Are you saving enough for retirement?

[DoubleF]

Originally Posted by PepsiFree

You shouldn’t. AI is already powerful enough to take over any financial advisory or accounting role with minimal oversight and the only reason it isn’t at scale is because it takes time and, at the moment, still requires people with the right knowledge to train and maintain these systems for optimal results. Once that training is complete it’ll be able to develop retirement, investment, and tax strategies based on simple inputs of what people want without them having any knowledge of how to get there. There are already options that can achieve this.

If you’re not retiring within the next 5 years, you’ll either be using AI to do most of the work for your clients or you’ll be in a different career.

It’s already the case for lawyers, developers, marketers, and many other industries. If you’re not using AI to improve your outputs, you’re falling behind your peers. And yeah, while we can all keep up the ruse that people need people to do these things and there will be a good stretch where folks still believe that, you shouldn’t bank on it lasting.

AI is not at that stage right now. It needs massive oversight to avoid serious errors. 5 years? Sure. But for sure, something you're describing at the highest level is Blue J AI, and outputs still needs to be heavily monitored. Some of the responses are brutally wrong. Minor case facts that are missed give a totally wrong recommendation.

But even lower level AI, lots of issues even at the bookkeeping level. No way you can leave it alone with minimal oversight. Again, in 5 years? Maybe. But absolutely not now.

AI certainly will lift the floor for many industries and create an environment where excruciatingly simple errors should cease to exist.

[bizaro86]

Originally Posted by Slava

^ I question the whole idea that passive beats active. I wrote a paper on this and it’s being reviewed. The main claim for that is SPIVA, which is put out by S&P and it seems like everyone quotes that to conclude that ~97% of active managers don’t beat the index. I can get into it (if you’re interested), but it’s basically marketing and there are several major flaws.

And that’s on the equity side. The fixed-income side I question even more.

I mean, in aggregate passive has to beat active because of the fee savings. If you added up all the active investors, in aggregate they own the average of the total stock market (it's literally impossible for them to own anything else on average). So the gross returns for the universe of active and passive investors has to be the same, but active pays more fees.

Now, all that said I actively manage my own money, and have outperformed the indices for a long period of time. Lately it's mostly been by taking the other side of trades from people doing dumb things (eg meme stocks). There are some active investors with truly terrible returns so if you take the other side of their trades...

[Slava]

Originally Posted by Izzle

I would like to read this paper if you wouldn't mind sharing.

I think conventional financial advice is that passive beats 80-85% of active managers. Even then the 15-20% of active managers that do beat the index and not able to sustain it in the subsequent period.

Yeah I have no problem with that (I didn’t spend all the time and energy writing it to keep it secret, lol). Like I mentioned, it’s being reviewed and that process take a little time, but I’ll post it once it’s complete.

[Slava]

Originally Posted by bizaro86

I mean, in aggregate passive has to beat active because of the fee savings. If you added up all the active investors, in aggregate they own the average of the total stock market (it's literally impossible for them to own anything else on average). So the gross returns for the universe of active and passive investors has to be the same, but active pays more fees.

Now, all that said I actively manage my own money, and have outperformed the indices for a long period of time. Lately it's mostly been by taking the other side of trades from people doing dumb things (eg meme stocks). There are some active investors with truly terrible returns so if you take the other side of their trades...

Well, this is why I said I don’t know of people want to get into this, but here’s a few issues with this. First, there’s no such was passive. Every investment requires active decisions. The indexes that people seem to think are purely rules-based and without discretion aren’t that at all. For example, the S&P 500 has a lot of active discretionary decisions.

And regarding fees, that’s an extremely interesting topic. First, you can’t buy an index fund with no fees. Comparing some index with no fees against other things with fees and concluding “hey the no-fee thing wins, only you can’t do that in practice” is just of no value.

And maybe I’ll just touch on the fact that no one knows what a total market portfolio would actually be. That includes William Sharpe. It’s a theoretical portfolio that would include every public and private equity, real estate and everything else. You literally cannot construct it because you’d need a piece of all those private deals. So, it’s just a hypothetical exercise. The utility of this is of questionable value, but of course the trillion dollar index providers aren’t mentioning that.

Anyway, I have a lot to say on the topic. I think it’s great if everyone wants to buy the index and thinks the markets are efficient and you can’t outperform though. It’s great news for me, and even better if people who are buying other things stick to Fartcoin and meme stocks.

