Many Canadians in their 30s, 40s not saving enough for retirement

[Slava]

Originally Posted by Cowboy89

Which is why passively invested ETFs that have fees at or below 0.50% are available too. Over decades there is little empirical proof that active management increases a fund's return. Therefore building portfolios from index tracking ETFs that pay low fees are a nice option.

Although I see your point here (and do use ETFs from time to time for specific investments) there is an issue here. One is that there are actually a lot of funds that beat the market. Another is that although people measure the return against the index it's not achievable; you cannot buy the index for free anywhere so it's basically irrelevant as anything other than a benchmark.

For those of you who are investing in the index as a whole though I do wonder how long you will stick with that if the market is range-bound for the next 3-5 years? Same question regarding a market drop over the next year or two?

While it might be simpler and it might be cheaper it doesn't necessarily make it better.

[ken0042]

Originally Posted by Phaneuf3

Well according to ING Direct's savings calculator, if you start with $0 and put away $400 a month for 40 years, you'll have just a little over a million (1,056,xxx.xx) if you got a 7% interest rate.

But where can you get a 7% rate these days without a lot of risk? When banks are collecting 1/2 that amount in mortgage interest, you will have to take on risks that could result in a net loss over time.

The key is to start early indeed. I recall at age 15 after learning about compound interest in school- walking into a bank to setup a retirement plan. I was making $75 per week back then; and had I invested from 15 to 20 years of age I would likely have been set. My original money would have had 50 years to collect interest.

However like so many of my peers spending habits got in the way of saving over the years- so there is something to the original comments of this thread.

[tete]

Originally Posted by pylon

It is not like my parents were super wealthy. My dad was / is an oilpatch guy that was likely making around 100 k/yr through the 80's and 90's and my mother supplimented the family income with a part time job as a realtor.

100K in the 1980's? That's not an "average" wage. In the 1980's, my parent's COMBINED salaries was about $40K.

Anyhoo, this is a digression from the original thread. Carry on.

[Slava]

Originally Posted by ken0042

But where can you get a 7% rate these days without a lot of risk? When banks are collecting 1/2 that amount in mortgage interest, you will have to take on risks that could result in a net loss over time.

The key is to start early indeed. I recall at age 15 after learning about compound interest in school- walking into a bank to setup a retirement plan. I was making $75 per week back then; and had I invested from 15 to 20 years of age I would likely have been set. My original money would have had 50 years to collect interest.

However like so many of my peers spending habits got in the way of saving over the years- so there is something to the original comments of this thread.

It depends on what you consider a lot of risk. With medium risk investments you can average 7% over the longer term. You are going to see some better years there and some that are not so good though, and you have to be prepared to see that fluctuation.

[Phanuthier]

Real interesting replies. Since my last post, a lot of posters of those who are preparing for 60 - my question is, is that what you really should do? Is the goal of life to be as frugal as possible so you get a retirement home with a window instead of a cheap painting? I'm not saying you nessasarly have to buy the most expensive car, but I think life is worth living and not to try and save up as much as you can so you can enjoy life... when you are 60 and your best years are behind you. (sorry to anyone here > 60)

If life in the Western world is to work hard, stress to the max so you can go on vacation every 3 years then have a grand retirement... maybe something in how things are done should change.

Myself, I find that since I'm starting to transition to the working life, I am using a lot more money than I used it. I'm not too sure of what to think about it. My last roommate (as to avoid talking about me) was 24 years old single guy with a 6 figure salary and commented on how he used to rake in the cash for internships, but these days it seems like he's using up everything he makes and he's not sure what to make of that either.

[ken0042]

Originally Posted by Slava

It depends on what you consider a lot of risk. With medium risk investments you can average 7% over the longer term. You are going to see some better years there and some that are not so good though, and you have to be prepared to see that fluctuation.

What would you consider "long term", and how much of an investment would one need to put in? Would it be something that the average person could add hundreds per month into?

