Are you saving enough for retirement?

[Leondros]

Originally Posted by Sliver

Did I lowball it? I had to do my roof in 2009 and it was $7k or something on a ~1500sf bungalow. I was just going off of that.

Edit: Okay, just looked back in my spreadsheet and yeah, that would have been low even back then. Actual price was $7700 and I bought the shingles myself direct from a supplier and paid a roofer guy I knew cash for the installation. I didn't even cheap out on the shingles...they're really nice and beefy looking.

During COVID - like right at the start I was able to call around to every shop in town and get my roof done for $5,100 on a 1,400 sq foot bungalow. Its a rental so I wanted it as cheap as possible. I didn't think $10K was out to lunch...

[RichieRich]

Light reading…. https://www.greaterfool.ca/2022/03/10/chill-7/

Interesting responses to the Firecalc I ran. Arguably, based on being here for over a year, id suggest of readers here earn above national average levels and thus it’s not on your nature to consider that $40k/yr is possible. I read a lot of reasons how it just wouldn’t work for you. Yet there are many millions of people that do make it work. Some very well. It’s not my target either but doesn’t mean it can’t be considered reasonable by many.
My early CoVID layoff experience showed me that if were just 2 people in a paid-for residence that we could be ok on $40k/yr including a couple driving-style domestic holidays.

[Enoch Root]

Originally Posted by RichieRich

Light reading…. https://www.greaterfool.ca/2022/03/10/chill-7/

Interesting responses to the Firecalc I ran. Arguably, based on being here for over a year, id suggest of readers here earn above national average levels and thus it’s not on your nature to consider that $40k/yr is possible. I read a lot of reasons how it just wouldn’t work for you. Yet there are many millions of people that do make it work. Some very well. It’s not my target either but doesn’t mean it can’t be considered reasonable by many.
My early CoVID layoff experience showed me that if were just 2 people in a paid-for residence that we could be ok on $40k/yr including a couple driving-style domestic holidays.

Yes, of course it's doable. And your points are well taken and valid.

The argument that Slava and I are making is that, for most people, the target should be higher than that, if possible. This topic is "Are you saving enough for retirement?" and if you're saving towards a target of $40k of income, I would strongly suggest that you increase that target, if you are able.

[stone hands]

Originally Posted by RichieRich

Light reading…. https://www.greaterfool.ca/2022/03/10/chill-7/

Interesting responses to the Firecalc I ran. Arguably, based on being here for over a year, id suggest of readers here earn above national average levels and thus it’s not on your nature to consider that $40k/yr is possible. I read a lot of reasons how it just wouldn’t work for you. Yet there are many millions of people that do make it work. Some very well. It’s not my target either but doesn’t mean it can’t be considered reasonable by many.
My early CoVID layoff experience showed me that if were just 2 people in a paid-for residence that we could be ok on $40k/yr including a couple driving-style domestic holidays.

Obviously my lifestyle isnt the norm, but as a household we make a combined income of $115k pre tax and our yearly expenses are usually around 45k per year(last year it was 47,791) - 29,698 of that being a mortgage we are trying to pay off as soon as possible, so our "non mortgage" spending has floated just shy of 20k for the last few years. It's amazing what making your own meals and enjoying non expensive hobbies like cycling or a library card or used video games can do for your expenses if you are a homebody

[RichieRich]

Originally Posted by stone hands

Obviously my lifestyle isnt the norm, but as a household we make a combined income of $115k pre tax and our yearly expenses are usually around 45k per year(last year it was 47,791) - 29,698 of that being a mortgage we are trying to pay off as soon as possible, so our "non mortgage" spending has floated just shy of 20k for the last few years. It's amazing what making your own meals and enjoying non expensive hobbies like cycling or a library card or used video games can do for your expenses if you are a homebody

Thanks for the real-world example. I wish we could come closer to that. I assume you're not eating (much) cat food? (or caviar)



That's impressive for sure... I assume you're saving a lot then, approx 50% of your annual take-home amount. Which also means, if continued, and you were starting at $0 you could choose "retirement" (whatever that means to you) in 7-8yrs (or less depending on market returns).



