Retirement a distant dream for many Canadians

[Reaper]

Meh, I plan to die at work.

[SeeGeeWhy]

Honestly... retirement, CPP, OAP, pensions in general, RRSP/RRIF - they all have so many assumptions built into them.

1. You work a labour job.
2. You will work until you're 65.
3. You will live until you're 75.
4. Your cost of living will decrease when you are older.
etc

I feel like all of these assumptions build a paradigm that is completely false for a very large number of people.

I am not a labourer and am not actually very opposed to "working" (i.e. using my brian to earn money) until the day I die. Why should I have savings beyond what I need to cover emergencies? Why cannot I engage my spare capital today into making sure my house is paid off (a guaranteed, risk free return) at a sooner date and taking some time every so often to enjoy life? Is having insurance policies to cover my outstanding debts, help fund my child's education, and provide a comfortable lifestyle should I become dead/disabled/invalid at the same time irresponsible because I am not investing into bunk mutual funds with negative real rates of return?

Originally Posted by Ozy_Flame

While an inheritance is a nice thing and being a trust-fund baby sure sounds nice, I think the real problem lies in education. Kids are NOT being forced to take money management classes, nor are they taught to respect the almighty dollar. Kids today play with Xboxes, iPhones, crazy light-flashing toys that connect to the Internet, and the parents don't realize that these things add up. They kind of beleive that it's good practice for their kids in the future.

Technology may change, but the buck sure doesn't. A dollar saved is a dollar earned. I don't think enough kids going into their teenage and young adults years have been taught to think like that.

+1 for this.

The state of financial literacy is awful. I am critical of a leadership that does not teach proper rules of currency and financial discipline, who instead choose to promote a system that is really just a dangerous race to the bottom. The goals that are expounded to the masses though the marketing arm are totally out of whack with reality... brainless "saving" habits that only actually help feed a monstrous industry and do nothing to ensure a good lifestyle for people except for those who are managing the dollars. Nothing understood about economics, shrewd investing into companies that build projects with real returns... we've definitely reached a state of financial hubris and wonder why our world seems so manic and unsatisfying. It's pretty gross and it needs to change.

[yads]

Originally Posted by Slava

The wealth transfer he refers to is the baby boomers passing their wealth to the next generation, which is considered to be the largest wealth transfer between generations in history. It brought up constantly at financial advisory meetings of one sort or another. For a few reasons I think that its largely bunk....but thats another story.

The biggest failing of people planning for retirement though is horrible planning. Most people have this idea that they are going to downsize, and spend less money than they currently live on - that figure is approximately 75% of their income. Mysteriously though they plan to reduce their spending to this point while having more free time (no longer working for 40 or more hours a week), and no schedules to hold them back from their likely poor spending habits! The reality is that a lot of people spend more than they are actually earning when they initially retire. They travel, they buy stuff for the grandkids and kids, they do things in terms of hobbies more than they were able to before. This comes to an average of about 135% of their pre-retirement income. In other words people are planning for a retirement where they'll have much less budgeted than what they will actually spend in their retirement!

(Saving to be able to spend 135% of your pre-retirement income would be a nightmare btw, but the numbers are what they are; and I'm looking at the first 10-15 years where most retirees are active and spending the most money)

Statistics contradict what you say. In that Money Sense article linked earlier it says

According to Statistics Canada, median spending by a couple over 65 is about $40,000 a year, and average spending is about $51,000. But VanGorder says to enjoy the type of retirement he wants, you might spend as much as $60,000 a year.

Hardly earth shattering numbers.

[Reaper]

Originally Posted by SeeGeeWhy

I am not a labourer and am not actually very opposed to "working" (i.e. using my brian to earn money) until the day I die.

Made me laugh.

[Tron_fdc]

So what's everyone's idea of enough savings? I wonder if we should do a poll?

$250 000.00
$500 000.00
$750 000.00
$1 000 000.00

I would think that $500k savings and owning your own home would be enough. At 10% return you should be able to live on $50k a year.

[MelBridgeman]

freedom 35 baby!!!

Thank god for my frugal parents!

[Cowperson]

In my experience - and it seems to be backed by studies starting to show up - people are less and less likely to straight-up retire.