Obviously I'm just looking for general info- my impressions are that one would need 10's or 100's of thousands up front to invest.

[Slava]

Long term would be 5 years as a bare bones minimum but more in the ten year range in my line of thought. You can definitely do these things with hundreds of dollars and don't need tens of thousands. Eventually you keep investing and get some growth and you have the tens or hundreds that you need though!

[macker]

[QUOTE=ken0042;2459746]What would you consider "long term", and how much of an investment would one need to put in? Would it be something that the average person could add hundreds per month into?


If you look at the last 10 year period of time the S&P/TSX Composite (Canadian) total return index was up 6.2% for the 10 year period ending June 30, 2009. The S&P 500 (US) total return index was down 4.4% hence the "lost decade". The World Markets excluding the US total return index was down 0.3% over the past 10 years. This is before considering that MER's in Canada are the highest in the world and take off 2.5% - 3% off the index returns quoted above. I would also note that 75% - 80% of fund managers can't beat the index and even a 1% MER is significant over a 10 year period of time. If you aren't convinced then build your portfolio to include actively managed funds and passively managed etfs or index funds and compare over time. It is very hard to argue with the couch potato portfolio for most lazy investors. If you have time use the passive etf's/index funds actively to play trends and stay on top of things. Diversify your assets and your investment style.

[MoneyGuy]

I'm going to get a little personal here. I'm in the middle of the boomer generation and have seen a lot. I have a bleak view of people in their 20s and 30s. Not all of them, but many. My generation left high school and immediately went to university, trade school or whatever and then started careers. Yes, some of us went to Europe but then we got on with our lives. We were very determined and focused. I know many boomers who screwed up also, but lots of us did the right things. I'm not at a point in my life where I have lots of money and can do almost anything I want (as long as the wife agrees).

Ah, those folks in their 20s and 30s again. I hope not to offend anyone here, but I'll be blunt. I shouldn't offend you anyway because I know very few of you and you may be exceptions. Many of that generation want everything now and are willing to forsake good financial decisions and into debt for it. The biggest mortgage I ever had was $65,000 and now I have young clients (I'm a financial planner) who have 400,000-plus mortgages. I bought a starter house, but see lots of people of my kids' generation who are willing to do that. I built equity more slowly, but not so the 20s and 30s. I just recently bought a 50-inch screen; most of you have had them for a long time. It's not that I couldn't afford it, because I certainly can but I carefull consider big purchases both as wants and also what makes financial success. My RRSPs are totally maxed out, as are my wife's. Our TFSAs are also maxed out and we have a tonne of non-reg investments.

If I because disabled and couldn't work for a year, I could do it easily. I'm insured and have other financial resources. How many of you could withstand a few months without devastating your finances?

I'm not alone. We have friends who are similar positions. If we wanted to drop $10K for a trip to Europe or anywhere, we can do it. I'm revealing this not to boast, but in the hope that my story can inspire some young folks to do the right things. Talk to your parents (assuming they're financially successful) and ask what they did. Do more things as they did and less like what your generation is doing and you'll reap the rewards down the reward and many of your friends will be envious. Having said that, many of your parents' generation are also in dire financial need also, so maybe your parents are not the best model for you.

I know young people who are absolutely stupid financially (just as I know people of my generation who are the same) and some very smart young people. Which will you be?

In short, make good decisions (use your head and not your heart) and you can be financially successful, build a moat around yourself and your family and achieve wonderful things. If not, well all bets are off. Good luck.

Edit: ETFs are not the cure-all many people think. Compare properly and mutual funds and stocks stack up a lot better than you're led to believe.

[SeeGeeWhy]

Good points money guy.

I notice that very few of these dick wavers ever get into how sweet their cash surrender values are.

Investing is only one part of financial planning guys.

Financial management (budgeting), tax planning, asset management (investing), risk management (insurance), retirement planning and estate planning are all pillars to what your plan should be comprised of.

