Are you saving enough for retirement?

[darklord700]

My rules are simple, max out on RRSP and TFSA, aim for market return and you are done. If you still have some money leftover to put into an investment account, take a shot as some flyers (like oil stocks right now) and hope for the best.

[blankall]

Originally Posted by Phanuthier

Curious, what are your thoughts about rentals vs a REIT? Obviously you aren't paying an upper management, and you are better leveraged off a mortgage, but its less dirty work and better diversified.

I've been wanting to do the calculation myself to see the advantages vs disadvantages... curious about thoughts of those that may have don't.

You'd have to find a REIT you really trust. Around the time I bought my place, there were lots of horror stories about REITs going bankrupt or being ponzy schemes.

The advantage would be that you potentially have experts making more cash by buying and selling properties and no personal maintenance.

My route, for me, was more stable long term. It, however, also relies on long term increases in property value. I bought an older condo in downtown Vancouver during a market dip.

[Slava]

Originally Posted by SeeGeeWhy

I'm constantly sending PMs to Slava spitballing random ideas and questioning what my assumptions and plans are.

Those damn high priced advisors!

[MoneyGuy]

Originally Posted by Slava

Those damn high priced advisors!

Is it OK if I send random ideas to you also for your opinions.

Alberta's second best advisor should have something to offer.

[Slava]

Originally Posted by MoneyGuy

Is it OK if I send random ideas to you also for your opinions.

Alberta's second best advisor should have something to offer.

Absolutely and here's a freebie to start you off: No, the Oilers aren't building anything special. Neither are the Eskimos!

[tvp2003]

Originally Posted by automaton 3

Having been on both sides of the fence - saving for retirement when you have dual incomes and no kids is very easy. Saving on one income and with kids becomes much more difficult.

Absolutely true. And as SeeGeeWhy pointed out, your plan should be personal to you and will change as your life circumstances change. Just like everyone's current lifestyle, the ability to plan and save for your retirement years is hugely dependent on income level, debt, ability to work, and other obligations such as kids, parents, etc.

So while it's all fine and good that Person A has "x" saved up in RRSP's at age 35, that doesn't mean that Person B who works, supports a wife and kids, has a mortgage, etc. should be evaluated the same way. Apples and oranges.

[SeeGeeWhy]

Originally Posted by MoneyGuy

Is it OK if I send random ideas to you also for your opinions.

Alberta's second best advisor should have something to offer.

I'll be happy to send Slava my business as soon as he convinces me to stray from my current plan

[Derek Sutton]

So this isn't going to set any of us for for early retirement but I will share something I found out recently. My company has no pension but they match RRSP contributions up to 5% (pre tax), it is all through Manulife. You can go online and change your contirbution % how you want. I tinkered with mine for a bit last year and found that my take home is (very) slightly more by increasing my contribution from 5% to 7%. Son instead of saving 10% annualy I save 12% and get an extra $14 a month on my pay cheque.

[MoneyGuy]

Originally Posted by Derek Sutton

So this isn't going to set any of us for for early retirement but I will share something I found out recently. My company has no pension but they match RRSP contributions up to 5% (pre tax), it is all through Manulife. You can go online and change your contirbution % how you want. I tinkered with mine for a bit last year and found that my take home is (very) slightly more by increasing my contribution from 5% to 7%. Son instead of saving 10% annualy I save 12% and get an extra $14 a month on my pay cheque.

If your employer is matching, you put as much in as they will match, as you are doing. It's a no-brainer for the free money. If you can afford to do more, then the decision is whether to put it into the group plan, or into a personal RRSP outside of the group plan. I don't think how it affects your take-home pay is terribly relevant. What is relevant is that you're saving aggressively for your retirement. Well done.

[undercoverbrother]

Originally Posted by Derek Sutton

So this isn't going to set any of us for for early retirement but I will share something I found out recently. My company has no pension but they match RRSP contributions up to 5% (pre tax), it is all through Manulife. You can go online and change your contirbution % how you want. I tinkered with mine for a bit last year and found that my take home is (very) slightly more by increasing my contribution from 5% to 7%. Son instead of saving 10% annualy I save 12% and get an extra $14 a month on my pay cheque.

Holy ####!

I have been putting away for the past 4 yrs, but today was when i actually looked at how much they match. I am "overpaying" into my company one, I will be lowering my contributions to match the max the company puts in, and putting the rest into my own RRSPs.

[CliffFletcher]

Originally Posted by SeeGeeWhy

When has it ever been anyone other than your own responsibility to take care of your own retirement?

Up until the last 20 years or so, most middle-class Canadians enjoyed secure and guaranteed pension plans, either from their private employers of government plans. And back in my grandparent's day, people didn't expect to live beyond 70 or so, which meant a pension was something to make the final 10 years or so of your life comfortable.

