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

[Enoch Root]

Originally Posted by PepsiFree

My only point is that you do not, actually, need that amount of money to live "comfortably" in retirement.

It's this prevalent idea of greed, and "more" that I think is a bit distressing and why people are, overall, very bad with their money. That much money ($150k-$200k, household) is enough to live comfortably with a mortgage, two car payments, and two kids, unless you have a spending problem. If you bought too big a house, or your cars are too expensive, or whatever, it's not a lot, but if you're in that situation you're not saving $4M anyways.

I struggle to understand people who think you need $150k+ for two people to get by comfortably with bare minimum expenses. What are you spending your money on? Break it down for me, and help me understand.

You haven't commented on the comparison vs a DB pension for a couple. You continue to think that the saved retirement is exorbitant, but it is no different than the DB pension couple. Are DB pension benefits too exorbitant, or is it only unreasonable if a person saves the money themselves?

[peter12]

Hey Rich Dads, I just spent $14 on a burrito!

[nik-]

Originally Posted by peter12

Hey Rich Dads, I just spent $14 on a burrito!

Probably one of those ####ty mission style burritos too. If I want a rice roll I'll just eat onigiri.

[GGG]

Originally Posted by nik-

If your retirement is staying home, or the odd dinner out maybe. If you want to enjoy your retirement, if you want a trip or two a year, it's really not. It's not now, in 20 years it won't be close.

A lot of people are planning for really miserable retirements and then they'll die quicker because they're literally bored to death.

I was assuming today’s dollars in all my thoughts (The 4% SWR includes inflation). So 1 million in today’s dollars.

So 4K per month with no mortgage to me would allow you to take a winter vacation every year and road trips in the summer.

[nik-]

Originally Posted by GGG

I was assuming today’s dollars in all my thoughts (The 4% SWR includes inflation). So 1 million in today’s dollars.

So 4K per month with no mortgage to me would allow you to take a winter vacation every year and road trips in the summer.

But it's not 4K a month, it's $2800 a month. There are 12 months, there are taxes.

[peter12]

Originally Posted by nik-

Probably one of those ####ty mission style burritos too. If I want a rice roll I'll just eat onigiri.

No, carnitas were literally spilling out like a Rich Dad throwing twenties onto his budget retirement prostitute.

[Slava]

Originally Posted by rubecube

Eh? That's not at all what I was saying. I'm not even sure why an estate tax on exorbitant wealth is being bandied about as a deterrent to retirement savings. That makes absolutely no sense. No sane person is going to say to themselves "Well I better not save for my retirement because the government is going to take the leftovers when I die."

Why is it being bandied about here though? Because you brought it up in response to someone saying they would retire on $24k/year.

[stone hands]

well, 45k, but eventually only needing 24k. 24k you only need like 650k of savings with a 4% withdrawl rate

[Slava]

Originally Posted by GGG

I think you ignore the costs of working and the cost of mortgage when comparing to what they spend today. If you are driving 20km round trip to work and spending 400 a month on parking plus 2k a year on work clothes and $250 per month on lunch your cost of working is $1000 per month. Now some of that is transferred to your expenses while retired but certainly not all. Then account for say 20-30% of after tax income going to a mortgage and 10%-20% of pretax going to retirement savings.

So your retirement expenses are going to be significantly less so if someone is living off of 100k after tax during life there after tax income sans inflation only needs to be something around 64k to have the same lifestyle. I think it’s also reasonable to target savings based on an expected life expectancy then use your house to cover the overages. So cash savings to 85 then House seems like a reasonable way to plan as opposed to 4% save withdrawal rate and never hit capital.


I really appreciate this thread as it made me go look again through retirement planning and budgeting again and make a few tweeks. Also appreciated that MrMoneyMoustache link for a completely different philosophy around how to think about money.

I wanted to come back to this because it's a good point. At the same time though, you are going to do something in retirement. People who retire with nothing to do invariably are miserable. They go back to work doing something, or they die young. So while you might save some money on "not working" you also spend some money for the same reason.

It does also depend on what you want to do in retirement. I look at things like travel, which I definitely enjoy now. But it's changed. When I was young I would tolerate a certain kind of travel because it was all I could do. As I age, I want slightly nicer accommodations, better food and that type of thing. I can only imagine when I'm 70! I'm not sure that I'll be physically able to travel in the same way, and even less sure that I would want to at that point! It's different for everyone, but my point is that generally that kind of thing increases the costs for you, not the other way around.

[rubecube]

Originally Posted by Slava

Why is it being bandied about here though? Because you brought it up in response to someone saying they would retire on $24k/year.

I think I'm still on the debate from yesterday and fell behind.

