What will I spend?

 

RYANBy Guest Blogger Ryan Lewenza

Our industry spends a lot of time on trying to determine how much savings you’ll need in retirement, and often overlooks how much you’ll actually spend in retirement. At the end of the day the savings is there to support your spending so let’s spend some time on this important topic.

The conventional wisdom is that you will spend less in retirement. Many use the rule-of-thumb that people will spend 70% of their final pre-retirement income in retirement. We think this is overly simplistic and for many people is too low. In fact, our financial planning team assumes that spending will remain the same in retirement when building financial plans and making spending projections.

When you’re working 8-9 hours a day (my wife wishes that was my normal day, but the big guy runs a tight ship at TI!), you don’t have much time to spend money, outside of lunch and grabbing a “double double” at Timmies. When you retire you have a lot more time on your hands to spend those retirement funds. Not to mention the increased travel and leisure that will add up in costs. Basically, if you’re retired every day is a weekend. At least that’s what my dad keeps jawing on about every time I talk to him.

So where does it all go?

A study done by Duke University and MoneyComb, an educational company focused on financial literacy and personal finance, determined a good way to think about and estimate spending is to break it up into seven key categories: eating in and out, digital services, recharge, travel, entertainment, shopping, and basic needs. Below is a breakdown of those seven categories.

Take a second and try to visualize what a typical day or week looks like in retirement. How often do you anticipate going out for dinner or to the movies? What digital services like Netflix, paper subscriptions (I have three myself), and smartphone plans will you use? How much shopping will you do? Will you be a member of a gym or club? And a big one, how much travelling do you see yourself doing?

These things add up and add up quickly.

Your exercise today is to take 10 minutes and write down your estimate for each item on the list per week or per month. Then multiply that by 52 weeks or 12 months to get your total spending for the year.

The study referenced above found that people surveyed required 130% of their pre-retirement income to fund their retirement spending, not the typical 70%. What percentage of your current salary did the expenses work out to?

List of Potential Retirement Expenses

Source: Wall Street Journal, MoneyComb

Now that you have your spending number we can determine what level of savings is required to safely support that income stream. In the chart below I show the level of savings required to fund different annual spending amounts. For example, if you plan to spend $50,000 annually in retirement you should have roughly $1.25 million in savings. For $100,000 you would need $2.5 million, etc. These calculations are based on the “four percent rule”, which is a common financial planning rule-of-thumb that estimates the amount you can safely withdraw from the portfolio to fund your retirement.

Amount of Savings Required for Different Spending Levels

Source: Turner Investments

So what did we learn today?

You need to commit some time to thinking about what your retirement will look like and how much you plan to spend each year. We provided a good list of all the main expenses to help in this endeavor and it’s now up to you to crunch the numbers and tally it up. Having that expense number you then know how much you need to save to get there. Now the hard part: making it happen and having the retirement you want and deserve!

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

136 comments ↓

#1 Doug t on 09.15.18 at 11:57 am

LOL so many are not able to save anything for “retirement” – POOCHED

RATM

#2 AlbertaGuy on 09.15.18 at 11:59 am

Ryan, does the 4% rule assume that the original capital amount will not be diminished? What is the rule of thumb if you want to spend your last dollar before your best before date comes up?

#3 Ponzius Pilatus on 09.15.18 at 12:05 pm

Reading this post just raised my blood pressure, cutting at least a year of my life expectancy.
Good, so I need to save only 15 k instead of 16k monthly for my retirement.
To forsake current consumption for an uncertain future is just stupid.

#4 Ponzius Pilatus on 09.15.18 at 12:08 pm

2008 caused the Trump.
Therefore we still suffer the effects.
http://m.spiegel.de/wirtschaft/soziales/lehman-brothers-pleite-wie-die-finanzkrise-zu-donald-trump-fuehrte-a-1228041.html

#5 Polly on 09.15.18 at 12:17 pm

Per the chart, am I to assume it’s per today’s dollars and should FV the savings target when they
Plan to retire. Also. What is your outlook on CPP and OAS, should someone in their 30s plan for those funds

#6 Peter McLean on 09.15.18 at 12:22 pm

“When you’re working 8-9 hours a day (my wife wishes that was my normal day, but the big guy runs a tight ship at TI!”

ZING! Take that Garth! Ease up on the poor guy, will ya Garth?

#7 LP on 09.15.18 at 12:40 pm

Hi Ryan

Does that assume “leaving” with the capital intact? And, if so, why?

F71ON

#8 BillyBob on 09.15.18 at 12:41 pm

#3 Ponzius Pilatus on 09.15.18 at 12:05 pm
Reading this post just raised my blood pressure, cutting at least a year of my life expectancy.
Good, so I need to save only 15 k instead of 16k monthly for my retirement.
To forsake current consumption for an uncertain future is just stupid.

==================================

Said the grasshopper to the ant. Assuming the future will never come seems at least equally stupid.

This is why I don’t pay taxes in Canada. Happy to help those in genuine need, but not keen to support people who refuse to prepare for the future.