OzyFlame wins the trophy for most pompous and arrogant mental quiff in this thread so far. After explaining how his parents paid for his tuition in full:

"This worked out marvelously, and I can't help but recommend the same path for other undergraduates."

Are you fataing serious. What a stellar... nay, MARVELOUS recommendation. You've really got the system figured out. If only we could all be so wise to have realized that getting someone to GIVE YOU $20,000+ is a good idea. WHY THE HELL DIDN'T I THINK OF THAT!?

Give your head a shake.

Do you have any idea the upward mobility that education provides?

You are the essence of the entitlement stereotype that your generation carries (...I think I'm technically on the front end of that generation being 28 myself). You pretty easily brush off what a gift it is to have your parents pay for your tuition and give you the chance to work and amass wealth while educating yourself.

Un fricken believable!

Sorry dude, but that's about the most dickheaded thing I've seen written on this board in a long time.

1stland... a B.Comm/MBA combo lacks power. An MBA is a B.Comm for people who did not do it the first time around. If you're an accountant, a CA is a much more powerful designation. CFA is another popular and effective way to boost yor B.Comm if you're looking to do that.

[SeeGeeWhy]

Originally Posted by Phanuthier

Real interesting replies. Since my last post, a lot of posters of those who are preparing for 60 - my question is, is that what you really should do? Is the goal of life to be as frugal as possible so you get a retirement home with a window instead of a cheap painting? I'm not saying you nessasarly have to buy the most expensive car, but I think life is worth living and not to try and save up as much as you can so you can enjoy life... when you are 60 and your best years are behind you. (sorry to anyone here > 60)

If life in the Western world is to work hard, stress to the max so you can go on vacation every 3 years then have a grand retirement... maybe something in how things are done should change.

People used to retire at 60 - 65 because a majority of jobs were hard labour based and your employers would literally work you as long as they could before you kicked the bucket. Retirement probably lasted 2 - 5 years in this scenario.

These days, retiring at 60 means you've got to 'self-fund' for probably 20+ years. Life expectancy in Canada is high and is getting higher.

What I think this means is that a person's mentality about retirement needs to change. Probably means you amass a mixture of assets that includes your own human/mental capital (skills) along with equity, debt, real estate, etc so you can continue to bank on all of it well into your golden years.

What does it mean to you? That's the real question.

[KTown]

Originally Posted by Muta

How do you just 'buy' 4 houses? It's not like you're going to the convenience store or anything to pick something up, these are houses... investments. I barely qualified for one, let alone four.

Easy, as Donald Trump says you have to spend money to make money. Instead of blowing my cash in my early 20's I bought a house at a good price. I paid more than I could afford at the time which was a stretch off the salary I was making back then. Then I started paying off the mortgage faster than normal, got my house re-appraised and took the equity out of my house and put a downpayment on houses in Regina before it boomed there.

I could have bought a lexus or something like that instead of driving my crapbox from high school back then and rent like some of my other friends did but I started investing my money, first investment was buying my house. It's a tax free investment if you think about it. I also started an RRSP when I was in college, I started at 18 throwing in $50 a month, its not hard. Its just living comfortably within your means and not getting suckered into living on credit and buying every nice new thing you see.

[KTown]

Originally Posted by Table 5

Dude probably had money to begin with.

Never got a dime from anyone for any of the things I got. My parents wouldn't give me money, they wanted to retire early and as soon as I finished college dad said move out or pay rent. So I moved out, being smart with your money is not hard. Driving a 96 Ford Escort for 14 years was hard, while all my friends where driving there nice trucks, BMW's, etc.

[blankall]

Originally Posted by MoneyGuy

I'm going to get a little personal here. I'm in the middle of the boomer generation and have seen a lot. I have a bleak view of people in their 20s and 30s. Not all of them, but many. My generation left high school and immediately went to university, trade school or whatever and then started careers. Yes, some of us went to Europe but then we got on with our lives. We were very determined and focused. I know many boomers who screwed up also, but lots of us did the right things. I'm not at a point in my life where I have lots of money and can do almost anything I want (as long as the wife agrees).