Assuming your continued full-year all-in expenses are "only" $45k that puts your FU amount at 25x or about $1.125mil.
If it's "only" $20k/yr all-in expenses then... $500k. In other words, $500k at 4% withdrawal ($20k) makes it possible to not touch your capital and so if your after-inflation returns+fees are greater than 4% annually your capital will grow.

[GGG]

Originally Posted by Enoch Root

Yes, of course it's doable. And your points are well taken and valid.

The argument that Slava and I are making is that, for most people, the target should be higher than that, if possible. This topic is "Are you saving enough for retirement?" and if you're saving towards a target of $40k of income, I would strongly suggest that you increase that target, if you are able.

Is that good advice?

You are making a broad recommendation that people change time for material things. Better advice likely is to really evaluate what makes you happy and spend intently on those things only. Then base your number on that. Arbitrarily saying people need more than 40k per year to retire on doesn’t seem right.

You can’t buy time.

[Enoch Root]

Originally Posted by GGG

Is that good advice?

You are making a broad recommendation that people change time for material things. Better advice likely is to really evaluate what makes you happy and spend intently on those things only. Then base your number on that. Arbitrarily saying people need more than 40k per year to retire on doesn’t seem right.

You can’t buy time.

Yes, I am making a broad recommendation - thus the phrase "for most people".

And yes it's good advice, as it is based on decades of experience in retirement advice, not just from me specifically, but from the entire industry.

Of course people should make their own choices to suit their lifestyle - both Slava and I said as much - but life throws you surprises. Like some said, maybe you need a new roof this year, or whatever. Point is, despite the lifestyle and budget you think you need this year, it might be different, 5 years from now. But once you're retired, there is little you can do about that.

So yeah, budgeting in some wiggle room, and planning for that in advance, IS good advice. For the vast majority of people.

[Jason14h]

Originally Posted by GGG

Is that good advice?…
You can’t buy time.

Actually this is exactly what $$ can do - buy time

Don’t have to go to work anymore? - Time
Don’t need to clean your own house ? - Time
Don’t need to mow your own lawn or shovel snow ? Time

Or maybe better stated -
$$ buys freedom and flexibility

And there’s only so many years and opportunities to earn that freedom and flexibility

[GGG]

Originally Posted by Jason14h

Actually this is exactly what $$ can do - buy time

Don’t have to go to work anymore? - Time
Don’t need to clean your own house ? - Time
Don’t need to mow your own lawn or shovel snow ? Time

Or maybe better stated -
$$ buys freedom and flexibility

And there’s only so many years and opportunities to earn that freedom and flexibility

Your first bullet is the point. You don’t have to work sooner by reducing the amount of money you spend.

You trade Time for money. By simply reducing consumption you earn that time.

The idea that the target value should be higher isn’t great advice. Instead cut spending so you have the same level of flexibility at a lower target number. The fastest way to save for retirement is to avoid adjusting to a standard of living that requires more wealth to support.

[RichieRich]

spend less
earn more
save/invest more
aim a little higher
figure out when enough is enough
be flexible, and consistent
you do you
mooch as required (even Netflix)

[Jason14h]

Originally Posted by GGG

Your first bullet is the point. You don’t have to work sooner by reducing the amount of money you spend.

You trade Time for money. By simply reducing consumption you earn that time.

The idea that the target value should be higher isn’t great advice. Instead cut spending so you have the same level of flexibility at a lower target number. The fastest way to save for retirement is to avoid adjusting to a standard of living that requires more wealth to support.

But you can only cut spending so much

And that’s the point . In the long run if something unexpected happens you can’t go back and earn more once you are in retirement . Earn early and you have a lot more flexibility later in life for the unexpected

And/or set a higher goal and execute and you have a better chance to cover for the unexpected

[GGG]

Originally Posted by Jason14h

But you can only cut spending so much

And that’s the point . In the long run if something unexpected happens you can’t go back and earn more once you are in retirement . Earn early and you have a lot more flexibility later in life for the unexpected

And/or set a higher goal and execute and you have a better chance to cover for the unexpected

Sure you can trade time for a larger buffer. The point is it’s a trade off.

[Samonadreau]

I am 36 with 4 kids and almost $250k saved and another $400k in home equity. Trying my darndest.

[Enoch Root]

Originally Posted by GGG

Your first bullet is the point. You don’t have to work sooner by reducing the amount of money you spend.

