Are you saving enough for retirement?

[flamesfever]

Originally Posted by pseudoreality

I have my own little spreadsheet that I update once a year. It's fun doing drawdown scenarios, but it's hard to predict retirement expenses. I have a hard time deciding on whether I want to work longer and then have more money in retirement or retire earlier, but be able to do less. I do plan on having some income in retirement thru part-time consulting, but again, that is hard to forecast. There is also the concept of go, slow, and no-go years to take into consideration.

I recall we used to use the figure of 70 to 75% of your annual income when working as what you would need in retirement.

As for when to retire, I think around 60 is ideal if you can afford it. However, if you enjoy working, and don't have a good idea as to what you want to do with your time in retirement, then it may be best to keep working as long as you want.

Of course there are also many other considerations like your health, your plans for retirement e.g. travelling, your family needs e.g. children, parents, etc. etc.

just a few ideas that come to mind.

[RichieRich]

I believe people and particularly the investment companies project that this is more complicated and hence you need to pay someone for a service or software. It doesn’t have to be super hard.

1. How much do you need to live on? Let’s say $60k/yr. Figure out what your basic needs are (aka cat food diet) versus normal vs your idea of luxury.
2. Assuming you want to retain capital and only take a certain amount of “profit”… assume a 4% withdrawal. (Or 3% or 5% or whatever you think you can make long term… this is after taking into account CPI). So $60k is 4% of $1.5mil. If you don’t care about draw down you may choose 6% (or more if you anticipate an inheritance, or have a massive stash of coin, etc).
3. If you’re retiring before age of OAS/CPP/pension you gotta figure that out too.

If you’re ok with excel it’s easy enough to create a row by row spreadsheet with capital amounts, percentage gains and withdrawals, special amounts in/out, etc. this may change at specific ages so all you can do is assume.

If you want an actuarial perspective across a broad population and historical returns then play with Firecalc online. Lots of tabs and fields there.

As for optimizing the combination of OAS/CPP/RRSP/LIRA/TFSA/non reg etc to reduce taxable income and writoffs that’s maybe what you’re after? It’s more complex for sure but keep in mind ballpark is probably good enough.
4. Figure out what that $60k is comprised of. That may be CPP, OAS, other pensions, RRSP, TFSA, non reg.
5. Take a realistic look at where and how you spend money and your associated assumptions and bias’. Odds are you can reduce a few with no impact to quality of life. Nobody needs a $200/mo phone plan or $400/mo TV/internet plan. Or $1500/mo vehicle payment. Or many subscription services (gym, Netflix, Spotify, apple, OF, etc etc). I’m
Definitely not saying you have to be ultra frugal either.

6. As others have said - understand your net worth. Track it regularly. Think about your financial goals and what’s feasible for optimizing savings and returns relative to your risk tolerance. Don’t make stupid decisions around get rich quick ideas (unless it’s a very small percentage of your nest egg, you can afford to lose it, and/or it’s play money).

Here’s a good blog about year end plannings .. it’s USA oriented but similar concept to Canada:
https://bestinterest.blog/5-year-end...planning-tips/

[Slava]

There are some issues with the "it's not as hard as it seems" crowd. I talked with a guy this week, not a client, who's mid-60s and has been retired for 4/5 years. He's got some savings and investments he manages, and he's considering having someone else do that. We went through some things, and he has ideas and thoughts about how things work and certain things he must do. They're just wrong. These aren't investing concepts, nor am I saying he's wrong for buying/not buying things. These basic tax and financial planning concepts could significantly impact him. But someone told him these things, and he saw someone on YouTube, and the list goes on.

And frankly, we know financial literacy could be much higher to begin with. I've had numerous discussions with people on this board who feel like junior high and high school financial education doesn't cover things, and this leads to all kinds of rudimentary issues with people's finances. Things like racking up high-interest credit card debts and having no idea how to budget and how a mortgage works. Now we're telling those people they should handle all this for themselves and don't need a professional for their life savings? I mean, come on. I don't care...people can do whatever they like, but that strikes me as exceedingly terrible advice.

[V]

Originally Posted by cam_wmh

Has anyone built a Canadian retirement xlsx, with all the necessary and even optional inputs?

