Sunday, 12 November 2017

DON'T SAVE (too much) FOR RETIREMENT

This post is geared for Canadians as the American system for retirees differs, mainly because of the cost of healthcare.



Guiness Book of World Records - Oldest Paraglider

This scary article in Wisebread is typical of the advice out there which strives to encourage more and yet more saving for retirement.   People just aren't doing it enough the writer says.  Dire predictions ensue.  What if you live to be one hundred?  This article in The Globe and Mail discusses managing 'longevity risk.'   I guess for financial managers it's bad to live too long.  


Take a moment to consider your situation carefully.   Should you save, save and more save for your golden years?   Deprive yourself throughout your twenties, thirties, forties, fifties until at last you reach the magic age and you can start to really spend and enjoy yourself.   That's the theory, anyway.  Check out this article in Bloomberg.

I like to take a contrarian view, sometimes, or at least consider an opposing point of view.   Who exactly is singing this siren song or more likely threatening misery and deprivation if you do not sock away your version of a fortune.   Usually, it seems to me, the call comes from financial institutions who want you to invest or save with them.   The government wants you to save for your old age, lest you end up costing them money.   The more you save, the less they will need to make up the shortfall.

Unless you want to leave a legacy for your children or perhaps something for them to bicker about when you are gone, consider dying broke.   It is difficult to arrange to have your funds expire just as you do but I am going to propose that after age eighty you will not be spending large amounts of money for your amusement.   I base this upon admittedly unscientific observations of relatives and acquaintances. The spending and shopping urge is greatly diminished.  You're not buying furniture and knick knacks;  you're trying to give them away.  Following fashion trends seems of little interest;   comfort rules supreme.   Travelling is problematic.   Travel health insurance costs more than the vacation.    Dietary restrictions and mobility issues affect many after the three score and ten.   If you can't get out easily, you can't spend.  Try to arrange it so you own your own modest accommodation outright as well as your vehicle at retirement, if you don't plan to rely on public transport. 

According to the Wisebread article:  As of July 2017, the average Social Security retirement benefit was just $1,325 USD  per month.    In Canada, if you have made the maximum contribution during your working life the amount will be close to $1700 CAD.    Taking into account the exchange rate the amount is similar.  A couple should be able to be comfortable on Old Age Security and Canada Pension for each of them if those expenses (housing and transportation) are taken care of.   Defer your property taxes.


Some  activities can best occur when you are young or at least youngish.   Backpacking to foreign lands where you don't speak the language and don't know your way around is an adventure to the young;  a terror to the old.   I speak in generalities but that's the way it seems to me.  Learning to ski, scuba dive, rock climb, fly a plane, not to mention  two week hikes along the Appalachian Trail are the purview of the under 50's for the most part.   Don't deny yourself the opportunity to do those things if you have the agility and stamina, not to mention nerve, to partake.   You won't want to do it when you're eighty.  I know there are exceptions but there's a reason those people are featured on the evening news.

Eighty calls for more sedate pleasures, closer to home and generally less expensive. You may be the exception but know yourself. You don't want to end up with a bundle of money as well as a bundle of regrets for what you might of done but now can't.   


   

  


2 comments:

  1. I laughed where you said you were going to take a "contrarian view" because people accuse me of always arguing the other side of the coin. When I was a teen, one of my parents' friends thought it was because I was a Libra. I reckon it has more to do with the family dynamics around the dinner table!

    I think our biggest expenses going forward will be health care and housing costs. We just signed up for new health insurance yesterday. Holy moly, it's expensive, and we're in a group that gets a discount for being on the healthy side!

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  2. We pay $150 a month (for a couple) for our medical premium but this doesn't include dental, vision care or prescriptions. But it does take care of doctor visits, hospital costs and emergencies. The new government here is reducing this to $75 in the new year. Many provinces don't require any premium payment. Our taxes pick up the slack.

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