Instead, they're working less hours and then, some time down the road, finally walking away for good.

In other words, a black and white retirement is being replaced by gradually fading away.

The classic example you see all over the oil patch is the guy who worked for a company for 30 years and is now a consultant making good dough but only working three or four months in a year. That's very common these days and it works for the company because they don't have to provide the contract worker with expensive benefits while they gain the value of his experience.

This allows these workers to move beyond an initial underfunding of savings and maintain a retirement cash flow.

Cowperson

[Tron_fdc]

Originally Posted by fotze

No way. Good luck with 10%. I figure you need much more than that. Definitely $1MM+.

Interesting. I hear numbers from different people in the 500 range.

Why 1 million+?

[Sylvanfan]

Originally Posted by Tron_fdc

So what's everyone's idea of enough savings? I wonder if we should do a poll?

$250 000.00
$500 000.00
$750 000.00
$1 000 000.00

I would think that $500k savings and owning your own home would be enough. At 10% return you should be able to live on $50k a year.

How old are you and how long you think you'll live. For my mom who's 65 yesterday, will get a bit of a pension from her job as a nurse, her CPP and the like, she's probably okay with only 250k in savings so long as health care doesn't become privatized, and Real Esate loses no more than 60% of it's current value.

If you're 45 though...have 3 kids who are 8 to 12 years of age, no pensions you can tie into for the next 15 years....that ain't gonna work.

[Ozy_Flame]

Originally Posted by Cowperson

The classic example you see all over the oil patch is the guy who worked for a company for 30 years and is now a consultant making good dough but only working three or four months in a year. That's very common these days and it works for the company because they don't have to provide the contract worker with expensive benefits while they gain the value of his experience.

This allows these workers to move beyond an initial underfunding of savings and maintain a retirement cash flow.

Cowperson

Glad you defined it as a 'classic' example, because hardly any Generation Y or Z'er is going to stay with the same company for 30 years. Therefore, constantly changing jobs / companies is going to require younger workers to maintain their own sources of savings, such as RRSP's, and will less likely 'max out' the benefits plan at one particular company.

I would like to stress, however, that I think young people place a bigger emphasis on time than they do cash these days, and I think it's clearly evident when young people have huge debt loads but still want the freedom to travel and hang out.

[Dion]

Originally Posted by Tron_fdc

So what's everyone's idea of enough savings? I wonder if we should do a poll?

$250 000.00
$500 000.00
$750 000.00
$1 000 000.00

I would think that $500k savings and owning your own home would be enough. At 10% return you should be able to live on $50k a year.

I'm looking at $300,000 plus any inheritence I might get from my mother.

[Cowperson]

Originally Posted by Ozy_Flame

Glad you defined it as a 'classic' example, because hardly any Generation Y or Z'er is going to stay with the same company for 30 years. Therefore, constantly changing jobs / companies is going to require younger workers to maintain their own sources of savings, such as RRSP's, and will less likely 'max out' the benefits plan at one particular company.

I would like to stress, however, that I think young people place a bigger emphasis on time than they do cash these days, and I think it's clearly evident when young people have huge debt loads but still want the freedom to travel and hang out.

The average person has three careers I believe, although that may be changing as well.

Coincidentally, in the New York Times today, a look at the way young people view morality and its stunning differences with prior generations. As an example, the author is disturbed that the majority of young people in the survey have no moral issue with today's rampant consumerism - but then again, neither do I so I'm no sure why that would hook him.

Anyway, a look at the way young people view morality these days and their day-to-day decision-making which goes to your point and probably serves some purpose in this discussion about retirement planning. The culture of "me" and "now."

http://www.nytimes.com/2011/09/13/op...t.html?_r=1&hp

Cowperson

[Slava]

Originally Posted by yads

Except statistics contradict what you say. In that Money Sense article linked earlier it says



Hardly earth shattering numbers.

That article also says that its about $22k-$27k per year to live in most Canadian cities. That seems like a huge stretch!

Thats not to suggest that its impossible, but its not quite what I have in mind for my retirement. I just think that there are a lot of baby boomers who will get a rude awakening as their retirement nears. If I had a nickel for every guy who "has his retirement in his house" and just plans to sell the house and downsize I could probably retire today!

