I am sure you are aware that the trap is the goal-the goal is to maximize assets under management-ideally workers would never retire, just keep adding to the assets under management (and thus fees) until they die. The highest number I have seen in the MSM that someone needs to retire is 6 Million USD-I am sure eventually that will be revised to 10 Million. You should read the 4 hour workweek-you might like it. The Ontario pension plan scheme is the same old song-the goal is maximize assets under management and thus fees.

 

When you buy a home, keep adding to your investments even while you are paying your mortgage. In other words, stay in debt, because your investments will probably outperform the mortgage expense.

I think this part is debatable. Yes, you've got some people that more pro-investment, advocating that investments will likely outperform mortgage expenses. But I feel a lot of people I know preferred to try to pay down their mortgages asap.

We were lucky that our incomes were growing fairly rapidly during our mortgage years. We were able to max our RRSP's (no TFSA's back then) and throw any extra savings towards the mortgage. Didn't really do a lot of non-registered investing other then my company share plan. Didn't spend a lot on vacations back then. For us, being able to pay down the mortgage, with continued salary increases, then allowed increased free cash flow for non-registered investments and a little more fun at a still relatively young age.

However, the situation is made way more difficult and complicated nowadays with the insane home prices in Vancouver, Toronto, etc. combined with salaries not keeping pace. People's experiences even at little as 20 years ago might be difficult to apply in the current situation IMO.

 

We have TFSA 's and RRSP's and will be retiring mortgage and debt free this year at 45 on a much smaller amount than the bank will tell you you need (while they sell you mutual funds with high fees)

I will start tapping my RRSP for income in order to support a nice frugal early retirement, minimize taxes, and later, use gov benefits to supplement TFSA - (OAS,GIS and some CPP)

For people who value "stuff" and keeping up an appearnace over their time - well, yes, they will likely work forever. I would rather go to the gym and be super fit, then eat donuts at my cubicle till I am dead.

 

I would say the average person saves at least $150 a week by not working-pre tax say 10 grand a year-you can call this the not working bonus.

 

I always preferred to be working rather than sitting on a beach. Even the pastimes & sports I chose were mentally stimulating. Exercising mind is just as important as physical fitness. I know some who religiously exercised yet in later life started to suffer dementia or similar. I would go brain dead riding one of those gym bikes every day. Rather use a real bike, get outdoors and do some exploring.

Saving, mortgages etc were never a concern. Just live with your means. Minimize debt.

 

I like working too, but working on my own projects and hobbies and entrepreneurial endeavours - on my own terms. Part of my early retirement plan.

 

Paying the bills is just a fact of life most people are dependent on an employer for income. I'm sure many of us have felt the stress of cashflow needs at some point. I've never thought about living as a trap there is much more to living than just focusing on investments.
I think most people would still like to raise a family I know I had fun with it. Kids have a way of taking up free time most of the people I knew when my kids were growing were doing the same things. Amazing once they are grown time and money don't seem to be a problem even when still working.

 

I paid off my mortgage before seriously putting money into investments. I started 2 businesses and bought into one by using my home equity loc...I could get 100k in an hour at cheap rates(doesnt sound like much now but back in the day that was high society)

 

Now is the time to be working for money for those that are making a lot of money from the sky high markets.

When the markets turn & jobs become scarce it time to invest near the bottom & not work for money.

The banks are biased as they want you to invest plus borrow money to buy home as they make money from interest on loans plus fees on investments

 

I never bought the idea that you should invest for retirement, and carry a mortgage. As lonewolf says, the banks love to lend you money and invest your money at the same time. I paid off my mortgage first, then started saving for retirement.

 

Very interesting. I'm doing both right now.

Paying off debt and contributing to my TFSAs (both maxed) and RRSPs (mine is maxed, working on wife's).

I constantly debate over paying off debt vs. investing but I usually take the middle-road and do both every year. We have a low-six figure mortgage and we hope to kill it off in another 5 years by age 50 ideally. By then we might have reached a 7-figure portfolio.

Most early retirees that I know ended up killing off their mortgage in their 30s and 40s. They've done that I assume because it's a guaranteed, rate of return.

 

It's fairly hard to get a guaranteed, no-risk, tax free return that's equal to what you're paying on a mortgage? It really can't be done.

It's wise to get a mortgage out of the way first before you start to seriously invest.

ltr

 

Like some others we focused on paying off the mortgage first @ circa 1990 age 40. Then all that free cash flow went into investing. Doing this and living well within our means allowed for a reasonably affluent early retirement.

I am writing this from the pool deck of our cruise ship in the fijords of Norway. I would not have done it any other way.

 

I try to keep up with the financial news but somehow missed this crisis: Canada’s senior poverty rate is too low. So I googled “seniors poverty Canada.” Sursum corda affluent civic-minded seniors! Apparently, the senior poverty rate bottomed in 1995 and is steadily going up. All’s well and good.