Ah, those folks in their 20s and 30s again. I hope not to offend anyone here, but I'll be blunt. I shouldn't offend you anyway because I know very few of you and you may be exceptions. Many of that generation want everything now and are willing to forsake good financial decisions and into debt for it. The biggest mortgage I ever had was $65,000 and now I have young clients (I'm a financial planner) who have 400,000-plus mortgages. I bought a starter house, but see lots of people of my kids' generation who are willing to do that. I built equity more slowly, but not so the 20s and 30s. I just recently bought a 50-inch screen; most of you have had them for a long time. It's not that I couldn't afford it, because I certainly can but I carefull consider big purchases both as wants and also what makes financial success. My RRSPs are totally maxed out, as are my wife's. Our TFSAs are also maxed out and we have a tonne of non-reg investments.

If I because disabled and couldn't work for a year, I could do it easily. I'm insured and have other financial resources. How many of you could withstand a few months without devastating your finances?

I'm not alone. We have friends who are similar positions. If we wanted to drop $10K for a trip to Europe or anywhere, we can do it. I'm revealing this not to boast, but in the hope that my story can inspire some young folks to do the right things. Talk to your parents (assuming they're financially successful) and ask what they did. Do more things as they did and less like what your generation is doing and you'll reap the rewards down the reward and many of your friends will be envious. Having said that, many of your parents' generation are also in dire financial need also, so maybe your parents are not the best model for you.

I know young people who are absolutely stupid financially (just as I know people of my generation who are the same) and some very smart young people. Which will you be?

In short, make good decisions (use your head and not your heart) and you can be financially successful, build a moat around yourself and your family and achieve wonderful things. If not, well all bets are off. Good luck.

Edit: ETFs are not the cure-all many people think. Compare properly and mutual funds and stocks stack up a lot better than you're led to believe.

I think you are missing the point. There are no careers available after university. People spend more time messing around because their other option is working at earl's.

As for housing...what starter homes are you talking about that are available at anywhere close to 65k these days? A small townhouse costs 300k in a bad neighbourhood.

Personally I had to get a doctorate degree before I was qualified for a job that paid for more than my basic needs. Try living off $10-15/hr after taxes and see how easy it is to save anything.

Even now with my doctorate degree it will be years before I'll have a down payment together for a house I probably can't afford.

[Ozy_Flame]

Originally Posted by SeeGeeWhy

OzyFlame wins the trophy for most pompous and arrogant mental quiff in this thread so far. After explaining how his parents paid for his tuition in full:

"This worked out marvelously, and I can't help but recommend the same path for other undergraduates."

Are you fataing serious. What a stellar... nay, MARVELOUS recommendation. You've really got the system figured out. If only we could all be so wise to have realized that getting someone to GIVE YOU $20,000+ is a good idea. WHY THE HELL DIDN'T I THINK OF THAT!?

Give your head a shake.

Do you have any idea the upward mobility that education provides?

You are the essence of the entitlement stereotype that your generation carries (...I think I'm technically on the front end of that generation being 28 myself). You pretty easily brush off what a gift it is to have your parents pay for your tuition and give you the chance to work and amass wealth while educating yourself.

Un fricken believable!

Sorry dude, but that's about the most dickheaded thing I've seen written on this board in a long time.

lol! sour grapes at all? look man, I wasn't intending to be pompous; all I was saying is that even with my tuition paid for, I still had to earn my keep around the house for the things I wanted in life. Working worked for me.

You and I should smoke a joint sometime; that might help ease the tension.

[KTown]

Originally Posted by Table 5

Maybe cause I slept on a sleeping bag in an empty room for a good chunk of my early 20's, but anyone who can qualify for a loan for 4 houses, and can pay the down payment for them, qualifies as "having money to begin with".

Then again there are some enterprising kids out there who are totally self-sufficient.