You trade Time for money. By simply reducing consumption you earn that time.

The idea that the target value should be higher isn’t great advice. Instead cut spending so you have the same level of flexibility at a lower target number. The fastest way to save for retirement is to avoid adjusting to a standard of living that requires more wealth to support.

Sure, cut spending if that is what your idea of an ideal retirement is.

But to say it's bad advice is pretty silly, sorry.

[bizaro86]

Originally Posted by Enoch Root

not just from me specifically, but from the entire industry.

One of the reasons for skepticism here is that there is an entire industry around retirement savings. An industry where professionals both provide advice AND have higher earnings when their clients save more. All those freedom 55 ads weren't because life insurance companies deeply care about people, they were because they want you to save more into their products so they earn more fees.

The median income for a senior in Canada is $30k, or $60k for a couple. 40k is tight but possible, especially with a paid off house. Lots of people live on less. That's not what I'm planning for, because I like both nice things and a buffer.

But I think many people don't even try to fund retirement because they hear conversations like the one upthread about, "is 4 million really enough" and decide the whole thing is impossible.

[CliffFletcher]

Originally Posted by bizaro86

One of the reasons for skepticism here is that there is an entire industry around retirement savings. An industry where professionals both provide advice AND have higher earnings when their clients save more. All those freedom 55 ads weren't because life insurance companies deeply care about people, they were because they want you to save more into their products so they earn more fees.

Exactly. When you routinely see professional advice that you need $1 million to retire comfortably in Canada, you can only conclude that either A) Only a fraction of people in one of the richest countries in the world retire comfortably, or B) The person giving the advice has an interest in presenting a distorted picture of what’s normal.

[Sliver]

Originally Posted by CliffFletcher

Exactly. When you routinely see professional advice that you need $1 million to retire comfortably in Canada, you can only conclude that either A) Only a fraction of people in one of the richest countries in the world retire comfortably, or B) The person giving the advice has an interest in presenting a distorted picture of what’s normal.

We all have different ideas of what is comfortable, though. I see some people who are happy living lives that would make me crawl out of my skin. Some people want a more comfortable retirement and it takes a lot of money to fund that - those are the types more likely to be seeking the advice of a financial planner, anyway. And maybe normal sucks, too? Like, I know my one grandpa spent 25 years sitting in the same la-z-boy watching TV in a one bedroom apartment. Once in a while he'd shuffle down the hall to play crib, but that'd be about it. No thanks to that. If that's normal - which it would be on $40k/year - I want no part of it.

I have a really strong pull to make as much as I can to get the kiddy as big as I can get it. The reason for this is money can often buy security for yourself and your loved ones. I don't know what the world will look like for my kids when they're older and I certainly don't know what it'll look like for their kids, whom I'm sure I'll love. So yeah, at this moment in time, my wife and I can make a reasonable amount of money and we don't have tastes that are too luxurious given our incomes. We save and save and save. Not just for ourselves, but for others coming after us. Maybe they won't have the same opportunities to make money as we've had, so I want to work to help them should they need it.

I don't think these professionals advising on amounts to save are twiddling their moustaches and salivating at the money we're saving. We have goals, we have estimates as to how long we'll live, and it's not rocket science to work back from an expected lifespan, spending requirements, estate goals upon death, and average stock market returns to determine how much you'll need to retire depending on when you plan to retire.

It's way too high risk to leave it too tight because you can't undo that. My actual nightmare is being an old man working as a Wal-Mart greeter or something. Not because I look down on the job, but because I think most geriatrics still in the workforce at that level don't want to be there, but have to be there.

I think saving as much as you can is a noble goal regardless of your income. The poster above at 36 with four kids and $250k saved with $400k equity in his home? He's killing it. That's some great savings at that stage and he should be proud. I'm sure he had to sacrifice some short-term gratification to get there with a large family and a relatively young age.

If you spend every penny you make, after a certain income you're just buying material crap, really. I don't think you can get happy doing that. Exceptions would be like a family cabin/legacy property where memories can be made, a family trip to Disneyland, etc. That #### costs money and it's not a waste if you're uplifting all those you love by spending it (and you can afford it, obvs).