 

exactly what i was saying. No need to bless these folks any further.

country needs to invest in the future. Youth. Education. Training. Better police (they're going the right way but it's slow.) Better military (also going the right way, somewhat faster under the liberals.) Plus - dare one say it here in this forum of all places - need to invest in immigrants.

how come other provinces don't have subsidized daycare yet? it's the youngest citizens who are our best investment bet. Caring well for newborns through toddlers to school age should be a top national priority. Plus free dental care for kids through the teen years, too.

then there's infrastructure. Bigger canadian cities have underground 19th century water & sewer systems that are leaking badly. They can't be dug up because skyscrapers sit atop. There are trenchless repair & extension technologies but they cost $$.

bridges & highways are breaking down. Big $$ to replace all that crumbling concrete from the 1950s & 1960s.

the coast guard, the navy, how we going to surveille all those foreign ships that will want to traverse our arctic passage, let alone charge foreign shippers for the privilege? more manpower plus drones in the north are what we need ... do canadians understand how much it costs the air force to train just one drone commander through the post-doctoral level?

all in all, there isn't an extra penny to spare a senior an extra aspirin


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1. I agree with the sentiment that working is not necessarily a bad thing. If you're in a profession you love, you aren't counting down the days till retirement. In my retirement, my hobby is doing what I did while employed - only now there are no project managers waving Gantt charts in front of me. Everyone has a different lifestyle, a different plan for what they want to do in retirement, and how much $$$ they need for both. There's no 'one-plan-fits-all' for spending vs. paying debt vs. saving. I started saving late because I was self-employed for almost half of my career. I chose to work fewer hours and enjoy more leisure activities in my 20's & 30's, then realized I better start putting something away once I hit 40. That's when I switched to a full-time employment position.

2. There's something I never understood - why do retired people keep investing money rather than enjoying it? Why do bank financial advisers love old people like drug dealers love their clients? A few months ago, I walked into the bank with a draft for under $20K and was asked if I wanted to speak to a financial adviser. "No sir, I'm planning on spending this as fast as I can". It seems like an addiction to me; trying to squeeze that extra few percent out of every buck, living frugally with 100's of thousands of dollars locked away where there's a risk losing a substantial part of the principal. That's one trap I haven't fallen into.

 

IMO you are making a common mistake in perception-your perception is that the more money one spends the more enjoyment they will get-it doesn't work like that at all in the real world. Ask Kate Spade about that one. Having a high net worth and spending relatively little is fun for a lot of people even though you don't get it-it is very politically incorrect.

 

Looks like the thread has been hijacked to pump Liberal Party propaganda.

 

bright young undergraduate explained his retirement philosophy to me a few months ago

it's a reverse retirement. Student graduates college, travels the world, starts one or more nano-businesses & isn't financially ruined if they fail, goes back to school to pursue a new interest if he feels like it.

then around age 35 student settles down with a job & acquires the standard appurtenances of life, ie wife, kids, house, mortgage (his voice fell, he shrugged his shoulders & sighed as he listed the JWKHMs)

"It's a great plan. The only problem is i haven't figured out yet how to finance Phase One," he said.


.

 

then around age 35 student settles down with a job & acquires the standard appurtenances of life, ie wife, kids, house, mortgage (his voice fell, he shrugged his shoulders & sighed as he listed the JWKHMs)

"It's a great plan. The only problem is i haven't figured out yet how to finance Phase One," he said.

I think I have a slightly better plan. This video does a pretty good job at explaining what I'm thinking:
https://www.youtube.com/watch?v=OyahH2o9AAk

I'm in my 30s and have savings. The word "retirement" doesn't explain what I'm thinking of. Instead, I plan to keep working off and on for the next 40 to 50 years. That's a long time! So I want work and life to be interesting, invigorating, and healthy. I'm going to get bored doing just one thing, and I require more vacation and leisure time than jobs allow.

So I'm planning, over my working career (40 to 50 years) to take frequent breaks to rest, enjoy life, learn, re-train, and re-shape my career. I've been working for 8 years in a particular field, and it's time for a change. Maybe now I'll go travelling and hiking for a while, and then try a different line of work once I've cleared my head.

I could see myself doing this for the next half century. Work a few years, break for a few years, with constant change to keep things interesting and fresh. Hopefully have a child, etc.

I have the luxury of not being dependent on work. Even if I never earned another penny, I could live for 15 years off my capital. But of course I will keep working and earning more income. What I expect will happen is that my capital will keep growing over the decades, but with periods of decline as I live off it. There will be periods of cash inflows, periods of cash outflows, with net additions and net capital growth in the long term.

I've already been doing this for 20 years, which is why I think it's feasible. I ran a small business (cash inflows), then went to university (outflows), then worked (inflows), then travelled and had fun (outflows), worked some more (inflows). Over this period my capital increased by 330K even through the 2000 and 2008 bear markets. So why not keep doing this kind of pattern? As my capital level increases, it becomes more self sustaining.

Do any of you do something like this? It's completely unlike the traditional retirement advice.

