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

[RougeUnderoos]

Someone might have mentioned this, but I think a lot of people are of the rather optimistic opinion that they'll be making an absolute fortune in their 40's and 50's, and that's when they'll save up. Or they'll get so rich that they won't even really have to save for retirement at all.

A lot of people out there think they'll become a millionaire one way or another, even if they are 35 years-old and should recognize that it's not likely to happen.

[Table 5]

Originally Posted by CGYTransplant

Um...I went to a Canadian university, in Alberta, and I graduated in 2005 with a Bachelor of Science and $45,000 in student loans. That's pretty damn crippling to me.

Not to downplay your loans, but it doesn't compare. When that's the amount you owe PER YEAR, that's when you know what an American student goes through.

The pretty steady rise of tuition in Canadian schools is troubling for sure, however.

[return to the red]

Originally Posted by RougeUnderoos

Someone might have mentioned this, but I think a lot of people are of the rather optimistic opinion that they'll be making an absolute fortune in their 40's and 50's, and that's when they'll save up. Or they'll get so rich that they won't even really have to save for retirement at all.

A lot of people out there think they'll become a millionaire one way or another, even if they are 35 years-old and should recognize that it's not likely to happen.

So I should stop spending my $30 dollars a week on lottery tickets and put that to my retirement fund

[Table 5]

FYI, this thread is totally killing my recent pangs of wasting some money on a Z3 M Coupe. I guess I'll have to just read a book or stare at a wall for fun.

[Antithesis]

Originally Posted by Table 5

Not to downplay your loans, but it doesn't compare. When that's the amount you owe PER YEAR, that's when you know what an American student goes through.

The pretty steady rise of tuition in Canadian schools is troubling for sure, however.

True - I was accepted to an American university for my undergrad degree and to get a student visa they wanted me to prove I had $160,000 US to fund 4 years of tuition and living expenses ... this was when the dollar was around 65 cents.

[Frank MetaMusil]

Originally Posted by Antithesis

True - I was accepted to an American university for my undergrad degree and to get a student visa they wanted me to prove I had $160,000 US to fund 4 years of tuition and living expenses ... this was when the dollar was around 65 cents.

For that amount of tuition, they'd better be teaching you how to cure cancer......

[SeeGeeWhy]

Originally Posted by 1stLand

I am of the opinion that people should buy income producing assets. Best bet there is - Real Estate.

I agree on buying income producing assets - but why would you buy that property that you have to physically manage, reinvest, and generally worry about instead of borrowing and buying stock in a REIT? Similar asset class, impact of leverage, higher liquidity...

Your capitalization rate better be clearing your cost of capital (weighted average of debt cost and expected return on equity) or else you're losing ground.

I also agree on inner city vs suburbs.

Originally Posted by Jonrox

the experiences someone can have going to Mexico and Vegas at 21 years old are much different than the experiences they'd have at 50 years old.

Yeah, as a 21 year old dude you can hang out with your buddies and get loser plastered playin penny slots while you watch the rich 50 somethings wheel the 20 year old hotties you were chatting up at the pool earlier.

Originally Posted by Sylvanfan

.. Not to mention a lot of people my age are tragically uneducated when it comes to money.

Does your financal education level make you feel like saving and investing is so risky that you might as well not invest?

Originally Posted by shermanator

I'll agree with this 100%. Any money I save up gets either thrown towards the principal on my mortgage, or towards potential upgrades to my house so that when I do decide to sell, it's worth more than if I hadn't.

You should still compare that return vs what you'd expect to gain investing elsewhere.

[SeeGeeWhy]

Originally Posted by RougeUnderoos

Someone might have mentioned this, but I think a lot of people are of the rather optimistic opinion that they'll be making an absolute fortune in their 40's and 50's, and that's when they'll save up. Or they'll get so rich that they won't even really have to save for retirement at all.

A lot of people out there think they'll become a millionaire one way or another, even if they are 35 years-old and should recognize that it's not likely to happen.

People who load up their RRSPs also assume that they'll be in the lowest income bracket by the time they retire and that's probably not true either.

There are other tax efficient ways to invest and own assets and not worry about that RRSP being forcefully converted into a RRIF later on in life. Ask Slava - he is a certified baller.