[PepsiFree]

Originally Posted by DoubleF

AI is not at that stage right now. It needs massive oversight to avoid serious errors. 5 years? Sure. But for sure, something you're describing at the highest level is Blue J AI, and outputs still needs to be heavily monitored. Some of the responses are brutally wrong. Minor case facts that are missed give a totally wrong recommendation.

But even lower level AI, lots of issues even at the bookkeeping level. No way you can leave it alone with minimal oversight. Again, in 5 years? Maybe. But absolutely not now.

AI certainly will lift the floor for many industries and create an environment where excruciatingly simple errors should cease to exist.

I don’t disagree with what you’re saying here but the thing people kind of ignore in all this is that people aren’t without mistakes either. People are prone to outdated thinking, simple mistakes, misguided advice, or narrow minded-ness. Many AI, right now, are at a human level. Call it a junior position. Knows enough to help, but makes some mistakes. You wouldn’t hire a junior whatever and just let them run off with zero oversight and never check their work. And, just like those people, the more you train the AI with what’s right and what’s wrong, the more you improve it.

Someone mentioned AI not being able to give advice that’s more about “intuition” than basic knowledge but, you know, it will. ChatGPT, right now, can learn a lot about you and how you think and make decisions, and functionally provide therapeutic or “life advice” based on that knowledge. This isn’t just analyzing financial algorithms and charting the best course based on that, it’s pulling from history, determining what constituted good advice and what constituted bad advice, and charting the most advantageous path based on your goals.

A lot of the things we think are uniquely human are pretty easy to learn. And a lot of jobs people think are special or take some unique human characteristic to perform well really aren’t.

And that’s just talking about the best of the best. Let’s be honest, people who pretend they’re some experts at their job might just be average in the grand scheme of things. And average is not going to be difficult to beat when AI is training on the best.

[Weitz]

If you’re retiring 15+ years out I don’t even know how you judge what you need. All the things you like to do now (like travel) will likely be outrageously expensive. If anything you need to plan to spend more money now doing the things you love or save much more than you think you need to do a lot of the things you make like.

I have friends who do next to nothing now and think they will spend their retirement travelling.. good luck with that.

[Shazam]

Account for 3% inflation.

[flamesfever]

Originally Posted by Weitz

If you’re retiring 15+ years out I don’t even know how you judge what you need. All the things you like to do now (like travel) will likely be outrageously expensive. If anything you need to plan to spend more money now doing the things you love or save much more than you think you need to do a lot of the things you make like.

I have friends who do next to nothing now and think they will spend their retirement travelling.. good luck with that.

I don't think you should assume that travelling will be any more expensive in the future than it is now. I think there should be a healthy balance between spending now vs saving for the future. Extremes at either end may have significant consequences.

[edslunch]

Originally Posted by chemgear

What were you anticipating but are now spending? (And on what that you were not planning on originally?)

Planning...what a concept. We've been fortunate to have two decent incomes, but that allowed us to ignore a few fundamentals like proper budgeting. Partial retirement is an adjustment.

[flamesfever]

Good habits should start as early in life as possible. I think one of the biggest problems facing the younger generations is overspending, and society keeps doing everything possible to encourage it.

[edslunch]

On a related note, I’d like to help my kids get started with RRSP/TFSA. They’re currently students so would get no immediate tax benefit so TFSA might be the better option?

Either way, is there a tax-efficient way to move $ from my RRSP to theirs? I assume I would need to cash out but don’t know if I can claim a deposit to theirs? Are there any provisions for ‘early inheritance’. I’m not talking huge numbers so trusts or the like probably don’t make sense.

In the end they’ll get the money one way or other unless I go out on a binge, but having them establish and manage their own retirement funds now might get them in the right mindset.

[Brupal]

A contribution to a First Home Savings Account gets the adult a tax deduction but the account is designed to help fund their first home.

Any time YOU take money out of your own RRSP you will pay tax at your own highest tax rate, so not optimal to give to your child. But if you have surplus non-registered funds you could let them use it for the FHSA, or to contribute to their own TFSA.

https://www.canada.ca/en/revenue-age...s-account.html

[Weitz]

Originally Posted by flamesfever

I don't think you should assume that travelling will be any more expensive in the future than it is now. I think there should be a healthy balance between spending now vs saving for the future. Extremes at either end may have significant consequences.

