After work

What do people want to talk to me about the most? (Other than marital advice or canine obedience?)

Retirement, natch. When can it happen? Will I have enough? How can I prepare and still have a life now?

My experience: (a) People who work at companies with defined-contribution plans (shared RRSPs usually in crappy mutual funds) are the most stressed. They just know trouble looms. (b) Those with DB (defined benefit) plans are the worst savers and investors. Teachers top the list. (c) Self-employed folks make up in confidence what they usually lack in money.

So this year the TFSA limit has finally increased a bit, to $6,500. The RRSP max has now swelled to almost $31,000. As you know, the tax-free savings vehicle is the most democratic and universal one we have (which Trudeau attacked). The retirement savings plan is based solely on income and skewed to assist those making the most money (which Trudeau ignored). Go figure.

Unless you have a DB plan, you need these vehicles topped-up and churning out growth. After all, CPP and OAS won’t cut it, especially in a world like this where prices romp, houses and rent cost a stupid amount and taxes are only going to swell. Soon the FHSA will join this trifecta. Not maxing out tax shelters, or filling them with near-cash assets, is a blot on your future.

Will you have enough income to stop working? How soon can you pull this off? How do you integrate this massive change with the other elements of your life – like kids, spouse, house, health and personal bucket list? Basically, how do you get ready and how much will you need?

A bank survey out this week was stark. People said, on average, that $1.7 million in savings is required to stop working, wear your jammies until eleven and drive around aimlessly (major retirement goals). This was up 20% in the past two years, when the goal was $1.4 million. The bank attributes it to inflation, higher interest rates and less confidence in the economy. Only four in 10 believe they can accomplish this goal, however. Bummer.

As you know, most of us have most of our net worth in residential real estate. A home is nice, but it does not generate income and costs a lot to maintain. These days it’s also falling in value. That’s why advisors are always yakking on about balance and diversification. You need liquid assets. They need to grow. Tax shelters are the best way of getting there.

By the way, that survey found 53% have no idea how much they really need to exit work. Do you?

About the survey: Responses will be accepted until noon ET on Wednesday, February 8th. Results will be posted here on Thursday the 9th. Multiple entries will be auto-rejected. 

About the picture: “This is our family dog,” writes Andrea, “a 2 year old English Lab named Rosie. We pass by this tree engulfing the Private Property sign everyday so I thought I’d snap a pic for you. Thanks for your blog and free advice, we’ve been reading your blog since 2008!”