#9 SoggyShorts on 09.15.18 at 12:59 pm

#111 Linda on 09.15.18 at 11:54 am

Just remember that a promise will not necessarily become a reality. Political promises by definition are only words. It is only when those words are written into a Bill & voted into existence that they mean anything.

********************************
What if it wasn’t like this? Imagine if instead of just saying “We will get rid of the FPTP system if we are elected” or “We will balance the budget” They had to do all of the research, figure out exactly how it was going to work and pre-wrote the bill so that on day 1 of winning the majority it would be signed into law.

Is this crazy? It makes no sense to me that we are voting people/parties into power on vague promises or slogans and then hoping that they still care and figure it out over the next 4 years.

Take the US for example:
A huge part of every Republican platform was replacing ObamaCare. Then, even with the Whitehouse, Congress and the Senate being Republican they couldn’t come up with an idea on how.
Is it so crazy for voters to want to see the actual plan?

#10 SoggyShorts on 09.15.18 at 1:08 pm

#2 AlbertaGuy on 09.15.18 at 11:59 am
Ryan, does the 4% rule assume that the original capital amount will not be diminished? What is the rule of thumb if you want to spend your last dollar before your best before date comes up?
****************************
Sometimes you go down to zero, or even negative with the 4% rule.
Check out
https://www.firecalc.com/
The calculator takes your nestegg,yearly spending, and years in retirement and runs a scenario starting at every year since 1926 to see which times you would fail(winning is when you die with a balance greater than zero dollars)
For example with 1,000,000 and 40,000 spending you will make it 30 years 95% of the time (historically)
All numbers adjusted for inflation.

#11 Buddy on 09.15.18 at 1:11 pm

Hmmm thought I would only need a mil with my wifes omers my tfsa @ 50k and me 32. How much should we be socking away each month? We’re frugal now but if we’re going to save it all it best be worthwhile.

#12 BS on 09.15.18 at 1:15 pm

These calculations are based on the “four percent rule”, which is a common financial planning rule-of-thumb that estimates the amount you can safely withdraw from the portfolio to fund your retirement.

The 4% rule is for people who want to retire at age 30. Someone at age 65 could safely draw $200k per year with $3 million assuming you stay invested in equities.

#13 Jessica on 09.15.18 at 1:20 pm

You can reduce your needed savings by amount of CCP, OAS, and pension plan you expect.

For example, if you budget that you need $35k a year (875,000 needed @ 4% withdrawal rate) and you expect $1000 a month for above, you would only need to save $575,000 (35k-12k / 4%). However some retirement experts say you can safely withdraw 5%. In that case, you need to save $460,000.

When you just tell people they need 1.5 million, it’s discouraging for the smaller salaried. The fact is, retirement planning for the wealthy doesn’t take into consideration OAS because it gets clawed back.

But for those of used to living on much less, we will get CPP and OAS.

Finally, if you’re still young enough, you can easily save this amount by continuing to live like a broke student and saving all of your salary increases.

I lived like a broke student until well I’m my thirties and lived all over the world and had all kinds of adventures, so you can still enjoy life while also giving yourself a comfortable life later on.

Retirement planning is even more important for lower income earners, and we definitely need to save 1.5 mil, which is so out of reach (and out of touch) that it makes people give up on saving st all.

Some is better than nothing.

#14 MarcoPolo on 09.15.18 at 1:24 pm

This analysis is too simplistic and ignores that spending decreases over time in retirement…during early retirement, one spends more on travel, entertainment, hobbies than was possible while working. However, by ones 70s, activity slows and by late life, you stay at home and type angry comments in the National Post facebook comment section. Also, you are relieved of the financial responsibilities typically associated with the accumulation phase, such as mortgage payments, retirement savings, disability/life insurance premiums, children’s education, caring for aging parents, etc., etc. I think most people overestimate the money they will need in retirement.

#15 BillMH on 09.15.18 at 1:26 pm

Why do all these suggestions always seem to suggest you maintain the original capital. It if it is earning the same or more than the annual withdrawal when you and your spouse pass on, the estate will be hit with up to 50% tax rate on a large RRIF. Why not draw down more, pay a lower tax rate and park it outside a registered plan. The other argument is why you saved for all those years for YOUR retirement and left your estate a unused nest egg.

#16 Shawn Allen on 09.15.18 at 1:34 pm

So what did we learn today?

For one thing, that a $50,000 per year guaranteed by government pension allows the same spending as about $1.25 million in RRSP. (Another reason to hate government workers)

Similarly, $15,000 in CPP and Old Age Pension benefits is like having an extra $375,000 in RRSP. Nothing to sneeze at for most people. Sadly, many of the people with zero savings also had low and intermittent incomes and will get little in CPP.

I say RRSP because the tax treatment is the same as pension income.

I follow the advice of long old Dutchess of Windsor who apparently said: “You can never be too rich”.

Try to get a rich as possible without sacrificing too much. Earn as much as you reasonably can. Save as much as you reasonably can and then try to earn a high return without taking too much risk. Or just get a government job.

#17 Ryan Lewenza on 09.15.18 at 1:45 pm

AlbertaGuy “Ryan, does the 4% rule assume that the original capital amount will not be diminished? What is the rule of thumb if you want to spend your last dollar before your best before date comes up?”