I mean 8 years ago to now is an incredible difference. With climate change and all sorts of other things I’m not banking on much travel in my retirement.

Doesn’t mean I’m not saving now. But I feel for people who are saving too much just to lose their health, mobility, or ability (cost) to do the things they love in retirement that they have waited their life for.

[GGG]

Originally Posted by Weitz

I mean 8 years ago to now is an incredible difference. With climate change and all sorts of other things I’m not banking on much travel in my retirement.

Doesn’t mean I’m not saving now. But I feel for people who are saving too much just to lose their health, mobility, or ability (cost) to do the things they love in retirement that they have waited their life for.

Do these people actually exist? Or is this a straw man spenders create to justify their spending. For the most part the savers I know that have a choice have smaller houses, older cars, and lower cost vacations. Things that don’t necessarily affect enjoyment of life (depending on what you value).

I just haven’t met people saying I’m living at a lower standard of living today so that my standard of living will be way higher in retirement. Most people plan to live at roughly the same standard of living throughout their life.

[Weitz]

Originally Posted by GGG

Do these people actually exist? Or is this a straw man spenders create to justify their spending. For the most part the savers I know that have a choice have smaller houses, older cars, and lower cost vacations. Things that don’t necessarily affect enjoyment of life (depending on what you value).

I just haven’t met people saying I’m living at a lower standard of living today so that my standard of living will be way higher in retirement. Most people plan to live at roughly the same standard of living throughout their life.

Nice subtle dig, but the majority of people in my office fall into my description. Too worried about retirement to enjoy today.

Or they are just terrible with money.

[V]

Originally Posted by GGG

Do these people actually exist? Or is this a straw man spenders create to justify their spending. For the most part the savers I know that have a choice have smaller houses, older cars, and lower cost vacations. Things that don’t necessarily affect enjoyment of life (depending on what you value).

I just haven’t met people saying I’m living at a lower standard of living today so that my standard of living will be way higher in retirement. Most people plan to live at roughly the same standard of living throughout their life.

Yeah, most savers I know are just generally content with less than the people who need to spend to enjoy life.

I'm fascinated to find what part of your post was considered a dig, though.

[Weitz]

Originally Posted by V

Yeah, most savers I know are just generally content with less than the people who need to spend to enjoy life.

I'm fascinated to find what part of your post was considered a dig, though.

“..a strawman spenders create to justify their spending”.

Seems like a dig.

There’s a difference in savers and savers who complain they can’t afford anything. Especially when you know what they make.

[PaperBagger'14]

I have family members that are a cautionary tale for not enjoying life before old age hits. My Dad retired early due to a lifelong health condition that, while serious, isn’t immediately life threatening. He had also saved up the money in order to live a nice retirement and sacrificed somewhat during his healthy years to do so.

Fast forward to year 8 of his retirement and through some secondary health issues he is almost unable to walk. Golf is done for him, any sports or high intensity activity is impossible. Anything that requires balance on your feet cannot be done.

My advice to anyone who’s worried about saving enough for retirement is that if you’re going to invest financially into your retirement, you should also be investing physically into it as well. You don’t need to be the strongest or fastest or bendiest, but regular cardio, moderate weighted exercise and regular stretching will make your last years much better than my dads.

[GGG]

Originally Posted by Weitz

Nice subtle dig, but the majority of people in my office fall into my description. Too worried about retirement to enjoy today.

Or they are just terrible with money.

I wasn't intending any kind of value judgement of spenders but I can see where you may have interpreted it that way. There is no objectively correct way to determine your financial goals.

Can you describe what you mean by “not enjoying today”. Are you saying not spending enough money to derive enjoyment today or too stressed because of thinking about retirement to enjoy today.

I will say the only context I have ever heard the criticism of not enjoying things today is when in discussions with people about early retirement and why someone isn’t trying to do it. So for me the statement has always come with an underlying assumption that people are unhappy today as a result of their saving.

[Sylvanfan]

My Dad died suddenly at 67 while he was still working albeit in a less than full time role. His parents both died young and he came from a large and poor farm family. He never really worried about saving for retirement. So he had the attitude of I'll play a round of golf today and not worry about it.

I'm quite the opposite. I'd like to play more golf, or get back into playing hockey, maybe even skiing. But I don't because I worry that that $100 should be saved to buy soup when I'm 85 and starving on the streets.