Are you saving enough for retirement?

[Lubicon]

Not sure how much we will have to leave our kids, and my wife and I are not expecting much from our parents. The one thing we did for our kids was save for their education so at least they graduated from university debt free as they started their adult lives. That counts for something.

For myself? After 10 years of wage freezes/rollbacks I received my first increase since 2014 this year. On top of that the company RRSP program was suspended during this time so retirement saving has been 100% up to me and it's been hard when your wage is not increasing while everything else is. So I've fallen behind my original plan and with only a few years left until retirement I'll never make up for that. I guess that means either working longer or lowering expectations for what retirement will be.

[btimbit]

Cleared out the ol' retirement fund to pay for flight school. Here's hoping that ends up being worth it in the end

[MoneyGuy]

Originally Posted by btimbit

Cleared out the ol' retirement fund to pay for flight school. Here's hoping that ends up being worth it in the end

I hope that strategy “takes off” for you.

[GGG]

I’m still on track to retire when kids are done Uni. Expenses climbed back up a bit as travel added more costs. But still hitting the savings targets.

Inheritance is an interesting question. I’m not actively planning to have any if I retire into the worst 5% of market sequences but in most case I will end with significant assets. I’m not factoring in my house into any calcs as it’s the last backstop to get through worst case market sequences.

So it’s likely there is a paid off house for them plus some amount of cash. In terms of getting inheritance I don’t count on any but in theory my Dad would have a reasonably large amount.

[Wormius]

Originally Posted by btimbit

Cleared out the ol' retirement fund to pay for flight school. Here's hoping that ends up being worth it in the end

I remember watching those episodes of Ice Pilots and wondering if that’s how you have to start out after you get your pilot’s license and eventually work your way up the ranks to a more prominent commercial airline. That would be rough.

Anyway, we plan on leaving whatever is left to our kids, but not really caching some amount away for that. Definitely help them out if they need it, but if they strike it rich, I wouldn’t object to mooching off them.

[Lubicon]

Originally Posted by Wormius

I remember watching those episodes of Ice Pilots and wondering if that’s how you have to start out after you get your pilot’s license and eventually work your way up the ranks to a more prominent commercial airline. That would be rough.
.

For many, yes that is the route.

I have a friend who is a B787 captain. His first job was flying mining supplies in northern Saskatchewan in a Cessna 172. And he was lucky, he knew a guy who knew a guy who was looking for a pilot at the exact time he happened to finish flight school and was available the next day. Some people work the ramp for while before ever setting foot inside an aircraft.

[Slava]

Originally Posted by btimbit

Cleared out the ol' retirement fund to pay for flight school. Here's hoping that ends up being worth it in the end

Interesting because for the Life Long Learning Plan (where you borrow from your RRSP for education) this is said to be the most common pursuit.

[GranteedEV]

i know it's 30-35 years down the line but financially independent retirement before age 70 feels impossible to be honest. To get 75k a year in income, assuming about 9k of that is from pension, it means i need to have 1.32M saved up That however assumes GICs are still doling out 5% interest. Otherwise, if GICs are half of that, i need double that amount. And even that ignores inflation, which can eat into any gains. Maybe i am just a pessimist but even if I put all my money into something like XEQT and trust the market, there's a good chance I won't have anywhere near the money i need even at age 70 to retire comfortably.

[Slava]

Originally Posted by GranteedEV

i know it's 30-35 years down the line but financially independent retirement before age 70 feels impossible to be honest. To get 75k a year in income, assuming about 9k of that is from pension, it means i need to have 1.32M saved up That however assumes GICs are still doling out 5% interest. Otherwise, if GICs are half of that, i need double that amount. And even that ignores inflation, which can eat into any gains. Maybe i am just a pessimist but even if I put all my money into something like XEQT and trust the market, there's a good chance I won't have anywhere near the money i need even at age 70 to retire comfortably.

Well this sounds like a consultation with a financial planner would be sensible. A good planner should be able to incorporate things like CPP/OAS, pension and things like that to get you to that stage. And with 30-35 years to go, this is exactly when you should be taking action and having compounding work in your favour.

[GGG]

Originally Posted by GranteedEV

i know it's 30-35 years down the line but financially independent retirement before age 70 feels impossible to be honest. To get 75k a year in income, assuming about 9k of that is from pension, it means i need to have 1.32M saved up That however assumes GICs are still doling out 5% interest. Otherwise, if GICs are half of that, i need double that amount. And even that ignores inflation, which can eat into any gains. Maybe i am just a pessimist but even if I put all my money into something like XEQT and trust the market, there's a good chance I won't have anywhere near the money i need even at age 70 to retire comfortably.

