Dark Water Muse had a post a few days ago about the troubles with retirement planning (he’s just gone through the process).
I guess what only just in recent days became DWM’s “trailer park” retirement lifestyle, which he can almost afford, becomes his “cardboard box” retirement lifestyle. Assuming the healthcare system can afford then to cover the costs of treating paper cuts.
The scary part. DWM is one of the “lucky” ones, in a really good position, according to financial advisors. If this is true then how can anybody, in the past 30 years, have realistically expected “average” North American to be able to afford to retire? Aren’t these the same bong puffers who have been trying to eradicate the poppy fields in Afghanistan?
I guess addiction really is an irrational behavior, even when you dress it up and call it economics.
I wrote a comment, and then thought it might be a useful thing to expand on it a bit here:
This is a multi-pronged problem that will yield to no single solution.
The mere existance of the Canada Pension Plan (and the regular payroll deductions that fund current retirees) lull far too many Canadians into thinking that they’re going to be receiving enough money from CPP to carry on their pre-retirement lifestyle. That’s a huge, unconscious reason for people to fail to save for retirement.
Many Canadians have pension plans that are tied directly to their current employer. For the tiny fraction who successfully keep working for that firm/organization all the way to retirement age, it’s a winning bet. For far too many, three years in one plan, five years in another, seven years in a third will yield three miniscule pension cheques (far less than the amount if they’d been fifteen years in a single plan), as most pensions are geared to long-term employment. Given the commonly quoted notion that most Canadians will have three careers between entering the workforce and retiring, planning on putting in 20-25 years of pensionable work with a big firm is a pipe dream.
The banks and other finance organizations don’t help, either, as many of their print and online offerings for potential customers over-estimate financial needs (“What? I need $3 million to retire at 55? That’s impossible!”).
Schools don’t even attempt to provide financial planning information for students, and even if they did, who among us thought about retirement before age 35? It would likely be a wasted effort, unless it was a mandatory part of the graduation requirements. And even then, everyone under 25 thinks they’ll either live forever or be dead by 30, so it wouldn’t make much practical difference.
I’ve been in the working world for nearly 30 years, yet I’ve only ever worked for companies that had pension plans twice. In neither case did I work there long enough to accumulate any worthwhile seniority in the pension scheme (and given that neither company is still around today, I probably didn’t lose much). Among the other companies I’ve worked for, only two had Group RRSP plans (I think the closest US equivalent would be a 401(k) account). . . which paradoxically have been great for my long-term financial health. The broker for the plan at the first company is still the guy I call to get investment advice (each of us has moved on to different firms more than once, but it’s the personal relationship that matters).
I lost a lot of paper wealth in the last 12 months (at the worst, I was down over 45%). My investments — my retirement savings, that is — are back up to about 85% of their peak. If I hadn’t had to withdraw cash during periods of unemployment, I’d be closer to 95%. I’m nowhere near the multi-millions that the bank “planning software” says I should have at this point in my career, but I’m not panicking, yet.
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