[anyonebutedmonton]

Originally Posted by CGYTransplant

Um...I went to a Canadian university, in Alberta, and I graduated in 2005 with a Bachelor of Science and $45,000 in student loans. That's pretty damn crippling to me.

I don't understand how someone could possibly amass $45K in Alberta going to school... Tuition at UofA or UofC is somewhere in the $6-7K range times four years is $24-28K. Unless you partied hard and didn't work in the summer I fail to see how you could rack up that kind of debt. A bachelors degree can easily be done in under $20K in debt if you work hard during the summers and find reasonable accommodations.

[Table 5]

Originally Posted by anyonebutedmonton

A bachelors degree can easily be done in under $20K in debt if you work hard during the summers and find reasonable accommodations.

Leeching of the parents for as long and hard as possible is a great way to save money, especially during college. For me I didn't have any money so it was a pretty easy decision anyway, ha. Sure I lived at home, and had to borrow my parents car if I wanted to go anywhere, but I saved a ton of money to the point where I was cash positive by the time I came out of school. Plus at that age, you don't feel like a loser about it (compared to the people who have to back in with their parents after they finish college since they can't find a job).

[Bring_Back_Shantz]

Originally Posted by V

I don't completely agree. The fact is, if my employer is willing to match whatever I put in, I will put away more than otherwise. The reason being that the money will return 100% instantly and go from there. If the employer is not going to match, I will probably invest less, because the 300 bucks a month I can put away will not provide enough of an impact on my retirement savings to take away from some comfort that I can enjoy now.

There is definitely a balance there, because you really do need to put something away for the future, but it is not beyond comprehension that someone would pay more into RRSPs if it was matched by the employer. I know that I'd put more away if my employer matched more.

I never said people wouldn't put aside more money if their employer was going to match it. I doubt you'd have anyone that wouldn't agree that that would in fact be the case in for a lot of people.
What I said was that an employer not matching is no reason not to contribute all you can afford to.

[KTown]

The problem is people just don't have will power something comes out and most people must buy it.

I am still young, I have a house that will be paid off within 5 years, I bought 4 houses 4 years ago that I rent. I have several stock investments, I've had an RRSP account since I was 18 and not once did I ever receive a free contribution from an employer hence why the last 3 years I've been working on contract. I just finished driving the same car that I've had since high school and I finally cracked down and payed cash upfront for a brand new twin cab Tacoma. This car will last me 15 - 20 years.

All this on a college education doing a job I like.

People just live beyond there means. I still do lots and have lots, I go on a holiday once a year, I play golf (Just bought myself an R9 TP driver, waited till the 2010 models came out and bought a 2009. I play sports, I have all the amenities I need for myself and my family. There is no need to go out for lunch everyday, make a couple of sandwiches, just doing that alone will save you 10 bucks a day. Change your own oil in your car, this will save you 20 bucks. There is no need to go and overspend on everything. Buy a holiday last minute you'll save somewhere around 50%. Also doing stuff around your house yourself, hiring people costs a fortune build your own fence its not hard.

I get so frustrated how people can just blow there money, they need all the new toys.

I plan on retiring somewhere nice when I am 50, away from this cold place where I can play golf year round.

I don't need Canada to give me a pension plan, I'll take care of myself and will do it alot better.

[3 Justin 3]

Originally Posted by Table 5

Leeching of the parents for as long and hard as possible is a great way to save money, especially during college. For me I didn't have any money so it was a pretty easy decision anyway, ha. Sure I lived at home, and had to borrow my parents car if I wanted to go anywhere, but I saved a ton of money to the point where I was cash positive by the time I came out of school. Plus at that age, you don't feel like a loser about it (compared to the people who have to back in with their parents after they finish college since they can't find a job).

I am hoping (but pretty confident) I'll be in the same position.

I have my car paid off finally (an 06 Cobalt), and I live with my parents with a good chunk of money in my RRSP. Luckily my parents were smart and saved up for me to go to school so my tuition is paid and I just pay books.

Coming out of school I'll look to be up a car, and $35,000+ in my bank account. That's if everything goes to plan and I didn't go to Europe. As I am going to Europe/Asia in the coming years, shave $8000 off. Still, I'll be rolling in the dough.