Generally, though, I'm happier being a saver than blowing all my money. The diminishing returns of happiness as you get older and have the cool stuff you want is striking. There's really not much I could buy at this point that would put a smile on my face versus when I was younger, had nothing and bought something cool. I do think helping grandkids with university, or paying for braces for a kid, or gifting a down payment on a house will make me happy, though, so I'm looking forward to that and it motivates me to save.

[Slava]

Originally Posted by bizaro86

One of the reasons for skepticism here is that there is an entire industry around retirement savings. An industry where professionals both provide advice AND have higher earnings when their clients save more. All those freedom 55 ads weren't because life insurance companies deeply care about people, they were because they want you to save more into their products so they earn more fees.

The median income for a senior in Canada is $30k, or $60k for a couple. 40k is tight but possible, especially with a paid off house. Lots of people live on less. That's not what I'm planning for, because I like both nice things and a buffer.

But I think many people don't even try to fund retirement because they hear conversations like the one upthread about, "is 4 million really enough" and decide the whole thing is impossible.

I totally understand that cynicism, and honestly the financial services industry has done themselves a disservice for decades. But, that doesn't change the math, and the truth is that planning for a paltry income in retirement isn't what most people are looking for. Could you make do on $1500/month or something like that? Sure. People simply don't want to live like that in their golden years. And let's be clear that while the industry has it's failings and shortcomings, there are also a massive amount of benefits that proper financial advice provides. Study after study shows that people who use advisors have better outcomes, and those aren't all conducted by the companies standing to benefit from that. One of the most well-known was by Vanguard who is adored by the DIY investment community.

Originally Posted by CliffFletcher

Exactly. When you routinely see professional advice that you need $1 million to retire comfortably in Canada, you can only conclude that either A) Only a fraction of people in one of the richest countries in the world retire comfortably, or B) The person giving the advice has an interest in presenting a distorted picture of what’s normal.

I think that blanket advice like this is just impossible to be accurate though. If I (as a professional) get asked how much it takes to retire comfortably without knowing anything about the person and their lifestyle, situation or anything else, how in the world can I credibly give an answer? How can anyone? So, what gets thrown out there is a nice round number, and everyone thinks a million bucks is the minimum.

And let's not forget that advisors are going to plan for people to live a longer life than what people might live. I can't call someone when they're 87 years old and say "sorry, you're out of money Joe, but we thought that you'd be dead by now". So, of course advisors are planning for people to live to 95. If we know ahead of time that the end date is here, it answers a lot of financial planning and advice questions...but we just don't. There are a lot of moving parts and factors that have to be considered. I just don't think that it's all nefarious and not just advisors trying to bleed people of disposable income to have them save.

[Jason14h]

Saving a million for retirement is actually relatively easy - IF you start young enough

~300$ a month @ 7% return is a million at age 65 if starting at 20 (That's about 15% of salary for a minimum wage earner)
~600$ a month if starting from 30

I think the biggest issue is people keep putting off saving for instant gratifications (or lack of understanding of compounding interest) and then the amount to get to the 'million' becomes harder and harder, which they then use to justify not saving now and lowering their target retirement, etc.

My advice for anyone:

1. Start Early. The best day to start saving for retirement (Save FIRST right off the paycheck with instant withdrawals before you even get to spend the $$) was on your first paycheck. The second best day is today. Don't delay - Compound interest is your friendand always pay yourself/save first right off the paycheck

2. Saving is addictive. Set a goal with constant savings and you'll be surprised how you actually start saving more when you see your money start growing. "Oh for another $100 a month I'll end with an extra $120K at retirement? Hmm that isnt so hard. I'll eat out one less time a paycheck because im seeing my money grow "

3. You can't go back an re-earn $ once you are out of the workforce. Oversaving is better then undersaving.

It is like the old condom saying "It's better to have one and not need it, then need one and not have it"

[Iggy_12]

Im 33 plan to retire between 60-65
I contribute 1750 a month into RRSPs/TFSA growth accounts (plan on increasing this each year with salary increases)
Current savings around 100K
Im 3 years into a 490k mortgage
Married no kids, my wife saves very little as she doesnt make as much as me
My household income is around 160k pre tax
Retirement goals are to downsize the house to a small condo and potentially buy something in Arizona/palm springs, lots of golf and travelling

For the experts, am i saving enough to realistically reach my goals?