Canadians 'drowning in debt': 47% will borrow to cover costs, survey says

[bizaro86]

Originally Posted by redforever

$5000 will not get you very much for any type of house maintenance, especially for a senior who will not be doing the work by themselves.

Fair enough, but we aren't talking about - "honey, I don't like the color of the granite counters any more, we need to put in quartz"

Strictly maintenance type stuff. I bought my house 11 years ago, and paid a bit over $500k, and it's probably worth that now. We haven't spent $55k on it the entire time, even including very discretionary appliance upgrades. We will need to do windows soon, which will be way more than $5k, but even at the $30k I'm budgeting for that we will be well under $5k per year averaged over time. It's a 37 year old house, so not like I was on a new house maintenance holiday.

[GGG]

Originally Posted by Enoch Root

Here's the thing when you're talking about how much you need:

If you under-estimate it, you outlive your money and spend your twilight years pinching pennies.

If you over-estimate it, you leave some to your kids or your favourite cause.

It's a rather asymmetrical risk/reward trade-off.

Also, if you have bad timing as to when you retire, it can significantly change the math. experiencing a significant market correction in the early years of retirement can put you back far enough that you never recover. Many people that retired in 1999 and in 2007/08 ended up going back to work - or at least trying to.

If you overestimate you spend extra prime retirement years working.
If you underestimate you cut back marginally on your expenses early on to marginally decrease your standard of living. A rather asymmetrical trade off.

Agree that there is definite risk is timing your retirement. Here is a neat tool that calculates the probability that your money will last until death. The depressing / interesting part is how big the grey block of death is so if you want to maximize your length of retirement you need consider dying early as one of the factors.

https://engaging-data.com/will-money-last-retire-early/

[redforever]

Originally Posted by Mr.Coffee

Sorry, what?! $5,000/annum “will not get you very much for any type of house maintenance”???

I’m legitimately asking if you are for real here?

What are you doing to your house every year?

If you are talking about seniors still living in their home, which will probably be older, and they can't do the work themselves, $5000 does not go that far when you have to factor in the labor as well. Many might not be doing their own yard work, particularly winter time, they certainly won't be going up on their roofs to check out things, they won't be up ladders painting, at least they should not be.

And the goal is to keep seniors in their home as long as possible as it does not cost the health system as much.

[Enoch Root]

Originally Posted by GGG

If you overestimate you spend extra prime retirement years working.
If you underestimate you cut back marginally on your expenses early on to marginally decrease your standard of living. A rather asymmetrical trade off.

Agree that there is definite risk is timing your retirement. Here is a neat tool that calculates the probability that your money will last until death. The depressing / interesting part is how big the grey block of death is so if you want to maximize your length of retirement you need consider dying early as one of the factors.

https://engaging-data.com/will-money-last-retire-early/

Except you don't know that you've under-estimated until you're running out.

And yeah, graphs like that are informational if you want to play with the numbers and see what it looks like. But as a professional wealth manager, telling people "well, if we're wrong, you can always die earlier" isn't really a good way to deliver your services.

[rubecube]

Originally Posted by Mr.Coffee

Is it?

####ing narc

[Mr.Coffee]

Originally Posted by redforever

If you are talking about seniors still living in their home, which will probably be older, and they can't do the work themselves, $5000 does not go that far when you have to factor in the labor as well. Many might not be doing their own yard work, particularly winter time, they certainly won't be going up on their roofs to check out things, they won't be up ladders painting, at least they should not be.

And the goal is to keep seniors in their home as long as possible as it does not cost the health system as much.

Ah I see what you mean. I wasn’t considering paying for lawn care or snow shoveling and such as part of that. So yeah could be right.

[blankall]

Originally Posted by redforever

If you are talking about seniors still living in their home, which will probably be older, and they can't do the work themselves, $5000 does not go that far when you have to factor in the labor as well. Many might not be doing their own yard work, particularly winter time, they certainly won't be going up on their roofs to check out things, they won't be up ladders painting, at least they should not be.

And the goal is to keep seniors in their home as long as possible as it does not cost the health system as much.