It depends on the rate of return of the portfolio. In developing financial plans we use a 5% return, and adjust the income stream by 2% annually to account for inflation. Based on these assumptions the money will last over 40 years leaving some leftover in the end. If looking to spend every last penny then a 5-6% withdrawal rate should do the trick. – Ryan L

#18 Ryan Lewenza on 09.15.18 at 1:49 pm

Ponzius Pilatus “To forsake current consumption for an uncertain future is just stupid.”

I think that was Allen Iverson’s philosophy and I don’t think it worked out for him in the end. – Ryan L

#19 Shawn Allen on 09.15.18 at 1:50 pm

Consumption Inequality?

Canada and the U.S.A. have vast wealth inequality. At the extreme end, the wealth of Jeff Bezoes and Warren Buffett and the Walton family and others is absolutely staggering.

Income inequality is actually far less than wealth inequality but still staggering. Qute a few CEOs make $10 million. But that is “only” 100 times a $100k which a lot of ordinary people make.

Consumption inequality is far less. Many people have zero wealth even negative net worth. But everyone eats every day. With few exceptions everyone gets fed, clothed and sheltered every day. Which explains why there are not riots in the Street over wealth inequality.

It is impossible for the wealthiest to ever consume all that their wealth entitles them to consume. That’s a good thing. The wealthy will mostly die wealthy. Someone else will consume based on that wealth.

#20 SoggyShorts on 09.15.18 at 1:55 pm

#14 MarcoPolo on 09.15.18 at 1:24 pm
This analysis is too simplistic and ignores that spending decreases over time in retirement…during early retirement, one spends more on travel, entertainment, hobbies than was possible while working. However, by ones 70s, activity slows and by late life, you stay at home ……… I think most people overestimate the money they will need in retirement.
*****************************
Unless in your final decade(s?) you end up in a nursing home which could cost more than all of the travel and eating out combined.

Also in the early years of retirement, you may be fine with 2 or 3-star travel, but later on sleeping on a crappy mattress might be less desirable.

It really depends on lifestyle, and personally, I’d rather have more options than fewer.

#21 Ryan Lewenza on 09.15.18 at 1:58 pm

Polly “Per the chart, am I to assume it’s per today’s dollars and should FV the savings target when they
Plan to retire. Also. What is your outlook on CPP and OAS, should someone in their 30s plan for those funds.”

That’s in today’s dollars but we do increase the annual spending amount by 2% to account for inflation. Even if we do this, it’s remote that one will outlive their assets. Regarding CPP and OAS I think they’ll be fine over the long-term and that people can continue to count on it. But it will likely take higher CPP premiums from future generations to fund it as the boomers retire. So it should be there but it will be more costly to future contributors. Lastly, my numbers do not include CPP and OAS so you could subtract those amounts from your yearly spending amount and adjust down the required savings. – Ryan L

#22 SoggyShorts on 09.15.18 at 2:01 pm

#15 BillMH on 09.15.18 at 1:26 pm
Why do all these suggestions always seem to suggest you maintain the original capital?

****************************
They don’t. The 4% rule should maintain capital, but it doesn’t always. If you retire into a bear market, the 4% rule should keep you from going broke, not from dropping down below where you started.
http://www.firecalc.com

#23 Ryan Lewenza on 09.15.18 at 2:02 pm

LP “Does that assume “leaving” with the capital intact? And, if so, why?”

Not all of it. It will eat into some of the capital based on our assumptions but leave some funds at the end. Why? Because most (not all) want to leave some to kids, family and charity. – Ryan L

#24 Ryan Lewenza on 09.15.18 at 2:08 pm

MarcoPolo “This analysis is too simplistic and ignores that spending decreases over time in retirement…during early retirement, one spends more on travel, entertainment, hobbies than was possible while working. However, by ones 70s, activity slows and by late life, you stay at home and type angry comments in the National Post facebook comment section.”

But then it rises dramatically in the later years as you enter nursing/retirement homes. My grandma’s retirement home cost $5,000/month. So it’s higher at the beginning, then drops as you get older and can’t travel as much, then rises again near the end. So we assume a flat spending amount over one’s entire retirement. We add in a number of conservative estimates into our plans just to make sure our clients don’t outlive their assets. – Ryan L

#25 @careeraftschool on 09.15.18 at 2:09 pm

I respectfully disagree Ryan. I know many retirees and the 50 to 70% pre retirement income is fine for most people. Major expenses like mortgage payments, daycare, RESP contributions, post secondary costs, car payments, expensive work clothing are usually done by the time you retire. You also have more time to shop for deals on things like grocery. Anyone heard of the Flipp app? Also most places offer a seniors discount.

#26 AK on 09.15.18 at 2:10 pm

Love the picture today.

My vacation destination over the past 20 years now.

#27 Tony on 09.15.18 at 2:12 pm

Instead of playing golf everyday just buy a big 6×12 foot snooker table. Throwing darts or surfing costs virtually nothing. Give up drinking or only drink when you’re in America. Don’t put any money into credit unions in British Columbia.