And there are many 55+ Canadians today who are enjoying comfortable retirements after a working life where they put little of their own money away. That model is obviously dying (unless you're a police officer, nurse, or teacher or something), but it does color people's perceptions.

So the game has changed. Working Canadians today are facing something their parents and grandparents did not have to face: saving up enough money to live for 20+ years with little to no help from employers.

As for not expecting government pensions to be around, that may be prudent, but if CPP and OAS really are insolvent in 30 years, we'll have a major social catastrophe on our hands, with 70 to 80 per cent of Canadian seniors - millions of citizens - living in abject poverty.

Originally Posted by SeeGeeWhy

- Manage your affairs and relationships well...

Getting married and staying married is hugely important. As is maintaining a good relationship with your family. I expect we're going to see multi-generation households come back in a big way. Not only is it important to give your kids the advantage of discipline and a good education, you'll want to get along with them (and their partners) well enough to live with them for the last decade or two of your life.

Oh, and people who think they'll be content enough to keep working until they die are kidding themselves. That may seem tolerable from the vantage of a 35 year old. But I doubt when you're 66, tired, with a nagging health issue or two, waking up to a January snowstorm, you're going to look forward to 20 more years of the same with jaunty stoicism.

[Johnny199r]

Saving for retirement is certainly hard for this generation. However, smaller life choices can result in substantial savings over time, ie can your family make do with one car instead of two? Does it have to be a brand new car? Can you buy a house near a Ctrain station? Can you cut down to going out to eat to once a week? Can you quit smoking/cut down on drinking etc all of these type of choices can result in lots of extra money that would be well spent going to retirement savings. Unfortunately, many people feel that money burn a hole in their pocket, and theyd spend it on something else rather than invest it. We've almost been conditioned that certain life decisions/sacrifices are "below us".

So yes, from a generational standpoint (doing away with workplace pensions, expensive houses) it appears tougher to save for retirement than ever, however as a 30 - something, I feel most of my peers arent really willing to sacrifice long term, and have a you only live once mentality (how many of our older parents were going on spring break trips to Mexico or Cuba?) Something has definately changed with young people, with respect to standard of living expectations between today and even 30 years ago (I realize it's still harder today in many respects, notwithstanding the mentality)

[Phanuthier]

Originally Posted by CliffFletcher

Up until the last 20 years or so, most middle-class Canadians enjoyed secure and guaranteed pension plans, either from their private employers of government plans. And back in my grandparent's day, people didn't expect to live beyond 70 or so, which meant a pension was something to make the final 10 years or so of your life comfortable..

Did they have company match on RRSP (401k), retirement plans like RESP (IRA) and other company retirement plans (other then pension) 20 years ago? If not, I think this is the new retirement plan; rather then pool resources and pay for the old gen, I guess the new plan is take care of yourself but give them assistance and motivation to save. There is certainly options for this generation to save for retiremen, its just the format of how its done is changed.

[CliffFletcher]

Originally Posted by Phanuthier

There is certainly options for this generation to save for retiremen, its just the format of how its done is changed.

Not nearly as many people have matching stock options as used to have fully-funded defined benefit plans. And most people find it much easier to save when the money is deducted before they ever see it. That's human nature.

Nobody has said it's impossible to save for retirement. It's simply harder than it used to be. The average person who has bought a home in Canada in the last 10 years won't have it paid off until they're close to 60. The Boomers typically had their homes paid off before they were 50. That has a huge impact on retirement savings, as Canadians have traditionally used the period after they paid off their mortgage to really plow money into retirement.

Then there's the fact half of Canadians earn under 30K a year. Pretty tough to save for retirement on a salary of 26K. Even people with unskilled jobs used to get a pension. Working at the railyards for CP for 25 years, or at a Ford plant, would leave you with a secure retirement. Now those sorts of jobs have been replaced with a patchwork of service jobs like delivery drivers and Wal-Mart greeters. How's Wal-Mart's pension plan?

Yes, people can still save for retirement. It's just harder. We really are expecting people to show much more foresight and discipline than their parents or grandparents did. And I think we're going to find out just how unrealistic those expectations are.

[Slava]

^ I think you're missing a couple key points though. First while people had defined benefit plans they also worked until 65, often with few job changes, and were dying withing a decade of retirement. Today workers are much more mobile which means they aren't contributing to plans for the same length of time (a generalization to be sure). The other issue though is life expectancy. People are living much longer, and they're also retiring earlier. If you want to retire at 55, and live until 95, you're talking about working for about 35 years (from 20-55) and then supporting yourself for 75. Its crazy.