Napkin math incoming and make sure you get actual professional advice.

The market returns 6-7% adjusted for inflation. The trinity study found that a 4% withdrawal rate adjusted for inflation for a 30 year retirement was successful when backtested against the S+P performance and inflation. Other studies have been done and found 3.5-4%.

If you want a 75k per year retirement income and you are 35 years out I will assume you will max CPP. Current benefit max is 1350 or so and doesn’t yet include the full benefit of increases from the new CPP rates. Plus you get another 600 or so from OAS so let’s call that 25k per year.

So now you need a 50k income stream from your investment or 1.25 million in the bank.

At a 7% return and 35 years that is a $700 per month contribution.

If you want 70k after tax in retirement I assume you are making more than 100k now so it doesn’t seem unreasonable to save $8400 per year.

[kipperiggy]

Originally Posted by Regorium

Since the start of this post, I've lost more than $100k in Calgary real estate and Canadian O&G stocks (not to mention the opportunity costs of the S&P going up like 400% in that timeframe). Also got married with two kids. Luckily, I've continued to progress in my career and out earn all these terrible decisions.

Still on track to retire by 55 or so with a private sector defined benefit pension. However, I'm less confident in the stability of my career than I was 5-6 years ago, but luckily have enough of a cushion to weather a potential storm.

I thought these were a thing of the past!

[MoneyGuy]

Originally Posted by kipperiggy

I thought these were a thing of the past!

This is mostly true…. Many have gone away and new ones are not being set up but some still do exist. Some big corporations (banks, for example) have partly transitioned to a hybrid model; for example, the existing DB plan continues for existing money but new contributions go into a DC plan.

[The Fisher Account]

DB plans definitely still exist. Wife and I each have one.

[Regorium]

Originally Posted by kipperiggy

I thought these were a thing of the past!

Definitely is unfortunately. Company got rid of the DB plan for new hires recently but folks are grandfathered in.

[Strange Brew]

Originally Posted by GranteedEV

i know it's 30-35 years down the line but financially independent retirement before age 70 feels impossible to be honest. To get 75k a year in income, assuming about 9k of that is from pension, it means i need to have 1.32M saved up That however assumes GICs are still doling out 5% interest. Otherwise, if GICs are half of that, i need double that amount. And even that ignores inflation, which can eat into any gains. Maybe i am just a pessimist but even if I put all my money into something like XEQT and trust the market, there's a good chance I won't have anywhere near the money i need even at age 70 to retire comfortably.

Hey just my two cents but with a 30 year time horizon, GIC’s are not your friend. Get into a low cost index fund and just contribute monthly.

[Wormius]

I don’t think GICs are necessarily your enemy though. They’re paying out well enough right now, and if you want something hands-off and secure, they work. If they were only 1% or something, I’d stay away.

[Slava]

Well, I can’t give investment advice without knowing more, but if you have 30+ years until retirement (and you don’t need every dime of retirement income at age 65 either), you should be investing in things other than GICs.

[RichieRich]

my rule: avoid GIC's. You pay tax on gains, they're locked up and untouchable whilst they're there, and they're already barely above inflation. So really you're losing in most situations (except a short period of time recently).



It's time *IN* the market, not timing of the market. So the goal is to consistently put money away (except short periods when "life happens"), don't hop in and out of the markets, and really question all your expenditures. That $50k car today?... that $50k could be worth $400k in ~25yrs, so is it worth that opportunity cost? Ditto for home purchases... they don't always make sense - do a proper financial analysis and don't assume it's a money loss.


Lastly... on inheritances... leave enough for them to do something, but not enough to do nothing.



Some sites ya'll can play with:
https://engaging-data.com/will-money-last-retire-early/ (the best one)

https://www.firecalc.com/
https://milliondollarjourney.com/cpp-ultimate-guide.htm

[Wormius]

Why would GICs be treated any differently tax-wise? If they’re in a RRSP or TFSA the tax implications are the same as anything else.

[Slava]

Originally Posted by Wormius

Why would GICs be treated any differently tax-wise? If they’re in a RRSP or TFSA the tax implications are the same as anything else.

Yeah they’re not. I guess if we’re talking about outside a tax sheltered account then the character of the income matters, but if we’re talking about RSPs and TFSAs it doesn’t.