#28 Damifino on 09.15.18 at 2:19 pm

I have more wealth than I am ever likely to use. I see it as an economic engine that will outlast my stay here. It took quite a while to build up that engine from various parts I salvaged and nurtured over the years.

Trying to align one’s last dollar with one’s last day is a fool’s errand. The specific date of your demise is a morbid and pointless thing to calculate. Keep that date indefinite and build something that lasts accordingly.

I’ll be gone soon enough and my heirs will get what remains. And if not them, then the Alzheimer Society of Canada can take a crack at applying it to fight against the horrifying disease that took my fabulous mother.

Take the advice of this blog. Build yourself a good engine then get on with living as long as you live.

#29 What do I know? on 09.15.18 at 2:37 pm

The most important thing that anyone can do for retirement wealth health, in this society, is to buy Real Estate. Why? Because it’s really REAL! And it will always go up in value. It will protect you against massive housing cost increases in your old age.

Anyone that cautions against purchasing RE in the GTA, at ANY time, is an obvious idiot. Given a couple of decades, for most people in average situations, it will prove to be the most fiscally smart thing they could have done.

#30 Piet on 09.15.18 at 2:38 pm

It is easier to be frugal in retirement than when one was a wage slave. Working makes a person weary, so one tends to look for convenient (i.e. expensive) ways of handling the demands of everyday life. After retirement there is time to devote towards cultivating a more frugal lifestyle. There is time for composting and improving the vegetable garden, and learning more about preserving vegetables and fruits. There is time to collect seeds and to start new plantings early, thereby eliminating the need to spend money on seeds and plants. There is time to travel in the off season and to take advantage of last-minute fare reductions. There is time to thoroughly research travel in low-cost countries so that one can escape winter at minimal cost. There is time to study the flyers and to purchase only things that are deeply discounted. One can learn how to become a wizard in the use of coupons. Some of us are so dedicated to frugality that we drive old cars and eschew even such things as restaurants and smart phones. We wear sweaters and toques indoors so that we don’t need to spend much on heat. Living in a relatively cold house contributes to longevity. Whenever one feels a little cold, that can be taken as a signal to do some exercises with one’s own home exercise equipment. A lot can be accomplished with a few free weights, some chin-ups, pushups, and sit-ups. The proudly cheap among us scoff at the money a lot of people waste on expensive gym memberships.

By adopting the lifestyle described above, one can survive on very little income. It helps to have a mortgage-free house with a good vegetable garden and some fruit trees. With that in place, one can easily get by on CPP and a bit of a nest egg.

#31 Ponies Pilatus on 09.15.18 at 2:40 pm

#14 MarcoPolo on 09.15.18 at 1:24 pm
This analysis is too simplistic and ignores that spending decreases over time in retirement…during early retirement, one spends more on travel, entertainment, hobbies than was possible while working. However, by ones 70s, activity slows and by late life, you stay at home and type angry comments in the National Post facebook comment section. Also, you are relieved of the financial responsibilities typically associated with the accumulation phase, such as mortgage payments, retirement savings, disability/life insurance premiums, children’s education, caring for aging parents, etc., etc. I think most people overestimate the money they will need in retirement.
———
Exactly my point.

#32 piet on 09.15.18 at 2:43 pm

@#27 Tony

“Give up drinking”

Why not make your own wine? Using home-grown fruit, wine can be made for the price of a packet of yeast and a bit of sugar.

#33 Ponzius Pilatus on 09.15.18 at 2:45 pm

#8 BillyBob on 09.15.18 at 12:41 pm
#3 Ponzius Pilatus on 09.15.18 at 12:05 pm
Reading this post just raised my blood pressure, cutting at least a year of my life expectancy.
Good, so I need to save only 15 k instead of 16k monthly for my retirement.
To forsake current consumption for an uncertain future is just stupid.

==================================

Said the grasshopper to the ant. Assuming the future will never come seems at least equally stupid.

This is why I don’t pay taxes in Canada. Happy to help those in genuine need, but not keen to support people who refuse to prepare for the future.
—————-
The old grasshopper vs. ant fable to scare kids,
Some people never grow up.
Some pe

#34 @careeraftschool on 09.15.18 at 3:02 pm

I forgot to include RRSP contributions during the working years. Don’t need to save that when your retired. Also don’t need two cars if both of you are retired.

#35 Unemployed Jamaican Tyrone who dates married womyns on 09.15.18 at 3:12 pm

“When you’re working 8-9 hours a day (my wife wishes that was my normal day, but the big guy runs a tight ship at TI!)”

Nice to hear :-)

#36 SoggyShorts on 09.15.18 at 3:13 pm

#25 @careeraftschool on 09.15.18 at 2:09 pm

I respectfully disagree Ryan. I know many retirees and the 50 to 70% pre retirement income is fine for most people.

**************************
“Fine” sounds lame.
I’m sure a retirement of Netflix and Bridge can be very cheap. Personally, I have a never-ending bucket list of things I want to see and do in the world. YMMV

#37 Damifino on 09.15.18 at 3:20 pm

#33 Ponzius Pilatus

The old grasshopper vs. ant fable to scare kids
———————————

Nope. I’m an ant in retirement. I’m surrounded by grasshoppers from my cohort. Many are stressed, remoresful and unhappy. They had no financial plan and considered those who did to be boring individuals. Now they have to watch every dime and will work to 75 if any employer will have them that long.