I would also point out that not too many generations ago people didn't retire. So the pendulum swung to the point where many people retired, and maybe now its swinging back towards less people retiring. That is partially by need, and partially by choice as more and more clients I see are working longer on a reduced basis because they still love certain aspects and want something to do.

[Regorium]

Best way is to make enough money to both save 30% of your paycheck, and also live life not worrying about the cost of a beer or a latte. Single income no kids for the win!

[Chingyul]

Originally Posted by Regorium

Best way is to make enough money to both save 30% of your paycheck, and also live life not worrying about the cost of a beer or a latte. Single income no kids for the win!

Only way you can beat that is the double income no kids...

[V]

I've figured out that the single income four kids model isn't exactly conducive to retirement planning.

[saillias]

Originally Posted by Derek Sutton

So this isn't going to set any of us for for early retirement but I will share something I found out recently. My company has no pension but they match RRSP contributions up to 5% (pre tax), it is all through Manulife. You can go online and change your contirbution % how you want. I tinkered with mine for a bit last year and found that my take home is (very) slightly more by increasing my contribution from 5% to 7%. Son instead of saving 10% annualy I save 12% and get an extra $14 a month on my pay cheque.

I get a similar deal from my employer, they automatically put 6% in a pension and 2% in non-registered company stock and will match up to 4% of your choice of RRSP/TFSA/non-registered.

Even then Sunlife says I'm still falling short by about $100 per month of what I will need, to retire by 65.

[Flash Walken]

Originally Posted by Slava

^ I think you're missing a couple key points though. First while people had defined benefit plans they also worked until 65, often with few job changes, and were dying withing a decade of retirement. Today workers are much more mobile which means they aren't contributing to plans for the same length of time (a generalization to be sure). The other issue though is life expectancy. People are living much longer, and they're also retiring earlier. If you want to retire at 55, and live until 95, you're talking about working for about 35 years (from 20-55) and then supporting yourself for 75. Its crazy.

I would also point out that not too many generations ago people didn't retire. So the pendulum swung to the point where many people retired, and maybe now its swinging back towards less people retiring. That is partially by need, and partially by choice as more and more clients I see are working longer on a reduced basis because they still love certain aspects and want something to do.

Life Expectancy hasn't increased that much.

Life expectancy now is only a couple/few years older than it was in the 90s. The difference between life expectancy in the 1970s and today is about 10 years.

The real problems lies in the 30 percent wage decrease the labour force has seen since the mid 1980s.

There is simply too little money coming in to these earners to expect them to save adequately for retirement.

Regarding Phanuthier's post:

401ks, stock options etc weren't a big component of retirement plans because prior to the 1990s, the stock market wasn't something the average person participated in, largely because of it's volatility. This boomer generation that is now retiring was one of the first and largest groups to start to use those sorts of investments as a means for retirement, but it's proven to be a failure. Once executive pay began to be linked to corporate profitability, stock options began to be used as a tax free method of compensating executives in the states, and this quickly transitioned to Canada as well.

In order to increase the value of those stock options, employees were encouraged to invest in the company as well.

This article is from 2001, 20 years after the first 401 k.

There was also a push for more "portability," where workers could take their retirement money with them. Part of the reason for this was that companies restructured and some older employees lost their jobs. A growing number of people in the work force also started changing jobs more frequently.

Today, the 401(k) has become one of the most advantageous savings tools available, offering benefits for both employer and employee. But there's still room for improvement, experts said.

Savings advocates, for instance, have been pushing for higher contribution levels. Congress is likely consider a bill that would raise the cap on participant contributions to $15,000 a year from $10,500, and would provide a "catch-up" provision for workers 50 and older to save an extra $5,000 a year.

And the 401(k) structure still is evolving to match demand for greater flexibility.

A worker's investment choices, for instance, are likely to move in one of two directions, said Cerulli Associates managing director Peter Starr. They might mirror an employer's institutional pension funds, which are both less costly for participants and are more closely monitored.

Or, he said, they may become more retail-centric, meaning employees would direct all of their 401(k) money into a retail brokerage account, opening up a participant's investment universe.

At the time, it was sold as if employees were freely switching jobs and abandoning employers/pensions. The 401 k was designed to be there even if the employee changed jobs.

However, the reality of the situation is that people were more frequently being 'restructured' out of their jobs and those pensions were extremely costly components of personnel management. If you left it up to the employee though, you could lay off and terminate small or large portions of your workforce without the same financial cost.

Either way, you can't discount for the impact of a 30% reduction in spending power has on a population during the course of their working lives. Whatever your investment plan, an extra 30% of income goes a long way to making it easier to save money.

It's impossible to save for retirement when living paycheck to paycheck, and more than half of the country is in that situation.