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November 19, 2019 | Don’t Do It

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

There was a good reason 65 was set as the retirement age for a government pension back in 1935. Life expectancy at the time was 61. Surprise!

Well, lots has changed. Now you can apply for your CPP at age 60, if you want (and you should). The average dude lasts until 80 and the girls clock in at 84. Increasingly people say they want to retire at 50, or 55. That means three decades of life after you bring in the last paycheque. If you’re one of those crazy FIRE kids, you’re gunning to stop work at forty. So, four decades.

Therefore, we have a problem. Too long life. Too little money.

Stark evidence of that this week as yet another scary survey was published, this one by Sun Life. If you ever doubt at least half the people on your street are pooched – whether they know it or not –  just check out the stats.

Almost half (47%) know they’re going to run out of money before they die. Of those already retired, almost three-quarters say it sucks (“not what I expected”). Among people working, 75% say they have zero financial plan and close to half expect to still be working in their late sixties – of necessity.

This is compounded now by life expectancy. Unless every kid in school starts vaping, males will hit 84 and females 87. The fast-growing group is already wrinklies over 100 and in North America 11,000 Boomers retire every day. In 35 years an even larger number of Millennials will be doing the same – if climate change doesn’t have everyone sunburned, drowned or chasing bugs.

So we’ve never been in this space before, with longer lives, stretched finances, substantial debt, a record-low savings rate, a demographic bulge – and the death of pensions. Sure, the CPP and OAS exist, but that’s gas and grocery money. Disappearing are defined benefit plans and also corporate pensions with payouts people can depend on. Seven in ten of us (like me) have no employer-organized plan of any kind.

How much do you need to retire? Depends on what you plan to spend, of course. Surveys show most people think $750,000 would do it, but the average family has saved $180,000 (better than in the US, but public pensions there are twice as generous as ours). So – given the current savings rate of less than 1% – it’s a recipe for disaster. Also recall that 80% of all the money in TFSA sits in GICs or savings (making nothing after inflation) and most people believe stocks are satanic and condos divine.

The inescapable conclusions: retirement won’t happen for large numbers of people who will have no choice but to work until they drop. Second, lots more houses will come on the market since liquidation will be the only salvation. Not good for valuations. Third, don’t count on an inheritance. You might have to take mom in, actually. Fourth, it’s impossible for governments to live within their means given the tsunami of old geezers in need of support and health care. Fifth, taxes are going up. A lot. And, six, we have a big collective failure on our hands – when half the population is unable to care for themselves after living for sixty or seventy years. What the heck were they thinking?

As this blog has told you repeatedly, there are simple ways to ensure you’re not cannon fodder in the war on stupidity. Putting $100 a week into a TFSA and staying invested in decent ETFs for 35 years will net you about $800,000. The tax-free income kicked out will be close to $50,000 (at 6%). Add in CPP and OAS (which would be undiminished by the income stream) and you end up with nearly seventy grand in annual income and basically no tax payable. That compares with the median income of $57,600 for Canadian retirees now.

So is saving/investing a hundred bucks a week an economic hardship? Apparently it’s out of reach for half of the families in Canada, who average $200 or less a month in disposable income after paying regular overhead. The overwhelming reason is simple. Property ownership. The historic cost of acquiring and maintaining real estate in Canada has wiped out household savings, gutted earned incomes, torpedoed the savings rate and now has 47% of people convinced they’ll be croaking penniless.

So if there’s one overarching lesson for the next gen of moisters, it’s this: look at the financial failure your parents are turning into. And don’t do it. He who’s liquid will get the last laugh. Or maybe wheeze.


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November 19th, 2019

Posted In: The Greater Fool

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