[Aleks]

Originally Posted by jayswin

Also, too many new homeowners treat homes the same way they treat new vehicles. "I want all the options and I want to customize everything to fit my needs!!!!".

"A non new home in a 30 year old community? Bleccccchh! Take me 50 minutes away from downtown in a cookie cutter, small square footage NEW BUILD where I get all the CONTROL over OPTIONS! for $450-$550k.

In fairness, that's partially bank fault as well. Financing isn't flexible enough in many cases to just "change houses" when your needs change. You see mortgage rules change frequently, restrictive payout penalties (even with porting), etc.



I did the move up thing, I had a house in Tuscany prior to the 04 boom and did very well on it. I wanted to buy a bigger home because I needed certain spaces I didn't have in my little starter home, but when it came time to buy or build, you have to think not only of what you need now, but what the future demand or resellability is, so you don't get strapped into something that isn't as desirable on the market. So yah you end up with some space you don't need, some bedrooms you don't need, because when the time comes your life changes and you need to move on, it has to be something that has appeal beyond just yourself.

[GGG]

Originally Posted by nik-

But it's not 4K a month, it's $2800 a month. There are 12 months, there are taxes.

We considered the tax in already. 1 million * .04 = 40k per year plus 24k in government subsidies (assuming OAS, married and 800 in CPP between you) gives you 64k or 32k each in income with 10k personal amounts and 25% tax rate you pay 11k in taxes so you have a 53k annual income.

Now Single or Divorced changes it a bit.

[CroFlames]

Originally Posted by stone hands

well, 45k, but eventually only needing 24k. 24k you only need like 650k of savings with a 4% withdrawl rate

I'm ever on the lookout to get leaner and leaner on the budget where I can.

I am curious if you have children?

I have two little financial burdens of joy running around now, I just don't see how I can make 24k work, even with zero debts.

[rubecube]

Originally Posted by CroFlames

I'm ever on the lookout to get leaner and leaner on the budget where I can.

I am curious if you have children?

I have two little financial burdens of joy running around now, I just don't see how I can make 24k work, even with zero debts.

Are you planning on still supporting your children when you're retirement age?

[CroFlames]

Originally Posted by rubecube

Are you planning on still supporting your children when you're retirement age?

No, but property taxes and utilities eat up a good $6-7k a year. Add $3000 in insurance and gas for one vehicle you are eating up almost half of that $24k.

I imagine these costs will be a good 25% higher at least when I'm set to retire.

I'd like my children to come visit me when I'm retired (hopefully with their children) and we get to do some cool things like maybe go to the zoo or drive to West Edmonton Mall. I imagine a good chunk of money will go to entertainment when I'm retired.

If I didn't have kids, I suppose I could do more with less, but I want them to be involved in my life in the future.

[MoneyGuy]

Best. Thread. Ever.

[Geraldsh]

I was advised to save 11 times my annual income for retirement. Bolstered by cpp & oas it has worked fine for my modest lifestyle. No mortgage and no vehicle payments leaves my nest egg barely cracked after 6 years.

[MoneyGuy]

Originally Posted by Geraldsh

I was advised to save 11 times my annual income for retirement. Bolstered by cpp & oas it has worked fine for my modest lifestyle. No mortgage and no vehicle payments leaves my nest egg barely cracked after 6 years.

Advised by whom?

[Geraldsh]

Originally Posted by MoneyGuy

Advised by whom?

It was long ago in a bar far away; told to me by a guy who seemed to be doing alright. Sorry I don’t remember his name...

As I was in need of a goal to shoot for more precise than “millions “ I decided to try it. What really made it workable was signing on with a financial adviser(Servus ) to keep my savings invested wisely.

[Oling_Roachinen]

Originally Posted by GGG

We considered the tax in already. 1 million * .04 = 40k per year plus 24k in government subsidies (assuming OAS, married and 800 in CPP between you) gives you 64k or 32k each in income with 10k personal amounts and 25% tax rate you pay 11k in taxes so you have a 53k annual income.

Now Single or Divorced changes it a bit.

Following this logic, and correct me if I'm wrong GGG, this will result in no impact on the initial 1 million as well. Just working off the 40,000 passive income and 24,000 subsidies minus taxes.

Increase your spending by another 20k annually, and your nest egg will start dropping but it's going to last you another 28 years before it's gone.

EDIT: Oh, 0.04 is your SWR, gotcha. Will depend on circumstances when you retire but really 0.04 is an extremely safe number for typical retirees (read: old folks) and likely results in a higher principal. Of course some emergency spending or poor investments and the numbers change quickly but I'm not sold you need more than 1,000,000 to retire like nik- suggests, at least if you plan on retiring 'soon'.