Personal question but, is it a bad idea to put all my money into my RRSP (up to the limit at least) until I have saved $20,000, then take it out to buy a house (tax free apparently). Or should I save up in a different account for a house?

[Sylvanfan]

Originally Posted by KTown

The problem is people just don't have will power something comes out and most people must buy it.

I get so frustrated how people can just blow there money, they need all the new toys.

Is this really the case with people who are currently in their 30's and 40's though? I think that applies more to people in their 20's. Granted what you did in your 20's can largely affect where you are when you get to be in your 30's

My problem was that when I was in my 20's rather than go buy 4 houses with 5% down and take on a tonne of debt and risk....I opted for stocks.
Dumb, dumb move in hindsight. Of course had I bought a bunch of stocks and real estate in 2007 I'd be even dumber.

[Temporary_User]

I'll be graduating soon. I'm 25 and will have 50k is student loan debt.
I'm not horrible with money, but I'm not exactly good with it either. I worked for a couple years before getting back in school so I amassed a bit of furniture, nice car etc. That's all good.
My problem is that when I work during the summers I essentially spend what I make. I buy clothes and take one end of summer trip to Mexico or somewhere. I take out whatever student loans they are willing to give me (usually 10-13k). So I've essentially been living off ~25k for the last few years. When I do graduate and start working again I figure my standard of living will go up a little just because I will have constant income, but if I can learn to limit my spending to ~30-35k a year, whatever else can go to my loans. Hopefully I make more than that.

[Pastiche]

Here's a great book review about a book published by a British parliamentarian about the ensuing conflict with the baby boomer generation:

The Pinchsets out to show how the baby boomers – those, like Willetts, who were born between 1945 and 1965 – have "stolen their children's future" through their cultural, demographic and political dominance. Willetts does not quite succeed in proving this charge of intergenerational theft. But in marshalling his case he takes you on such a fascinating journey through British society that you do not feel remotely shortchanged.
His stated thesis is that the big generation of boomers has concentrated wealth, adopted a hegemonic position over national culture and failed to attend to the needs of the future. They have, in effect, broken the inter-generational contract. It is certainly true that the boomers have done well out of the welfare state, being set to take out, Willetts suggests, approximately 118% of what they'll put in. But this makes them no worse than previous generations, including those born between 1900 and 1920.

More on concentration of wealth: http://www.economist.com/culture/dis...ry_id=15495760

Half the population are under 40 years old but they hold only about 15% of all financial assets. People under 44 own, again, just 15% of owner-occupied housing. Comparing the financial and housing wealth of different age groups in 1995 and 2005 the Bank of England found that those aged 25 to 34 had seen their wealth fall, whereas those aged 55 to 64 had seen theirs triple. It helped that inflation was galloping when the older group was borrowing to buy homes, but slowed thereafter.

If pensions are counted, the situation is even more skewed. Lushly funded final- salary schemes are now broadly closed to new members, in the private sector at least. Baby-boomers can chuck the day job at 60 or 65 and head off into the perma-tanned sunset (they will probably prove freakishly long-lived), borrowing against the inflated value of their houses as they do so. Their children must slog on towards an infinitely receding retirement age, squirrelling away money for their meagre defined-contribution pensions as a growing proportion of state spending is devoted to the needs of a massive generation of the elderly.

Here's an article by Maclean's a while back that just boiled my blood, apparently Generation Y is the most entitled generation:

http://www2.macleans.ca/2009/01/14/d...80%99s-my-job/

Emboldened by these dual advantages, Millennials set their expectations high. Not only did they want fun, fulfilling work, with flexible hours, good salaries, and ample vacation, they wanted to be celebrated, too. Literally, feted. Savvy employers had taken to embracing measures like prize packages for a job well done, “public displays of appreciation,” and, in the case of one manufacturer in Texas, retaining a “celebration assistant” in charge of helium balloons and confetti.

