Wish it were my strategy, but it’s investing 101. The Asset Allocator book sounds good. One way of seeing if a financial advisor is good is that the first thing they should ask you is the level of risk you want to handle. It obviously goes down as you age, and if you have kids, and they get close to college etc.
It’s all about how you think about these things. We are hard wired to make bad decisions, so no one should go with their gut.
I read somewhere that, as a rule of thumb, you should take the age you start a pension and halve it. Then aim to put this % of your pre-tax salary into your pension each year until you retire. So someone starting aged 40 should contribute 20% of their salary for the rest of their working life.
Nice in theory, and the math undoubtedly works out great, but here in the real world, I doubt there’s one person in a thousand who could live on 80% of their salary and save all of the rest.
And the same is probably true for people at 30 or 20 years old, too, even with the lower respective percentages.
The trick is to spend enough time stony broke, so that 80% of your new job’s income feels like a big raise.
This is a target to aim at. A 20-year-old living at home should easily be able to save 10% of their gross income, but few do. Once they are used to not having that 10% to spend, it ceases to be a problem.
The formula demonstrates how much harder it will be if you don’t start early.
It’s been about three weeks and 70+ posts since we heard from the OP. @Translucent_Daydream, are you still following this discussion? It seems the bulk of us have wandered off into a discussion of investment concepts that may not be of immediate interest to you, and I hope we haven’t overwhelmed you with an avalanche of esoteric bullshit. Are you learning things here or elsewhere that are helping you understand how to get onto a path toward a more comfortable/financially secure retirement? Do you have any questions we can answer, or advice we can offer to help you move forward?
I disagree. Most people can save 20% once they are in an established career, but they simply choose not to. You’re telling me that two professionals with a combined income of say $180,000 can’t make it on $150,000?
My company had a matching program - put six percent of your salary in a company savings account, and they matched it 50%. My wife had the same thing, and it’s a fairly common white collar perk. That’s 9% of our salary right there. I knew guys who didn’t take advantage of the program, and turned down 3% of their salary in free money. Crazy.
Then we put away about 10-15% of our salaries each year in Registered Retirement Savings. Neither of us is from a background of wealth, and we started with nothing. We didn’t have super high paying jobs, either. Neither of us cracked six figures until we were in our 50’s.
The easiest way to save is to set up an auto-deposit to a retirement account. If you get a raise at work, instead of spending more money increase your auto-deposit. Trust me - at some point you’ll forget about the money since you never see it, and adjust your spenbding accordingly. But it will be there for you when you retire. And you won’t be as tempted to spend it, because money taken out of your registered retirement funds incurs a tax liability.
Also, if you put 20% of your money in a Registered Retirement Savings, you’ll get back a chunk of that in tax savings. We’d put $20,000 in our RRSPs, and get back $6000 as a tax rebate. Sometimes we’d use the rebate to treat ourselves to a trip or buy something for the house or do a repair job, but usually we’d just roll it back into the RRSP for next year.
If you have credit card debt, get rid of it. Carrying credit card debt is insane. From about the age of 30 on, we NEVER carried over credit card debt from month to month. 20+% interest is like the best investment you ever made - in reverse.
My wife retires next week. We paid off our mortgage this week, and are completely debt-free. She’ll be 58. I retired a couple of years ago, at the same age. Basically the earliest age with an unreduced pension.
The simple key to financial success is to live slightly under your means, creating savings, instead of slightly over, incurring debt. We always drove cheaper vehicles tyhan we strictly needed to, and kept them for a decade or more. We didn’t engage in expensive vacations each year, and neither of us have expensive tastes in food, clothes, or cars. We don’t go out for suppers much, especialloy now that prices are insane.
I will say though, that if we didn’t have pensions (mine corporate, hers government), we couldn’t do it. We’d both still be working until 65. But we could have retired comfortably then without the pensions.
Depends on what you mean by could - I’m sure there are plenty of 40 year olds who can live on 80% of their income if they wanted to, and many without giving up every luxury. But just because they can, doesn’t mean they will.
I don’t understand what you’re disagreeing with me about. As I said, the math works great and you’re proof that it can be done. Congratulations.
But my point was that very few people have the foresight and self control to do the same. Saying that only one in a thousand could do it may be hyperbole, but unless you are asserting that many people actually do save as much as you and your wife did, I’m not sure what the point of contention is.
There’s the confusion. I thought you were saying that it simply can’t be done by most people, not that it can be but most people don’t have the self-control. That I agree with. It seems obvious, given the statistics.
I was basically outlining some techniques to get around the self-control issue. Set up automated deposits, put the money in a registered account rather than a liquid spending account, prioritize getting rid of credit card debt, etc.
I’ve known lots of people who made way more money than my wife and I, who are now broke or heavily in debt. It’s not so much about how much you make (past a point) as it is about discipline and bad habits.
One thing my wife and I had going for us is that we’d not really bar-goers. I don’t drink at all, and my wife drinks wine on occasion. And we don’t smoke. Two people who are heavy smokers and drinkers in Canada can easily blow $1,000/mo on smokes and booze.
It has to be said that I’m talking about middle class people and above. If you are in the lower classes, living paycheck to paycheck is just a reality. The stats show that net savings don’t occur in most households until they are in at least the middle quintile of income. Obviously it’s easier for two professionals with one child to retire early than a family with two hourly wage employees without benefits or pensions, four kids and a big mortgage.
But most people live beyond their means and don’t save and accrue debt when they could simply lower their spending a bit.
I think you are disagreeing about the meaning of “can” in the sense that my doctor says “95% of people can’t lose weight through dieting alone”
Of course the can. If I attached a device to them that monitored their eating and gave them a taser-level pain if they exceeded 1250 calories a day, they would lose weight.