Don't assume without asking. I spend all my own money on my properties, that I've earned from working. I also worked a second job in my early 20's to get a head start. Like I said earlier I had an RRSP since I was 18, so I had backup of cash there, I built equity in my house by paying down the mortgage, as soon as I had the equity I pulled it out and bought 4 houses in Regina, couldn't afford Calgary.

I am thinking of selling my 4 houses in Regina and buying an 8 - 12 unit type apartment building in Toronto. One might ask why TO, well a I want to stay in Canada but I don't want to be in a boom or bust type area, plus Toronto is full of apartment renters you can almost only build up in TO now, not out.

[KTown]

Originally Posted by Traditional_Ale

So, assuming I'm in my mid 20's and don't make a tonne of money buy want to get my foot in the door with some kind of investment to start a nest egg.

Say I got, $5000. What should I do with it? BTW, I don't mind taking risks. He who dares, wins.

Buy an oil and gas stock, higher risks are ones that sell for around a dollar or less, but could turn into quite a bit. I've bought one stock a while back that was 6 cents and is now over 26 cents. Quadrupled the money so far.

On the downside though the lowend stocks have a higher chance of going belly up.

[ma-skis.com]

Originally Posted by blankall

I think you are missing the point. There are no careers available after university. People spend more time messing around because their other option is working at earl's.

There are lots of careers without university, it's just that society has played up university to be some kind of magic wand for people to find a career, so you have people languishing in school building up debt and trying to find jobs in markets that don't need their skills. Even working at earls can be lucrative. Head chefs and Restaurant Leaders can clear 100k. People choose to mess around at earls because they don't have the foresight to plan appropriately.

I would imagine after doing a short apprenticeship where you can get paid and then moving immediately into the workforce would be a much more practical plan for many people at this point in time. Instead we have people playing grown up living on their own, taking a masters in degrees with little job prospects. All of which adds up to debt.

People forget that university isn't the only route in life.

Plumber high school education --> after 2 years you're clearing 60k

Electrician High school education (without even math 30) --> clearning 60 after 2 years...

There's plenty of jobs out there for people, it's just that there's too many people who feel they are "too good" for certain types of work. or deserve something they deem as "better"

you have much to learn young grasshopper

[SeeGeeWhy]

Originally Posted by Ozy_Flame

lol! sour grapes at all? look man, I wasn't intending to be pompous; all I was saying is that even with my tuition paid for, I still had to earn my keep around the house for the things I wanted in life. Working worked for me.

You and I should smoke a joint sometime; that might help ease the tension.

Ha! No shabazz, sherlock. I WISH someone would have handed me a cheque to pay for my school back then. I worked at Boston Pizza from age 14 - 22 to make sure I convocated from engineering debt free. I actually vowed to establish the Bitter White Male Fund to support the average white person with good grades and extra-cirriculars during university. Seemed like you had to be an Aboriginal Narcoleptic born on a solstice with the intent of entering the field of forestry to get a scholarship back in the day.

I've had my fortunes in life and I am very thankful for them. I hope you treat yor parents well.

Look, I respect that you made the most of the position and came out of it with cash on hand. I just wanted to point out that what you said was a pretty damn pompous way to relate your tale.

Now, about that joint. If you're offering, I can tell you my story!

I still remember the time Trout busted me at TVotR high as a kite and I was like... Uh... hey Trout! See you later man....

Smoking around CPers can be an adventure.

[Frank MetaMusil]

Originally Posted by blankall

I think you are missing the point. There are no careers available after university. People spend more time messing around because their other option is working at earl's.

As for housing...what starter homes are you talking about that are available at anywhere close to 65k these days? A small townhouse costs 300k in a bad neighbourhood.

Personally I had to get a doctorate degree before I was qualified for a job that paid for more than my basic needs. Try living off $10-15/hr after taxes and see how easy it is to save anything.

Even now with my doctorate degree it will be years before I'll have a down payment together for a house I probably can't afford.

This townhouse is $310k in Silverado (next to Spruce Meadows)