The comments to this article are better than the article itself:

I think Gen Y largely grew up more socially alienated than any generation before it. They don't have the sense of community offered by religion, they grew up in gated communities or ghettos (large gap between rich and poor), their parents moved around more than any generation before them, rising crime meant hanging around with the neighbourhood kids was harder than before and as much as technology puts them in constant contact with more people, it probably reduces the quality of that contact. That is, I think, the opening for employers - they need to foster cooperation and social integration for Gen Y'ers, and give them a sense of belonging to a team. Gen Y may LOOK like it is all about unbridled individualism and selfishness, but look at how they go about it collectively (and how easily folks like the sellers of Che Guevera t-shirts co-opt them) - Gen Y is just looking to fit in

[WilsonFourTwo]

Originally Posted by The Yen Man

I guess I'm a bit lucky (or a loser depending on your interpretation) because my vacation consists of sitting at home and playing video games. My last week off from work, I sat at home and played Final Fantasy 13. So I don't spend much on exotic vacations because I don't need it to help me unwind.

I didn't really start travelling until I was about 25, but I discovered what a boost it really can be and felt foolish for not doing it sooner. I think everyone should take a quality vacation every 2 or 3 years if they can.

A method that has worked very well for me is to turn the trip into a savings reward. Every month, I save $600. The first $500 is for retirement, the next $100 is for the vacation fund. It's worked very well for me over the years, and allows me to take a quality trip every 2 or 3 years. I may spend a couple grand on a trip, but I save $15,000 while gearing up for it.....makes it pretty guilt free.

[WilsonFourTwo]

Originally Posted by Kybosh

I have a very hard time making any RRSP contributions right now because I'm playing the academic research game. In between all my bills/mortgage and so on there just isn't anything left for any investing.

Don't sweat the RRSP stuff right now. I know that 'Mortgage v. Savings' is the constant great debate amongst financial planners, but neither side is actually wrong per se.

Everyone's minimum goal should be to retire without a monthly housing cost. CPP and OAS provide enough money for the typical person to live a simple but healthy lifestyle. You can afford Christmas presents, you can feed yourself, etc etc. That said - if you're still carrying a Mortgage or paying a significant amount in rent, you're gonna be in trouble.

[WilsonFourTwo]

Originally Posted by Sylvanfan

Fast forward a few years with a wife, kids...etc. Working 60+hours a week isn't that easy, and unfortunately the cost of the things required is quite a bit more today. When that $3500 a year you were hoping to get is pulled from under your feet, it's hard to come up with that extra money when you're already living pretty tight.

If I'm falling short of meeting retirement goals I would hazzard to guess I'm not alone. If everyone in North America was as cheap as I am...the recession would go on for decades.

You know, Moneysense Magazine (which I recommend to EVERYONE) talked about the financial-decades in an article about a year ago. Basically, the advice was to chill out and stop stressing so much.....you're probably on the right track without even knowing it. Generally speaking, your life will be:

Your 20's: Acquiring an education, likely some acquire some debt. The goal should be to get an education with the least amount of debt possible.

Your 30's: Start a family, buy a house, acquire debt. The goal here is to keep your head above water.....nothing more.

Your 40's: Parental expenses start to ease, earnings still strong. The goal here is to chip away at debt wherever/whenever your can.

Your 50's: Kids are gone, mortgage gets paid off, still earning decent money. The goal is to be debt free, and save what you can.

Your 60's: Retirement beyotches! Woot!

[Kybosh]

Originally Posted by WilsonFourTwo

Don't sweat the RRSP stuff right now. I know that 'Mortgage v. Savings' is the constant great debate amongst financial planners, but neither side is actually wrong per se.

Everyone's minimum goal should be to retire without a monthly housing cost. CPP and OAS provide enough money for the typical person to live a simple but healthy lifestyle. You can afford Christmas presents, you can feed yourself, etc etc. That said - if you're still carrying a Mortgage or paying a significant amount in rent, you're gonna be in trouble.

Oh, I'm not concerned in the slightest about any of this stuff. I've accomplished a lot on a minimal salary (technically below the poverty line) in the past seven years or so (own a house, still have an RRSP but just not where I would like to be). If anything, I'm one of the most fiscally responsible people you'll ever see and I'm pretty confident I'll be alright in the future. I should actually write a book about how to stretch your salary as I'm honestly that good at it.