My buddy manages my portfolio, and is killing it for me, but when I asked to have an xlsx he deferred me to his associate, who insisted it's much more complex... rrrrright

Like honestly, you search for such cdn retirement xls, and every investment house under the sun wants you to use their stupid tool.

F### off, and let me do it.

I built my own spreadsheet, it tracks and categorizes every dollar spent, every asset and liability on my balance sheet and also tracks progress against a number of retirement scenarios. I’ve also developed a number of financial metrics that make sense for my situation. I update it monthly.

Your buddy’s associate is right, it’s very complicated and I’m not sure if you have someone build it for you it’ll be all that useful. I suggest you learn excel and build one yourself. You’ll learn a lot in the process.

[I-Hate-Hulse]

If you have the skills - for sure you can build your own Excel spreadsheet to figure out your retirement plans.

But if you don't have these skills - find an app this will do this for you. Like this:

https://www.moneyreadyapp.ca/

Free Trial, with a yearly fee after that.

[PepsiFree]

Originally Posted by Slava

There are some issues with the "it's not as hard as it seems" crowd. I talked with a guy this week, not a client, who's mid-60s and has been retired for 4/5 years. He's got some savings and investments he manages, and he's considering having someone else do that. We went through some things, and he has ideas and thoughts about how things work and certain things he must do. They're just wrong. These aren't investing concepts, nor am I saying he's wrong for buying/not buying things. These basic tax and financial planning concepts could significantly impact him. But someone told him these things, and he saw someone on YouTube, and the list goes on.

And frankly, we know financial literacy could be much higher to begin with. I've had numerous discussions with people on this board who feel like junior high and high school financial education doesn't cover things, and this leads to all kinds of rudimentary issues with people's finances. Things like racking up high-interest credit card debts and having no idea how to budget and how a mortgage works. Now we're telling those people they should handle all this for themselves and don't need a professional for their life savings? I mean, come on. I don't care...people can do whatever they like, but that strikes me as exceedingly terrible advice.

AI will sort that right out.

[Slava]

Originally Posted by PepsiFree

AI will sort that right out.

I don’t know, probably one day. But every time I see my robot vacuum stuck in the corner and unable to find its way back to the dock I feel fairly confident that people aren’t close to allotting their life savings to AI.

[PepsiFree]

Originally Posted by Slava

I don’t know, probably one day. But every time I see my robot vacuum stuck in the corner and unable to find its way back to the dock I feel fairly confident that people aren’t close to allotting their life savings to AI.

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.

[Slava]

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.

Nah. I’ve paid for and tried out AI for a chunk of my job, and it was not useful. It’s amusing, because people think it’s perfect and have it all sorted. In reality though, it’s not there yet. The investment recommendations looked great on the backtest, but when the systems were live they were brutal. That’s not to suggest that it’ll never happen (I’m not that naive), it’s just that it’s not there yet.

And investing in particular is a little different. I can see the obvious application in terms of quants and formulaic investing. But investing isn’t a science. You can’t just boil down everything to formulas and screens to get an edge (and certainly not a lasting one). And that leads to another issue for AI; if all the AI is looking for the same edge, it gets arbitraged away even faster and there’s no edge.

[Slava]

Oh, I should add that the planning software uses a fair amount of AI. That’s where it can add value though; as a supplement to an expert. It still makes some bizarre suggestions and assumptions, and it really can’t be trusted on its own, but it can help in some areas.

[PepsiFree]

Originally Posted by Slava

Nah. I’ve paid for and tried out AI for a chunk of my job, and it was not useful. It’s amusing, because people think it’s perfect and have it all sorted. In reality though, it’s not there yet. The investment recommendations looked great on the backtest, but when the systems were live they were brutal. That’s not to suggest that it’ll never happen (I’m not that naive), it’s just that it’s not there yet.

And investing in particular is a little different. I can see the obvious application in terms of quants and formulaic investing. But investing isn’t a science. You can’t just boil down everything to formulas and screens to get an edge (and certainly not a lasting one). And that leads to another issue for AI; if all the AI is looking for the same edge, it gets arbitraged away even faster and there’s no edge.

It’s also amusing because people say “I used AI” as though every AI is the same and if you’ve used one you’ve used them all. Who is saying it’s perfect?

