Financial Planning Talk

[Regorium]

Originally Posted by Peanut

Hockey illiterate kind of reminds me of Mr. Money Moustache. I get the concept in principle but I can't seem to achieve the spending level MMM advocates (I think like sub-$20k/yr?).

The key to MMM's success is that he wildly increased his earning power. Not the savings side. Him and his wife was earning 200k+ when they were in their mid-late 20's. At that level, it's not particularly difficult to be a millionaire.

I'm not harping on his success, but more highlighting that increasing your earning power is orders of magnitude more effective than saving 10% a year.

[Peanut]

Originally Posted by Red

Here’s my contribution to this thread. Assuming this is not specific continuation from the layoffs thread.

Don’t wait till 65 to collect CPP, start at 60 at reduced rate.
The 5 extra years of receiving CPP far outweighs the little higher amounts of money you’d otherwise get starting at 65.
If you are still working after 60, put the CPP money in RRSP to lower your taxes. Or get that Corvette you have always wanted.

Good idea? Bad? Hope our resident financial gurus can comment.

My parents are taking their early CPP and using it to travel to Maui every year. No retirement in sight, either. I think it's an outrageously horrible idea. But hey. My sibling and I are probably their fall-back plan, realistically. So... YOLO.

[Red]

Originally Posted by Peanut

My parents are taking their early CPP and using it to travel to Maui every year. No retirement in sight, either. I think it's an outrageously horrible idea. But hey. My sibling and I are probably their fall-back plan, realistically. So... YOLO.

Horrible idea to take it early or to spend it? I can see the appeal of both haha...

[Slava]

A lot of the plan to get to $1.5mm by 50 is pretty straightforward actually. You spend x amount to live when you start working, and essentially never increase from there. So if you can basically maintain a steady spending level and then save more as your income increases then soon enough you save more than you spend, and with some good investments you have a significant amount of money.

To me there are a few issues, but a lot of comes down to personality. Very few people are able to save like that. For a lot of people there is always a nagging 'what if I save all this money for retirement and then die young?' Or other thoughts. Then you have a seg!ent where people want to be able to do things while they can. You want to take a trip walking around European cities? Awesome when you're young and able, probably not when your 70 and not as energetic and healthy. Plus the fact that a lot of these amazing savers have no kids, and rent houses/apartments.

Its not a pro/anti home buying issue here. Its just that once you have kids, buy a house, and then maybe another vehicle , and go down to one income for a year or two, etc. the numbers change. There are other expenses and things that come along with this. And one quick note on home ownership. Its not that you have to buy a house to have kids, but owning a plce, while a major expense, is also stable which a lot of people want with kids. It costs a lot, but then you have control over when you move and why. To someone without kids that's maybe more flexible, but with kids it means considering where they go to school and everything else. Its a huge impact.

[Hockeyguy15]

Originally Posted by polak

I feel like as long as I'm single income, I'm just going to roll with it. My priority is to live life. Eff the rest.

Bankruptcy is off your record in 7 years. Easy.

I would have been in this exact position, but I got lucky and got a job when I was 20 and they took 6% off my pay and matched it and put it into a retirement plan.

I never thought about retirement saving when I was younger, but now I'm pretty happy I lucked my way into it.

[Slava]

Originally Posted by Red

Horrible idea to take it early or to spend it? I can see the appeal of both haha...

In general its a good idea to take the money early. That certainly doesn't apply to everyone because its taxable (one of the reasons), but its generally what I would do.

[polak]

Originally Posted by Hockeyguy15

I would have been in this exact position, but I got lucky and got a job when I was 20 and they took 6% off my pay and matched it and put it into a retirement plan.

I never thought about retirement saving when I was younger, but now I'm pretty happy I lucked my way into it.

Well to be honest, the only way I could have had any real savings at this point in my life is if I decided to pass on most of the trips I've been on and never bought a place. I had a pension plan at my last job but everything I got from that when I left I ended up putting into my home. It was only like 6K since I was there for a year.

I have one big trip left that I'm committed too and then all my savings focus can go on just building up as much as possible, since I finally have a place now.

[Sliver]

I've never understood why people think travel is a reasonable expense. It's fine after savings are taken care of, but to prioritize travel over retirement seems crazy. You're just screwing over yourself.

[Hockeyguy15]

Originally Posted by Sliver

I've never understood why people think travel is a reasonable expense. It's fine after savings are taken care of, but to prioritize travel over retirement seems crazy. You're just screwing over yourself.

You of all people should understand priorities.

People think you're crazy stuff you do, and you are perfectly fine with your choice.

[polak]

Originally Posted by Sliver

I've never understood why people think travel is a reasonable expense. It's fine after savings are taken care of, but to prioritize travel over retirement seems crazy. You're just screwing over yourself.

It's not like I'm going into debt to travel (I did when I was younger though). I'm just spending a lot of my money on doing things that I will remember for the rest of my life.

I personally don't understand how people would rather sit around doing nothing throughout their 20's and saving their pennies so that they can be a bit more comfortable in their 60's. Seems backwards to me.

[Hack&Lube]

Originally Posted by Sliver

I've never understood why people think travel is a reasonable expense. It's fine after savings are taken care of, but to prioritize travel over retirement seems crazy. You're just screwing over yourself.

