. It was unnecessary and yet the boomers not only bought, but they financed it! How dumb were these kids?!

They've now paid off their credit card debts, houses, and in general don't understand why the youth finds it to be a struggle to do the same. Maybe budgeting when you're debt free becomes easier? (Who'd have thunk it!). I found this incredibly frustrating when I was younger, but it all makes so much sense now; its the empathy gap. We can't really understand another persons feeling hungry after we've just eaten an enormous thanksgiving meal. We can't really understand and feel the warmth of the summer sun when its -30 and we're out shoveling snow. The boomers ahead of us can't understand why the youth can't just "save more money" or "put off those purchases" because they are in a totally different situation. Its a basic human condition and it certainly doesn't make them bad people.

At the end of the day the generation ahead of us has passed along some horrible financial strategies. They've borrowed a huge amount and not waited for anything. They've passed along a distrust of "the man", which leads into a distrust of many professionals and people thinking that they can do things better on their own because these professionals might try to screw you. Lawyers, doctors, teachers and a lot of the big corporations are viewed cynically for various reasons and its really a detriment to society that we take that view.

The boomers have also done some amazing things though. They built an infrastructure system across the North American continent which is nothing short of amazing. They have built hospitals and schools that put every other civilization ahead of us to shame. They made technological and scientific advancements over the last 50 years that have transformed our society and built the very platform that we stand on today. Its really miraculous what they've accomplished!

Anyway, this thread is beginning to get full of a lot of vitriol and somewhat personal attacks. I just wanted to chime in with my unedited thoughts here before things go too far off the rails. There is more than one way to succeed financially and we don't all have the same starting point.

[ma-skis.com]

Originally Posted by blankall

Following and during university I worked in just about every industry there is. I observed how the people 10 years senior were living and what their prospects were. They simply were not very good. Hard work had nothing to do with it.

I agree with the intrinsic value of education, but at the same time people need a backup plan rather than staying in school because the job market is poor to buy time. Someone who takes 8 years to earn a masters in religious studies and piles up 75K in debt is going to be in a worse financial position than someone who has been training to be an electrician for 8 years.

It's the same reason why I struggle with people who major in communications and culture, (what used to be general studies) that person has just earned a 4 year degree in nothing particularly useful other than the experience of university education... and 25k of debt.

I agree, if a substantial number of people dropped out of university to pursue trades there would be the reversal of the same problem, ideally there would be a balanced number on both situations. you would think, universities would be projecting the type of demand industry x needs and then accepting y number of applicants into that field. Maybe they do... but i feel that enrollemnt numbers are more important to them.

[Shazam]

Originally Posted by Sylvanfan

Only if those damn boomers don't exhaust that resource before those in the trailing demographic get there.

CPP has an expected lifetime of 75 years right now. CPP premiums have been almost doubled over the past decade to ensure that CPP is alive and kickin'.

CPP funds are actively managed and invests in the stock market and other vehicles. Contrast this to US SS, where they're still pissing over whether it's okay for them to buy CDs.

[username]

Bottom line is this: If you put away at least 10% of your salary every month, you're going to be fine when you retire.

People are certainly living way beyond their means, particuliarily those that claim they "can't get by" if they don't put that money aside. If you're reading this thinking there's no way I can get by with putting 10% away each month then YES you are living beyond your means. Simple as that. Change your lifestyle and you will be able to put 10% away.

[blankall]

Originally Posted by username

Bottom line is this: If you put away at least 10% of your salary every month, you're going to be fine when you retire.

People are certainly living way beyond their means, particuliarily those that claim they "can't get by" if they don't put that money aside. If you're reading this thinking there's no way I can get by with putting 10% away each month then YES you are living beyond your means. Simple as that. Change your lifestyle and you will be able to put 10% away.

Your making the assumption that everyone has regular and consistent work available to them.

Going back to the subject of trades, all of my friends who went into the trades three years ago because of all the opportunities are now living off EI, savigns, parents etc..

[macker]

[QUOTE=Slava;2460292][QUOTE=macker;2459795]

Weird. I did a very quick search and found 326 funds that were equal to or over your 6.2% rate for the last decade. I'm not sure how many index funds could make that claim? I also think that a lot of the ETF studies are flawed to being with. The MERs in some cases are low, but there are acquisition costs that are not factored in or the comparison is against the index as a whole that no one can buy for free.


I think you are making my point here. 326 funds divided by the number of funds in Canada will equate to at least 75% - 80% of the fund managers underperforming the index. If 75% - 80% can't beat the index then why give them 2% -3% every year. It doesn't add up. I couldn't agree more with Warren Buffett about the wisdom of using index-based funds for most institutional and individual investors. It is not just Warren Buffett either....look at the Chinese state owned sovereign wealth fund (over 300 billion in assets) Top holdings include MXI, XLE, EFA, EEM and GLD. I think they like ETF's so much as they can hide in them and play the trends without having to disclose their postions like in stocks. By the time we find out their holdings they could have changed. ETF's have much to offer and you can actually get actively managed ETF's now with Horizons BetaPro if that is your basis but I am saying to do your DD and see what works best for the average investor. Google active funds don't work and see what you get. Sure there are some star managers included in those 326 funds but it is a very small percentage. How many players are in the NHL and how many scored 50 goals this year. It is the same thing. I can see where you are comming from and I won't really argue this point beyond this.

[Pastiche]

Edit: ETFs are not the cure-all many people think. Compare properly and mutual funds and stocks stack up a lot better than you're led to believe.

Says the guy with a stake in selling Funds.

Not according to this recent survey:

http://blog.canadianbusiness.com/act...s-index-funds/

Standard & Poor’s released today the Standard & Poor’s Indices Versus Active Funds (SPIVA) Scorecard for Canada. It shows how Canadian mutual funds fared against market indexes in 2009 and for the last three and five years.

A main finding was that only 12.5% of actively-managed Canadian equity funds outperformed the S&P/TSX Composite Index over the last three years. And only 7.45% outperformed over the last five. SPIVA again highlights how “passive investing provides a cost efficient way to access capital markets,” to quote the news release.

Full report: http://www.standardandpoors.com/serv...ervalue3=UTF-8

[Kybosh]

Originally Posted by username

Bottom line is this: If you put away at least 10% of your salary every month, you're going to be fine when you retire.

People are certainly living way beyond their means, particuliarily those that claim they "can't get by" if they don't put that money aside. If you're reading this thinking there's no way I can get by with putting 10% away each month then YES you are living beyond your means. Simple as that. Change your lifestyle and you will be able to put 10% away.

Good advice, I wish I had been better at budgeting and put away 10% of my $1500/month. Come on, it isn't simple as that and depends on a lot of other factors.

It's funny though, the bank classifies me in one of the highest earning potential brackets (which is why I was able to get my mortgage) but I struggle to make ends meet even with my frugal lifestyle. Stupid academic research.

[Cactus Jack]

If you have roots/connections/interest in living in Latin America for instance, what about the strategy of selling your 400K house in Canada and taking that money to go live in South America?

[Sliver]

Won't we get kidnapped down there?

[macker]

Originally Posted by Cactus Jack

If you have roots/connections/interest in living in Latin America for instance, what about the strategy of selling your 400K house in Canada and taking that money to go live in South America?

I don't know if it has changed but you used to be able to draw from your RRSP's in Mexico without paying taxes as long as you became a resident of Mexico. Interesting idea if that is where you want to be.

[Cactus Jack]

I won't, I know that. You might.

[Sliver]

Originally Posted by Cactus Jack

I won't, I know that. You might.