#38 Piet on 09.15.18 at 3:39 pm

@#36 Soggy Shorts
“never-ending bucket list”

Craving after pleasure and material goods are forms of attachment that can never be truly satisfied due to the impermanence of all things. As a result, such desires ultimately bring suffering.

#39 Wog on 09.15.18 at 3:54 pm

How should we consider inflation in the math if retirement is 30 years down the road?

#40 MarcoPolo on 09.15.18 at 4:00 pm

Ryan: “But then it rises dramatically in the later years as you enter nursing/retirement homes. My grandma’s retirement home cost $5,000/month.”

I appreciate a conservative approach – but I would sell my residence to pay for any LTC home expenses. Also, citing research in the Fred Vittesse book(s), LTC is generally a short-term (terminal) affair.

Of course, these discussions are based on generalizations and everyone is different. For me, I don’t have heirs and plan to die with enough in the bank to pay for a cardboard box and cremation ;)

#41 espressobob on 09.15.18 at 4:20 pm

The term retirement sounds like a euphemism for those preparing for the inevitable. That sucks.

Some I know could have packed it in years ago but they didn’t. These individuals keep on working because they love what they do. Being productive can in itself be rewarding. Doesn’t mean one can’t go on a cruise or join a private golf course.

Real freedom has a lot more to do with having choices instead of obligations. Having sound investments allow that.

Balance. Did I miss something?

#42 SoggyShorts on 09.15.18 at 4:21 pm

#38 Piet on 09.15.18 at 3:39 pm
@#36 Soggy Shorts
“never-ending bucket list”

Craving after pleasure and material goods are forms of attachment that can never be truly satisfied due to the impermanence of all things. As a result, such desires ultimately bring suffering.

**************************
What a sad sad way to view life. New fun adventures and experiences = suffering? I pity you.

#43 SoggyShorts on 09.15.18 at 4:28 pm

#39 Wog on 09.15.18 at 3:54 pm
How should we consider inflation in the math if retirement is 30 years down the road?
*****************************
2% inflation over 30 years is about 80%
so a
1,000,000 portfolio with 40,000 spending in year 1 of retirement in 2018 becomes a
1,800,000 portfolio with 72,000 spending in year 1 of retirement in 2048

#44 crossbordershopper on 09.15.18 at 4:34 pm

i think these financial guys have it all wrong, if people have the million and spend the 4%, they keep the principal and live off the income
no one goes one step further, so your kid gets the million and what about them do they continue your retirement lifestyle, how about the money they worked and accumulated, and honestly, why would anyone work if their parents sacraficed and has money set aside for them.
all we have to do is live here for a generation or two and bang, were all millionaires in our 40’s living a retirement lifestyle all our lives.
it sounds crazy, i think you should spend every penny in retirement and end up with nothing, enjoy every penny every single penny end up with nothing.
the government will look after you

#45 Penny Henny on 09.15.18 at 4:48 pm

#40 MarcoPolo on 09.15.18 at 4:00 pm

Of course, these discussions are based on generalizations and everyone is different. For me, I don’t have heirs and plan to die with enough in the bank to pay for a cardboard box and cremation ;)

///////////////

Good news Marco. No need to save for that cardboard box cremation, CPP will give you $2500 upon your death to pay for that.

#46 Linda on 09.15.18 at 4:51 pm

Regarding the money needed in retirement, it depends on the individual. A person who retires with no debt, has funds (savings/TFSA/RRSP/investments) set aside & possibly even a workplace pension plan will likely have more than enough to live on. Why? Because that person has already shown financial discipline in that they have an RRSP/TFSA/savings etc. This is an individual who knows how much they spend every month & on what.

If however the retiree is someone who retires with debt & who has always lived payday to payday their retirement isn’t going to be financially secure, even with a workplace pension. It is highly unlikely they have set aside any additional funds if they have been living payday to payday & for most, working after tax income will be a higher sum than pension after tax income.

Further to sums needed in retirement. It is truly astonishing how quickly the hours previously spent working & commuting to work disappear upon retirement. My retiree acquaintances all say the same thing ‘I/We don’t know where we found the time to work’. Most end up doing the same activities they did pre-retirement, just for longer amounts of time. Their overall spending is therefore nowhere near their pre-retirement estimates. And that doesn’t even get into the plethora of age discounts available. For instance, my local leisure centre charges $633 for a one year pass for adults aged 18-64. Those aged 65 or older pay less than $400 for the exact same pass. There are many other age related discounts & most retirees can tell you who offers what & where the best deals are to be had. For those who prepared, you will find that you are indeed richer than you think:)

#47 Stone on 09.15.18 at 5:00 pm

Hi Ryan. It appears that there’s a couple important pieces missing in this equation.

The first is to assume pre-tax earnings. All my savings, investing, and retirement assumptions are based on post tax income. Capital gains and dividends are taxed more favourably considering the higher risk taken for this type of income and therefore would impact post retirement income taxes paid. Even when you eventually add rrsp withdrawals, cpp and oas into the mix, your income taxes in retirement will be much lower.