[bizaro86]

Originally Posted by Slava

That article also says that its about $22k-$27k per year to live in most Canadian cities. That seems like a huge stretch!

Thats not to suggest that its impossible, but its not quite what I have in mind for my retirement. I just think that there are a lot of baby boomers who will get a rude awakening as their retirement nears. If I had a nickel for every guy who "has his retirement in his house" and just plans to sell the house and downsize I could probably retire today!

If you define living as "not dying" that's possible. In Calgary half of that is rent, (or property tax/utilities/insurance are close if you own a place). Even counting the borderline free senior transit passes as transportation, that doesn't leave much for anything other than food and basic necessities.

But I wouldn't call that the golden years by any stretch.

[IliketoPuck]

The amount of money you need for retirement is directly related to the quality of living you want to have. Is living on 50k a year what you want to do when you are retired? For me it is having the flexibility to travel wherever I want, whenever I want and to be able to afford whatever I want to. Not saying that I'm going to go out and buy a Ferrari, but I want a nice house, a nice car and I want to be able to pay for my kids education and to give them some $$ to start their lives.

Is 50k a year enough $$ to do that? Not likely. 2-3, maybe 4 million is closer to what I'm aiming at.

[Slava]

Originally Posted by bizaro86

If you define living as "not dying" that's possible. In Calgary half of that is rent, (or property tax/utilities/insurance are close if you own a place). Even counting the borderline free senior transit passes as transportation, that doesn't leave much for anything other than food and basic necessities.

But I wouldn't call that the golden years by any stretch.

I agree with you...but thats what the article says.

[Erick Estrada]

Originally Posted by J pold

Flipin’ baby-boomers! I laugh when I hear people say that it is my generation (Gen Y) that is the most self entitled in history. Make no mistake the baby-boomers are by far the most entitled generation of all. They lived an overleveraged lifestyle in the prime of their earning years which lead to massive bubbles that nearly broke the financial system, which in turn has resulted in a bleak economic outlook for the people of my generation when we reach our prime earning years, that is if you are able to find a job at all. Now it appears a fair share of them didn’t even have the foresight to save for retirement and are now forced to work longer into their lives, which results in a depressed job markets for new graduates. When they are finally booted out the door they probably won’t have enough money saved and will expect the younger generation, which they already have greatly disadvantaged, to prop them up until the die.

It depends on how you look at it. When I was young (mid/late 80's) I was happy to stack lumber, shovel rocks, dig trenches, etc for 8-12 hours a day for $6-10/hr. Now we have young kids that scoff at $15-18/hr for simple stuff like warehouse work or shipping/receiving. The ones that do accept the job spend half the day texting on their cell phone. If you can get 4hrs of work out of some of these kids in an 8hr shift you have a keeper lol. I have a very hard time not placing Gen Y as the most self-entitled generation of all-time.

[IliketoPuck]

Well EE, its tough to find a Baby Boomer that won't help themselves to a piece of the CPP pie when it is their turn.

At least the kids working four hours a day aren't leveraging themselves into debt they can't afford in order to live above their means.

Kids working those jobs only care about enough money for beer and insurance on their '98 Cavalier.

[Oil Stain]

Originally Posted by Young-Sneezy

misery loves company at 1:30 am, hey?

some of those stats seem a bit.. awkward...

40 percent, of employees, aged 55 to 65...are a quarter of the way to their retirement goal?

i dont think that Canadian debt is a joke, or a non issue...i just think sometimes people can reach for certain stats to gain peoples attention to an issue.

No kidding. That stat kind of neglects the portion of the population that is already retired between the ages of 55-65.

http://en.wikipedia.org/wiki/Retirement

This Wiki article doesn't list Canada, but we can compare some of the first world countries used and assume Canada is in the same ball park.

According to the article about 25-30% of employees are retired by 60. By the time a person reaches the age of 64, there is only around a 30% chance they are still working.

So this 40% of employees still working between the ages of 55-65 that are having trouble saving for retirement actually only makes up probably 25% or less of the potential workforce which sounds about right.

[IliketoPuck]

Very true, the first thing anyone learns about statistics is that they can be used to show whatever point you want.

I mean 60% of the time it works everytime......