The doctor is saying that the overwhelming majority of people will fail left to their own devices. You are saying they just need better devices.
Or as a character said in an 1850 novel by Charles Dickens, “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”
It’s been true for a very long time.
Sure, but it’s way easier for people making double median income to save than it is for people making median or below income. Median income in Canada for 2021 for individuals was $41.2k. Trying to save 8k from 40k is a very, very different proposition than trying to save 32k of 160k.
Can that Canadian earing $41,200 save ten percent, or about $4,000? Or perhaps five percent to start?
Hey now, wait just a minute here…
Okay, you beat me to the punch 
. Most people I think is an exaggeration to at least a mild degree. Many people could feasibly do this but do not for any of several reasons is rather different from most people can do this period. If savings don’t start until the middle quintile of income it is at least semi-reasonable to assume that maybe up to half or more of people in any given year can’t really manage this even if they had better financial discipline. I think that is where most of the push-back comes from against these sort of hypotheticals.
Education matters a great deal. I was raised by highly intelligent, well-educated, but not highly-paid live-long renters who had zero interest in finance or retirement (they wised-up in their late 40’s and lucked out in timing on the real estate market). As a result I regarded home ownership as a sucker’s game well into adulthood 
. “What - I should take on all these maintenance responsibilities and be stuck in one spot for years at a time? Idiocy!” The financial benefits of home ownership and stuff like planning for retirement were of absolutely no consequence to me - after all that shit was decades in the future.
Luckily I was hired young into a job with a reasonably well-funded defined benefit pension, so I will not have to sweat my early ignorance. But those are rare these days. Few if any of my college-educated peers, none of them with pensions, really did start thinking about it until they started hitting their 40’s themselves.
Net savings in the population doesn’t occur until the middle tier, but that doesn’t mean it’s impossible to save with a lower income. It might be that some of the lower income people don’t save for the same reason they are lower income - low impulse control maybe, poor education, poor habits. My wife and I were saving when we were about middle tier, and my mother managed to have $30,000 in her savings when she died, despite never making much more than minimum wage. My grandparents saved like crazy, even when my grandfather was working as a pump jockey and they lived in a tiny apartment. They saved enough to put a down payment on a small farm when they turned 50, and never looked back.
Clearly if you are desperately poor, you can’t save money. But I came from a poor background and was surrounded by poor people, and most of them had spending problems. Cigarettes and booze were a big part of it, but also the problem that when you are poor you want a lot of things, so when you get extra money there is a huge temptation to spend it.
A friend of mine made more money than I did every year of his working life, and died broke. Poor choices. He bought more house than he could afford and couldn’t keep up the payments and lost it. Later, he bought an expensive truck and an RV when he had windfall money, and wrecked them both over time. He was the kind of guy who, when payday came would buy rounds for all his friends at the bar, make crazy impulse purchases, etc. Always maxxed out credit cards, had debt from ‘do not pay for a year’ furniture deals that he never paid off, etc.
I also had an aunt and uncle who won a lottery of over a million dollars. Five years later, they were flat broke and in debt again. I remember my uncle taking us out in his brand new Cadillac and cutting donuts with it in a field. He also bought a large speedboat he didn’t know how to use, and it sat and deeteriotated in his driveway for years. Probably sold it for pennies on the dollar.
Very few people in North America are living on the ragged edge of existence. Most people, even poorer people, can save a bit and avoid egregious, high interest debt. But it does require significant sacrifice if you are living paycheck to paycheck.
I have had intermittent internet access issues. I am still following along though. I don’t know what questions to ask specifically since none of these words ever made a lot of sense to me before. Its helpful to read along, if for no other reason than for me to determine what a new word I need to learn is if that makes sense.
I am still trying to get Fidelity to accept that I work for my employer. HR has taken a “hands off that’s between you and Fidelity” kind of stance with the whole thing.
I mean if I don’t ever get retirement setup, I am not much worse off than I expected to be to begin with. Its largely run around I’m getting with everyone. The only helpful people I have spoken with want money, but not through my employer. I did see that I am getting something in the mail today from Fidelity. I wonder if its another statement that had “0.00” on it, if that is the case, at least I will have some sort of account number on it that can be referenced.
One of my relatives that “lost his retirement’s value due to the stock market” died since I opened the thread.
He died at work, was 76. He did get to retire for two years until he had to go back to work. He ran a machine that cut wood on a computerized mill. He had a heart attack and went pretty quick. They were nice enough to clock him out before EMS came.
I really like the term “Avalanche of Esoteric Bullshit”. Going to have to steal that one.
I thought I replied to you before, but I am notorious for not doing that final step and hitting the button.
I am coming to believe that my company actually doesn’t want to do the 401k. Nobody talks about it or is enrolled in it at my work, and HR is not helpful trying to link my “account” or whatever the hell it is with Fidelity’s system. I have wrapped my head around the company putting in a match, and I think that is what they don’t want to do. It would cost them money to fix this.
Without that match, it doesn’t seem to me that you can keep the account in the positive when the stock market crashes. Maybe it works out without the match. I dunno.
The Schab guy I was able to get in touch with through my credit union tells me it makes more sense to just invest directly into the stock market directly vs having someone do it for me through the 401k that I guess doesn’t exist. If there isn’t going to be a match, then does it even matter to have a 401k if its just invested on the stock market anyway?
Yes. You need to be careful about what sort of account you’re opening up if you are going to save for retirement, as different account types are treated differently for tax purposes.
If it’s hard to save money then you’re living beyond your means. Fixing that is the larger concern. Find a roommate, stop eating out, buy in bulk, get a bus pass, stop getting drunk all of the time, etc.