I have found it challenging to draw down from our resources. Starting to get used to it. Not as difficult though because the market has done very well for us over the past six years of retirement. We need to enjoy those hard earned resources now while we have the health to do so.

I'm thinking the same thing, though I'm in my 30s. I'd like to start getting used to drawing out of my capital now, while I'm healthy and can really enjoy the fruits of my labour. Additionally I can practice and refine my money management techniques. I want to make it a lifestyle routine, not a distant goal.

 

I have found it challenging to draw down from our resources. Starting to get used to it. Not as difficult though because the market has done very well for us over the past six years of retirement. We need to enjoy those hard earned resources now while we have the health to do so.

 

And if TFSA's are penalized in terms of OAS/GIS reduction, I'll just sell my invested TFSA and move the money into a larger or more expensive principle residence and draw down from that.

 

I'm not trying to make life more difficult than it has to be, but I'm also reading the writing on the wall. I am not aware of any field or any company that can employ me for a time span of 50 years.

Canadian federal government, with a fully indexed defined benefit pension.

ltr

 

Likely fails the "intellectually stimulating" test.

 

Other than covering the basic financial requirements there are no rules. There are only individual plans. You do your own planning, financial and otherwise. Take responsibility for yourself. Some fortunate folks do get covered by DB's but they pay for it. My sister paid in 12 percent off the top for DB and CPP in her public service job. How many would be happy about that?

I worked in the tech industry for most of my career. It was lucrative. But lots of travel, long hours, dealing with difficult team members, and meeting quarterly revenue, profit, and customer sat goals. Long hours, no overtime of course, and lots of travel during so called personal hours. What personal hours? Cell phones etc. made the work day longer as did multiple time zones. So when I walked away a 58 I was thrilled and never looked back. So was the company. They got rid of an oldie, cut the salary expense, brought in new blood, increased the span of control. Everyone was happy. Like it or not employers turn over older staff. Especially if the firm still has a DB (very few these days) and if those ee's have a salary signficantly higher than new hires or younger ees. Older employees in some vocations need to be aware of this trend and plan for it.

 

Yes, I have been applying to government jobs and I'm hoping to land something in Ottawa.

Thinking long term though, there is always the possibility that government cuts back the workforce... govt employment is more stable than private sector, but hardly a sure thing. I had family members laid off during the DFO cuts and my friends across a variety of departments (NRC, DRDC, etc) said things got really bad during the Harper years.

The problem still remains that you could end up one day being a 55 year old who has spent little effort on diversifying yourself outside of your narrowly focused government job. But at least government gives you mobility between a wide range of departments and job roles, which is pretty good.

 

I would disagree with OP's chacterization of working to save for a comfortable retirement as a "trap".

If you prefer not to work 9-5 for most of your employable years, and live in reduced circumstances in your "golden" years, that's your choice. But "Traditional Retirement Advice" is advice for the average person, not the free spirits.

 

And where exactly is the average person supposed to find a field of work that provide them steady employment for half a century? With life expectancies today, a 20 year old has about 50 years of employment ahead of them.

If you want to talk about reduced circumstances in old age, how about a 60 year old with failing health who can no longer find any work in the field he's dedicated his entire life to (that 9-5). All that work, all that deferral of savings for later years, and nothing to show for it. It's a huge risk, and people are already experiencing it today due to the collapse of manufacturing.

 

Maybe James should become a self employed for fee investment consultant. Should be intellectually stimulating. No boss, no pension, lot's of challenge.

 

You need to get some skills but be cognizant that is this is not the end of your education- only the beginning. You need to be a life long learner. You need to work hard and work smart. You need to change careers early if you do not like what you are doing. You need to fail and you need to be willing to accept a challenge and to stretch yourself. You need to be flexible and go where the jobs and the opportunities are.

Jobs will come, you will recognize opportunity, and in the end bob and weave with the best of them. And accept the fact that you will probably have multiple careers and multiple employers. Enjoy it because it goes very quickly.

 

At varying times we did mortgage and investments at the same time. We would invest in equites when the after tax return was significantly better than our mortgage rate. We never, ever did term deposits, etc. in favour of paying down the mortgage.

Don't compare pre tax investment returns with the after tax mortgage carrying costs.

 

I am not certain that I would be in a hurry to pay off student debt any faster than required.

My understanding is that the interest on student loans is tax deduction as long as it is pure student debt, ie not a consolidation of any kind.

 

For me... I attach a lot of value to the that freedom, leisure, and flexibility. If having more of that in my younger years means that my net worth at old age only reaches 1M instead of 3M, then I will happily make that trade

Seems like a wonderful plan J4B, if you only have yourself to take care of. When I was 30, I'd been married for 9 years, my wife did not work, and we had two children aged 6 and 4. I was the sole breadwinner and three other people depended on my salary, so I didn't have the luxury of considering "freedom, leisure, and flexibility". However, if it works for you, then I wish you the best.