Seniors staying in their detached homes past the point they need to, or in many cases can, be there is a huge societal problem. There's a massive housing shortage for young families.

If a senior can't upkeep their home, they should downsize to a condo. Instead we have families crammed into the condos.

This is part of a bigger issue of baby boomers being detached from reality. Back on topic, it's shocking how many baby boomers are carrying debt when they should have money saved up for retirement. Instead of saving they're just taking advantage of Canada's fiscal, zoning, and foreign investment policies which have pushed the value of property through the roof. Essentially forcing young people into cramped living spaces and then forcing the ones that get ahead to spend their lives paying off their homes, inheriting the massive debt levels that there boomers created.

[Yoho]

Originally Posted by blankall

Seniors staying in their detached homes past the point they need to, or in many cases can, be there is a huge societal problem. There's a massive housing shortage for young families.

If a senior can't upkeep their home, they should downsize to a condo. Instead we have families crammed into the condos.

This is part of a bigger issue of baby boomers being detached from reality. Back on topic, it's shocking how many baby boomers are carrying debt when they should have money saved up for retirement. Instead of saving they're just taking advantage of Canada's fiscal, zoning, and foreign investment policies which have pushed the value of property through the roof. Essentially forcing young people into cramped living spaces and then forcing the ones that get ahead to spend their lives paying off their homes, inheriting the massive debt levels that there boomers created.

This is so bad.
If someone bought property with their own hard earned money they can do whatever they want with it. Sorry it inconveniences you and the rest of society.

[GGG]

Originally Posted by Enoch Root

Except you don't know that you've under-estimated until you're running out.

And yeah, graphs like that are informational if you want to play with the numbers and see what it looks like. But as a professional wealth manager, telling people "well, if we're wrong, you can always die earlier" isn't really a good way to deliver your services.

I was thinking running out was a function of early market problems rather than a long life. If it’s early market problems then you cut back. My theory for longer life is your house is the buffer. Though that could be over saving as well.

I would love if a financial planning person talked about the probability of death and how certain I want to that my money will last. Is a 1% chance that you run out of money and just have government programs for the last 3 years of your life worth retiring 2 years later or reducing your retirement income by a few K per year. Framing retirement planning as a choice between a bunch of options and probabilities for me is a better way to make decisions

There is a real cost to over-saving.

[Slava]

Originally Posted by GGG

I was thinking running out was a function of early market problems rather than a long life. If it’s early market problems then you cut back. My theory for longer life is your house is the buffer. Though that could be over saving as well.

I would love if a financial planning person talked about the probability of death and how certain I want to that my money will last. Is a 1% chance that you run out of money and just have government programs for the last 3 years of your life worth retiring 2 years later or reducing your retirement income by a few K per year. Framing retirement planning as a choice between a bunch of options and probabilities for me is a better way to make decisions

There is a real cost to over-saving.

That's exactly how I do my plans. In all honesty, investing and planning is all about probability. So I guess, what do you want to know? I can't really do a plan for you on a public site having no idea who you are or anything, but I'm more than happy to give you something generic or an example. I'm also happy to give you more detailed stuff for your situation (not on a public board for obvious reasons).

[GirlySports]

I dont think over saving is bad. Not to the point where to have to calculate it as closely as you guys are. If you live longer you have the flexibility to give some more money away.

For example, give a little to charity or to grandchildren etc...
Just play it by ear.

[CliffFletcher]

Originally Posted by blankall

Seniors staying in their detached homes past the point they need to, or in many cases can, be there is a huge societal problem. There's a massive housing shortage for young families.

If a senior can't upkeep their home, they should downsize to a condo. Instead we have families crammed into the condos.

It that really true? Family homes keep getting bigger and bigger - new builds today are twice the size of the average new home in the 70s. And it's not families living in condos, it's singles.

Seniors don't start to have trouble looking after themselves and their properties until they're in their 70s. And the neighbourhoods with lots of homeowners that age - like Lakeview, Acadia, Kingsland - have small houses. When those houses go on the market, they tend to be bought up as rental properties, because they're considered too small for modern families (even though family size is decreasing).

Originally Posted by blankall

This is part of a bigger issue of baby boomers being detached from reality.