The second is that a portion of your working income is diverted for investing for retirement (I pity the hyper consumers who can’t save a dime – they are screwed in having a painful and marginalized retirement) . Therefore, lets say 10-50% of your post tax working income goes to that leaving you with 50-90% for your expenses through a given year. I see that 10-50% that was used to invest for retirement as the slush fund in your retirement years (discretionary expenses) for travel, events, etc. and that can vary year by year how markets perform so as not to erode the portfolio in a precarious manner.

I think these 2 points are something most people and advisors forget about, or intentionally choose to forget about. As a result, someone making $100,000 in their working years may have more discretionary income even at 70% of their working income in retirement.

Ultimately, it’s good to aim for the same income level as when you were working but come on, YOLO. I think most of us could use our time better than doing a 9-5 till 65. To me, if you feel fulfilled by your job (~5% of the working population), then do it. It’s definitely not the norm though as most others hate what they do or are just going through the motions without any zest (what a waste of precious time that you can never get back).

Also, how many people have over a million in investable assets (excluding personal residence)? 1% of the population potentially? I do ,however, I can confirm that those I work with are nowhere near that and most of them make near 6 figures or in the 6 figures. I imagine the rest to have a painful and marginalized retirement looking at the debt they owe and will never be able to repay in their lifetime. Can you imagine 99% of the retired population vying for the greeter job at Walmart or the plumbing section associate at Home Depot just to make ends meet because they saved nothing? Ouch!

#48 Shawn Allen on 09.15.18 at 5:09 pm

The Wealthy Spender

The Financial Post is advertising a charity event. Cost to attend is $2500. The event is a debate on Trump between Conrad Black and David Frum moderated by Peter Mansbridge. (Is Conrad still hoping for a pardon?)

Proceeds go to a charity, Mcdermott House, that wants “to create an innovative and warm, home-like environment for Canadian Veterans, Military, First Responders and community patients in the Palliative care Unit at Sunnybrook Veterans Centre in Toronto.”

This way the wealthy can burn off some wealth without really personally “consuming” much of anything. The money goes to charity. Taxpayers (bizarrely) must subsidize this since the attendees get a charitable donation receipt.

An unknown portion of the proceeds will presumably go to Conrad Black, David Frum and Peter Mansbridge. It’s not clear to me if this charity has any paid staff. Some of the proceeds also presumably go to the venue and associated costs.

There are many ways for the wealthy to recirculate their wealth to others. Charity benefits society even though it is tax subsidized as long as it is a worthy cause and the charity spends efficiently.

#49 NoName on 09.15.18 at 5:13 pm

The study referenced above found that people surveyed required 130% of their pre-retirement income to fund their retirement spending, not the typical 70%.

—-

Now that i know this, i think its time for me/us to quit. Snowball in hell have better odds of surviving than we accumulating enough to generate 130% of pre retirement income. Maybe we should quit before it’s too late, or sell kids to traveling circus…

#50 Piet on 09.15.18 at 5:14 pm

@#38 SoggyShorts

The comment was simply a paraphrasing of Buddha’s Second Noble Truth. For those of a Christian bent, a somewhat similar idea is expressed by Jesus when he says “…it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.” –Matthew 19:24

The suffering that results from attachment does not mean that pleasure is the same as suffering. Buddha’s Second Noble Truth refers to the impermanence of pleasures and material possessions, and the recognition of this impermanence is a cause of suffering. The Buddhist solution to this is to try to let go of attachment. It’s still nice to experience pleasures, but if they are an actively sought-after objective, disappointment is likely to occur.

#51 Ace Goodheart on 09.15.18 at 5:22 pm

If you Don’t have the money you can also “destination retire ”

For example, you can live at a Cuban resort for about 300 CDN a week (most of the cash you pay to go to Cuba is for the airplane).

Better health care and all you can eat and drink all the time. Cheaper by far than living in Canada.

Better health care too

#52 Linda on 09.15.18 at 5:27 pm

Further to my earlier comment about age related discounts, I did a quick check on actual costs for the current 2018 year. A senior (65+) leisure pass at my local leisure centre is $331 for one year; a one year transit pass is currently $135 (65+) for non-low income seniors. If you are a low income senior the current price is $20 – twenty dollars! – for a one year pass. Talk about the difference a day makes. For sure if any of these discounts are still available when I have my 65th birthday I will be applying for them. Talk about an antidote to inflation & how to preserve your buying power on a fixed income.

#53 Penny Henny on 09.15.18 at 5:32 pm

#51 Ace Goodheart on 09.15.18 at 5:22 pm
If you Don’t have the money you can also “destination retire ”

For example, you can live at a Cuban resort for about 300 CDN a week (most of the cash you pay to go to Cuba is for the airplane).
//////

Hey Ace,
any hard numbers or links for that?
Sounds interesting for an old fart like me.

#54 akashic record on 09.15.18 at 5:35 pm

“My grandma’s retirement home cost $5,000/month.”

The entire world economy output would not cover it if we all spent the end of our life there.

Probably not a sustainable model for the population of this planet at this time.