Some people prefer to enjoy life while they can still enjoy life.

[Fuzz]

Yup, what happens if you hit 50 and get some health issue that makes travel insurance horrendously expensive? I travel lots, but also save. If I made less I'd probably still travel, just more frugally. Sitting around in Calgary 365 days a year isn't my idea of a happy life. Good to get out and see the world!

[fundmark19]

Originally Posted by Sliver

I've never understood why people think travel is a reasonable expense. It's fine after savings are taken care of, but to prioritize travel over retirement seems crazy. You're just screwing over yourself.

Until you get cancer at 55 and never get to enjoy a dime of your money you put away to travel in your retirement years.

Life can be incredibly short and sure it can be short sighted but if traveling makes you happy spend your money on traveling!

[burn_this_city]

I've seen enough people kick off in their late 50s and 60s to know you better enjoy it while you're still topside. There's no way I'd forgo travelling while I'm capable for potentially living into my late 80s. Besides, I'm having children specifically as a safety net for when I piss away their inheritance.

[heep223]

Originally Posted by Sliver

I've never understood why people think travel is a reasonable expense. It's fine after savings are taken care of, but to prioritize travel over retirement seems crazy. You're just screwing over yourself.

You really can't understand why young people want to experience life before starting to save for retirement?

[DoubleF]

My belief of how my retirement will go down has been something like this:

Retire at age 60 ish.

Spoiler!

- Sell house for profit after owning one for like 30 years. (Assume worst case scenario +$250k in value over said 30 years) + Downgrade to a 1/2 bedroom condo or smaller townhouse to unlock cash.

- Add that to the "reasonable" 300-400k investments/nest egg etc acquired up to the age of 60. (Hope I didn't invest in the future Nortel/Enron/BreX or anything; less if you put more into a home that can unlock more capital gains cash)

- 550-650k (investment + cash from house) at a modest 4% should allow my wife and I to live ok on interest and principal for 25 years at approx 35k-40k.

- If I need more money near the end of the target age or somehow completely mess up money, plan B could be selling said 1/2 bedroom condo or townhouse (couple hundred thousand) and using interest renting or living with kids. Although by that time, I'm also sure euthanasia will not be viewed in the same way as it currently is viewed.

[Sliver]

Originally Posted by heep223

You really can't understand why young people want to experience life before starting to save for retirement?

I don't think you necessarily need to be in a different physical location that is expensive to get to in order to enjoy life.

And I'm not saying it's an either or. If you are undersaving for your future needs, you can't afford to travel. If you are saving enough and have extra money, you can travel. It's that simple. I want a Ferrari, but I can't afford one. Who cares what people want? Just because you want something doesn't mean you should get it if you can't afford it.

[Sliver]

Originally Posted by burn_this_city

I've seen enough people kick off in their late 50s and 60s to know you better enjoy it while you're still topside. There's no way I'd forgo travelling while I'm capable for potentially living into my late 80s. Besides, I'm having children specifically as a safety net for when I piss away their inheritance.

Have you seen those guys that live longer than they expect? The depressed geriatric at Wal-Mart. Old dude in a crappy apartment in a dirty wife beater? I met a couple going through awful cancer treatments living in an RV in a trailer park in Calgary and they were too cold at night so I was helping them add insulation to their RV. An underfunded retirement is a way scarier future to me than knocking off early.

[bubbsy]

this thread makes me sad....

we have what i would imagine is a very decent middle/upper middle case family income. However, with the house mortgage, 2 kids (resp, childcare, etc), car costs (1 car paid off, 1 on lease (<350/month), and then dumping just under 10% of our income into RRSPs (crappy mutual funds), we are saving a very small amount month to month. This year, is brutal with the wife being on mat leave, luckily it's a one off, and i think we're done having any more kids.

The rrsp is our biggest nest egg, but it's in a crappy vehicle, and i'm really unsure on where to put this, and how to move this optimally without incurring transfer fees, etc. I'm also being stretched way too thin, between working 60-70 hour weeks this past year, while having a new born and toddler at home, so i know it sounds like the stupidest/laziest excuse ever (which i admit it still is) i just cant' find the time to even go out and do the research to figure this out better.

i've been saying i'll get this sorted as soon as things settle down, but i said that when i exited my 20s, and were almost 5 years past .

Living in toronto, i really want to get into owning some rental properties but en would prefer to have saved up some decent equity in the home or thru income to pay for that, which again requires time.

i suppose at the end of the day, i need to create time to read up on these things. i'm reluctant to go to an advisor as it just feels like a commission based sales guy approach, and i don't really have anyone that i talk to openly about these personal topics in my surrondings (parents not very strong in this area either).

[polak]

Originally Posted by Sliver

I don't think you necessarily need to be in a different physical location that is expensive to get to in order to enjoy life.

And I'm not saying it's an either or. If you are undersaving for your future needs, you can't afford to travel. If you are saving enough and have extra money, you can travel. It's that simple. I want a Ferrari, but I can't afford one. Who cares what people want? Just because you want something doesn't mean you should get it if you can't afford it.

Yeah, future needs that you don't even know if you'll be around to meet.