The older baby boomers are just entering their 70s. Canadians 75 and up (about 15% of the population) are the Silent Generation.

[Enoch Root]

It is exactly how I do planning as well (and is really the only way it can be done). We're talking about the future obviously, so it comes down to scenario analysis, and probabilities for the variables.

Start with estimates for income needs, then map out what different savings plans look like, timing of major purchases etc, timing of retirement, etc.

Then you analyse the scenarios, determine if the required savings rates are reasonable, and if necessary, change them accordingly. And you map it all out. Normally, we would design the plan using only investable assets, if possible. That leaves things like your home, potential inheritances, etc, as backups (i.e. Plan B, Plan C, etc). Ideally, you don't need Plan B, C or D, and you can live off of Plan A.

But all of that is best guesses. And it all comes down to choices. If you want to save 'just enough' that is up to you. If you want to save more, to build more security into the plan, that is also a choice. We recommend being very conservative, and building in multiple levels of buffer You implement on an ongoing basis, and rework the numbers periodically, as life unfolds.

One thing we find though, is that people tend to under-estimate all of the numbers. Most people assume that whatever their lifestyle is now, it will probably remain that way throughout life. However, what we find is that, as people get older and their income rises and expenses decrease (kids move out, mtge gone), their lifestyle and lifestyle expectations rise with them.

It is my experience that it is infinitely better to over-estimate (be conservative), than to under-estimate.

[Enoch Root]

Originally Posted by GirlySports

I dont think over saving is bad. Not to the point where to have to calculate it as closely as you guys are. If you live longer you have the flexibility to give some more money away.

For example, give a little to charity or to grandchildren etc...
Just play it by ear.

I agree with everything you said, except the last sentence. Playing it by ear is a really bad strategy that will almost certainly end badly.

[Enoch Root]

Originally Posted by blankall

Seniors staying in their detached homes past the point they need to, or in many cases can, be there is a huge societal problem. There's a massive housing shortage for young families.

If a senior can't upkeep their home, they should downsize to a condo. Instead we have families crammed into the condos.

This is part of a bigger issue of baby boomers being detached from reality. Back on topic, it's shocking how many baby boomers are carrying debt when they should have money saved up for retirement. Instead of saving they're just taking advantage of Canada's fiscal, zoning, and foreign investment policies which have pushed the value of property through the roof. Essentially forcing young people into cramped living spaces and then forcing the ones that get ahead to spend their lives paying off their homes, inheriting the massive debt levels that there boomers created.

Blame boomers. Hell of a way to live your life.

[GirlySports]

That's a lot of work. Just over save

[GirlySports]

Originally Posted by Enoch Root

I agree with everything you said, except the last sentence. Playing it by ear is a really bad strategy that will almost certainly end badly.

Sure but I'm on the over side, not the under side.

[Scroopy Noopers]

Originally Posted by Yoho

This is so bad.
If someone bought property with their own hard earned money they can do whatever they want with it. Sorry it inconveniences you and the rest of society.

I don’t even buy it as a valid complaint. If every boomer sold their detached home properties tomorrow house values would free fall.

[blankall]

Originally Posted by Yoho

This is so bad.
If someone bought property with their own hard earned money they can do whatever they want with it. Sorry it inconveniences you and the rest of society.

I don't disagree. I think the government should do something about the gap between wage and property prices though. I don't disagree with people doing what they want with their own property.

I do disagree with people taking advantage of all time
low and artificially low interest rates and using credit, like Helocs, they can't afford. The government can't raise interest rates because it would bankrupt a large number of home owners.

Of these homeowners, some are desperate families who bought more house than they could afford (even though a generation ago this house would have been considered meager). The other group is baby boomers, who think they've accomplished some financial feat, merely by owning a home, and are spending like crazy.

I have more sympathy for the struggling young family than I do the Range Rover driving baby boomer.

Yes people can do what they want with their property. I'm not arguing for forced evictions. I'm staying that the government has to go something about the generational wealth divide.

[blankall]

Originally Posted by Scroopy Noopers

I don’t even buy it as a valid complaint. If every boomer sold their detached home properties tomorrow house values would free fall.

That's kind of the point.