#55 Stan Brooks on 09.15.18 at 5:52 pm

The ability of the stock markets to generate real returns of 6 % + annually is very limited in a resource constraint world and annual nominal GDP growth of 3 % (we might not have growth at all for quite some time going forward).

While investments will for sure help preserve purchasing power I doubt the ‘growth’ part.

Also with simple calculations I simply don’t see how people would be able to save and invest at all going forward, saving rates have been declining for quite some time with cost of living drastically surpassing the net wage increases and people going deeper and deeper in debt just to maintain current ‘standard’ of living.

Keep in mind income during retirement is taxable and who knows what the tax rates will be at that time.

I advice on purchasing a house in some Spanish/Italian/Greek village and on learning to grow your own food, it is a much better retirement plan.

People feel this wealth effect from current excessive housing valuations that is transient and will disappear with the RE crash.

As for real cost of living inflation see this:
http://www.shadowstats.com/alternate_data/inflation-charts

#56 E4me on 09.15.18 at 6:02 pm

Not even close! At 75 my wants are very little. I left behind the desire for the convertible or the new M/C as well as the 75inch tv. Winter, 6 months of the year the car moves every 2 to 3 days. The health equation steps in and don’t expect to travel that much in my 80’s. My needs for food is even less than when I was in my 40’s so where is that 125 percent of my working income suppose to go?

#57 MarcoPolo on 09.15.18 at 6:10 pm

#51 Ace Goodheart on 09.15.18 at 5:22 pm…For example, you can live at a Cuban resort for about 300 CDN a week (most of the cash you pay to go to Cuba is for the airplane).

I have an acquaintance who rents a house there for $600 a month…nice place with pool. I think there will be an increasing demand for developing country retirements for those in North America who could not acheive their retirement saving goals.

#58 SoggyShorts on 09.15.18 at 6:43 pm

#50 Piet on 09.15.18 at 5:14 pm
@#38 SoggyShorts

I get the fortune cookie sounding basic idea, I just don’t think it is a practical way to look at life.
Of course, everything is temporary, so it doesn’t affect you negatively if you don’t try for anything–but how can you really apply that to life? Especially to make yourself happier?

There are more great things on this planet than you can experience in a single lifetime, so there is always something to look forward to if you are open to new experiences.

#59 Snowtires on 09.15.18 at 6:53 pm

Retired 12 1/2 years ago, and had a very comfortable income since – an average of 88% of pre-retirement income ($ 85000 in May 2006).
Not once did we spend that 88% – most years we re-invest about $ 20,000 of it.
So technically we are spending about 60% of pre-retirement income and haven’t had to cut corners.

But we may invest in more real estate when Kelowna pops (already started), but have an eye on a couple of electric vehicles in 2019-20 as well.
Bottom line is, the more preparation you do earlier in your working career, the better.

#60 SoggyShorts on 09.15.18 at 6:54 pm

#57 MarcoPolo on 09.15.18 at 6:10 pm
#51 Ace Goodheart on 09.15.18 at 5:22 pm…For example, you can live at a Cuban resort for about 300 CDN a week (most of the cash you pay to go to Cuba is for the airplane).

I have an acquaintance who rents a house there for $600 a month…nice place with pool. I think there will be an increasing demand for developing country retirements for those in North America who could not acheive their retirement saving goals.
******************************
Indeed. For those retiring early and planning to travel the world, it is a really good idea to start with the cheapest places first so that your portfolio can grow in the early years- SE Asia for example. Alternatively, stay where you want but be prepared to take a 1-2 year vacation there if you retire into a bear.

#61 Ace Goodheart on 09.15.18 at 6:57 pm

So nobody other than me (because I’m nuts – I buy base model vw golfs for cash – 25k and they last as long as a 100k Lincoln for 1/4 the price) is going to put away 2.5 mil so they can retire off it. Or rather no one other than me and maybe 10% of the population.

North America is full of entitlement and ignorance. A deadly combo that leads to such arrogant incompetence as “the Iraq war” (invasion of a third world country “by mistake – oops” to kill about a million people (many of them children under 10) to settle a family feud between the Bush and Hussain clans).

We are the “toddler nations”. A group of folks who just can’t get over that golden period in their lives between the ages of one and three, where they could do whatever they wanted without consequence and it would always be someone else’s fault.

We are the remnants of the “smash and grab” generation
Their children really. The era of “freedom = military take over and control for the economic benefit of the North American nuclear family” of any county whose inhabitants were not white and whose first language was not English.

The people who stole the world.

By force with deadly violence.

And now the idea is, whoops, that was kinda wrong. You had no idea it was going on (politics of mass distraction). So the media gets made by force into liars (which they always were, but no one noticed because we used to be with them), invoke populism in a fake right wing seance and turn on the taps of nationalism.

What next?

Cuba, tax haven countries and my Reliance on the ignorance of the world to continue to pay me for my blood money North American investments.

I like to volunteer in a local soup kitchen.

I am part of a two person dishwashing team. I remove the dishes from the washer and get them back to the servers.

I regularly buy the kitchen new stuff. Do it anonymously. Recently I got their washer fixed for 1200 dollars and bought them 600 dollars worth of new dishes.