As I said, right now it depends a lot on the training, oversight and inputs. But you’re kidding yourself if you don’t think there’s an AI out there that can either do your job better than you can or is being trained to do exactly that, and will reach a point within very short order where the quality of inputs doesn’t matter. The next step in your career is managing the AI that does your job, until it doesn’t need you to manage it. It’s a sad reality, but it is one. You’re living with your head in the sand if you’re laughing at your Roomba thinking you can’t easily be replaced.

For the AI systems we’re talking about (without any idea of what you used), the more they’re used the more they learn. Everything they do right teaches them what’s right, everything they do wrong teaches them what’s wrong.

Anyways, that’s far enough down the AI rabbit hole. The point is that “handle this yourself” is not exceedingly terrible advice, it’s the opposite. Within five years at current progress people with be laughing at people who still use financial advisors. Your only hope is government intervention.

[bizaro86]

Originally Posted by PepsiFree

. Within five years at current progress people with be laughing at people who still use financial advisors. Your only hope is government intervention.

OK. So I'm not a financial advisor and don't use one. But I don't agree that this is true and not because AI couldn't manage a portfolio better.

The old-school algorithm of "buy one equity and one bond ETF and rebalance yearly" beats the vast majority of investors including both DIY and advised. Maybe AI can do better than that, but that isn't looking at the right problem.

Because that's not the value of an advisor. The value of an advisor is talking you out of selling at the bottom in 2009/2020 because the world is going to hell. If you added money to the market in late March 2020 then you don't need an advisor, imho. Everyone else does.

[Slava]

Originally Posted by PepsiFree

It’s also amusing because people say “I used AI” as though every AI is the same and if you’ve used one you’ve used them all. Who is saying it’s perfect?

As I said, right now it depends a lot on the training, oversight and inputs. But you’re kidding yourself if you don’t think there’s an AI out there that can either do your job better than you can or is being trained to do exactly that, and will reach a point within very short order where the quality of inputs doesn’t matter. The next step in your career is managing the AI that does your job, until it doesn’t need you to manage it. It’s a sad reality, but it is one. You’re living with your head in the sand if you’re laughing at your Roomba thinking you can’t easily be replaced.

For the AI systems we’re talking about (without any idea of what you used), the more they’re used the more they learn. Everything they do right teaches them what’s right, everything they do wrong teaches them what’s wrong.

Anyways, that’s far enough down the AI rabbit hole. The point is that “handle this yourself” is not exceedingly terrible advice, it’s the opposite. Within five years at current progress people with be laughing at people who still use financial advisors. Your only hope is government intervention.

My only hope is government intervention? Ok. I’m more than happy to come back to this in 2029 and see how that holds up.

Originally Posted by bizaro86

OK. So I'm not a financial advisor and don't use one. But I don't agree that this is true and not because AI couldn't manage a portfolio better.

The old-school algorithm of "buy one equity and one bond ETF and rebalance yearly" beats the vast majority of investors including both DIY and advised. Maybe AI can do better than that, but that isn't looking at the right problem.

Because that's not the value of an advisor. The value of an advisor is talking you out of selling at the bottom in 2009/2020 because the world is going to hell. If you added money to the market in late March 2020 then you don't need an advisor, imho. Everyone else does.

I entirely disagree that you can’t just bubble ETF for bonds and stocks and rebalance. I don’t know if people want to get into the active/passive debate that comes from this. I do agree that advisors add a lot more value than just rate of return though. That’s basically undeniable both in terms of of the examples you give, but also in terms of things like structure and strategy that most people are just not aware of.

[Winsor_Pilates]

Between my own job, family and hobbies, I don't want to spend hours per week watching markets and being an arm chair expert.
People have expertise in their fields for a reason; and of course that doesn't mean they're all good either.
My managed portfolio did 84% this year after fees; I'm happy to focus my time on things I know and go with that process.
To each their own.

[curves2000]

Originally Posted by PepsiFree

It’s also amusing because people say “I used AI” as though every AI is the same and if you’ve used one you’ve used them all. Who is saying it’s perfect?

As I said, right now it depends a lot on the training, oversight and inputs. But you’re kidding yourself if you don’t think there’s an AI out there that can either do your job better than you can or is being trained to do exactly that, and will reach a point within very short order where the quality of inputs doesn’t matter. The next step in your career is managing the AI that does your job, until it doesn’t need you to manage it. It’s a sad reality, but it is one. You’re living with your head in the sand if you’re laughing at your Roomba thinking you can’t easily be replaced.

For the AI systems we’re talking about (without any idea of what you used), the more they’re used the more they learn. Everything they do right teaches them what’s right, everything they do wrong teaches them what’s wrong.

Anyways, that’s far enough down the AI rabbit hole. The point is that “handle this yourself” is not exceedingly terrible advice, it’s the opposite. Within five years at current progress people with be laughing at people who still use financial advisors. Your only hope is government intervention.

I am skeptical at how far AI will progress from a regulatory perspective and if it will keep up with the changes. We know a lot of the tech companies have really moved the needle with AI from their platforms but that is with virtually no guardrails in that business. It kind of is a free for all for Silicon Valley in that regard.

How does the AI explosion move onto protected and regulated industries and day to day life?? The technology exists for jumbo jets to actually fly and land themselves in existing form but we still have pilots for obvious reasons. The 737 Max 8 crashes resulted from a software and mechanical issue on the planes. The fact that the 2 crashes happened in poor countries mitigated the fallout but if 2 Boeing planes crashed in downtown NYC and LA the result would have been different.

How does the financial community deal with obvious tech, coding and algorithm issues? Would the firms be 100% responsible for billions in client losses in poorly executed trades as a result of some coding issue from some California based company?

Although not really AI related, I remember having debates with people about Bitcoin and how it was going to be a hedge against equity markets, inflation, bank fee's, losses, taxes, government interference/trackability and more. That really hasn't happened after nearly 15 years. Bitcoin is effectively a stock.

Certain technology and regulations just needed to be moved due to the ever changing landscape, that may apply to AI here very soon but in some businesses it will not be as fast as people think. It was 10 years ago that everybody was convinced we would all be in driverless cars in 2025. Email was suppose to eliminate paper. Instant messaging was suppose to eliminate email. During Covid the thought of going into a physical office again to type on a screen and answer emails seemed outrageous but hundreds of millions of people are being forced into doing that again 2 years later.

Everybody is jumping onto the wind and solar tech as a way of the future, odds are we will all have mini nuclear reactors powering our cities.

Everybody thinks and knows Tesla as some big AI company and that may be true but the truth is, Tesla car's are also very poor quality. They are moving piles of high tech, problematic headaches.

We have moved forward a lot as a society in the last 50-100 years but not to the degree that our ancestors did during similar time frames.

Off topic post so apologizes to all about that

[bizaro86]

Originally Posted by Slava

I entirely disagree that you can’t just bubble ETF for bonds and stocks and rebalance. I don’t know if people want to get into the active/passive debate that comes from this. I do agree that advisors add a lot more value than just rate of return though. That’s basically undeniable both in terms of of the examples you give, but also in terms of things like structure and strategy that most people are just not aware of.

I mean, rebalancing 2 etfs mechanically beats the vast majority of active investors - that just isn't debatable. It also isn't what I do with my own money and I wasn't necessarily suggesting that for anyone.

But I think the flaw of "AI can beat an advisors returns so advisors will all get replaced" is the fact that simple algorithmic investing already beats the returns the vast majority are getting and that hasn't made advisors obsolete. If a simple system that works and is easy to understand didn't end advisors I don't see how a complicated black box system will do so.

The value of advisors is clearly in all the "other" stuff. Psychological/tax/planning etc.

Eg. I have an uncle who doesn't have an advisor. He has almost no savings but multiple DB pensions so he's doing great by most standards but no advisor wanted him in the town where he lives (small portfolio == low fees). Anyway, he took his OAS at 65 and then asked me why he wasn't getting anything. I looked into it for him, and because his combined pension/consulting income was over the max, his OAS was getting 100% clawed back. He is planning to quit consulting in a couple of years and fully retire, so he 100% should have deferred to get the higher payouts later, since he's getting $0 now anyway. It was too late to undo the decision when he asked me. If he had someone helping him it would have made a big difference.

[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.

[edslunch]

Saved plenty for retirement but somehow spending too much without a lavish lifestyle. Retiring with kids in school is only part of it.

[Izzle]

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 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.

[chemgear]

Originally Posted by edslunch

Saved plenty for retirement but somehow spending too much without a lavish lifestyle. Retiring with kids in school is only part of it.

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