The best thing about it is no one knows It’s me

I wear old clothes. Try to look rough.

Most of the peeps in the kitchen are there doing community service hours for their probation.

From my time on the street I can talk rough and look poor.

Life is good…

#62 Linda M Youell on 09.15.18 at 7:06 pm

Keep or reclaim your health, for every retirement plan has as many holes as swiss cheese if you do not have the ability to savor the time, talent and treasure that you accumulated from your working years. I am blessed to have both the physical and fiscal ability to enjoy, verily, relish, my retirement.

#63 LP on 09.15.18 at 7:15 pm

#61 Ace Goodheart on 09.15.18 at 6:57 pm

I really like your thinking!

#64 Re., ace goodheart on 09.15.18 at 7:19 pm

geesus, get some fresh air man . Your brain is frying

#65 Real Estate Is Like Bell Bottoms and Roller Skates on 09.15.18 at 7:23 pm

Everything comes and goes in the eyes of the consumer as the next big thing arrives/ hits the market. Watch real estate continue to plummet as people off-load their assets that cost them money every month to hold onto as prices continue dropping across Canada. Many are hanging by a thread, indebted way over their heads, many already underwater and gasping for air with banks and lenders pounding at the door demanding payments. The perfect storm.

#66 TurnerNation on 09.15.18 at 7:28 pm

Great night for some puss filled milk, totally sobar.

Shout out to today’s red pilled blog dogs
Ace goodheart
Crossbordershopper
Tony
Oft deleted stock picker.

#67 LP on 09.15.18 at 7:29 pm

#33 Ponzius Pilatus on 09.15.18 at 2:45 pm

The old grasshopper vs. ant fable to scare kids,
Some people never grow up.
*********************************

It’s not just a fable, only an expension on the old proverb:

Proverbs 6:6-8 NIV
Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.

F71ON

#68 Piet on 09.15.18 at 7:35 pm

@#58 SoggyShorts
“There are more great things on this planet than you can experience in a single lifetime, so there is always something to look forward to if you are open to new experiences.”

True, and Canadians are fortunate to be able to have so many opportunities for such experiences. My travels in Canada and other places in the world have been rewarding, particularly when experienced with family members. The next trip is to south Asia, which is certain to be interesting, but will by contrast serve as a reminder of the level of privilege we tend to take for granted here in North America.

#69 Ryan Lewenza on 09.15.18 at 7:36 pm

Wog “How should we consider inflation in the math if retirement is 30 years down the road?”

The numbers provided are in today’s dollars so you can estimate what the current number will be in 30 years by multiplying today’s numbers by 1.02 to the power of 30. I think a 2% long-term inflation number is reasonable. – Ryan L

#70 Old Dog on 09.15.18 at 7:46 pm

First off, no one can tell you how much money you will need in retirement. Everyone is different. It still takes a life time of saving and investing to accumulate wealth though. Life’s a balancing act of enjoying yourself but still saving enough for retirement. I’ve been retired 18 years. I only spend a portion of my dividend and interest income, so the money will never run out. I spend two and a half times my gross wage I earned when I was working. Betting on spending less in your seventies may not work out well for you. Make sure to cover all bases the best you can.

#71 GreatScott on 09.15.18 at 7:58 pm

If I make 100k and get cost living increases only until I retire in 30 years, then I’ll be making 250K year. If I only intend on with drawing 4% and assume 130% spending in retirement, don’t I need near 8mil??? This seems unattainable for even the most frugal households.

#72 Leebow on 09.15.18 at 7:59 pm

Oh come on Ryan. We all know it’s Starbucks. Just admit it.

#73 Samuel on 09.15.18 at 8:15 pm

Hey Ryan, a nice basket of Canadian energy, bank, REITS and telecom blue chip stocks can pay dividends of close to 6% a year. For 50% more income than the 4% rule, and never needing to sell your holdings (which will also likely grow if not stay steady), why is this approach flawed?

#74 Newcomer on 09.15.18 at 8:19 pm

#42 SoggyShorts on 09.15.18 at 4:21 pm

What a sad sad way to view life. New fun adventures and experiences = suffering? I pity you.

————–

No, it’s actually a very happy way of looking at life. But I will admit that I reacted just as you did when I first came across it. I would suggest starting by reading about stoicism. If you don’t look suffering in the face, you will never free.

#75 Newcomer on 09.15.18 at 8:35 pm

I was talking to a recently retired guy this morning. He has a 3 M portfolio and spends 1K/month. He lives in a fancy neighborhood in a fancy city and does whatever he wants, but he’s never been fond of extravagant things. He likes podcasts, vegan home cooking and exercise. I have another friend who can blow through 40k/month. It depends what you like.

#76 FOUR FINGERS WATSON on 09.15.18 at 8:46 pm

Been retired 9 years now. Single, 69 years old, slowing down. Retirement income is the same as pre retirement income. Tweakable if I need more but has not been necessary.No debts obviously, condo is paid for, very low expenses and cost of living in Kelowna. *Boredom and inflation are the enemies.* Having fun costs money. 70% of working income would not work for me but everyone’s needs are different. I travel about half the year, have done so for 9 years.Currently on the Island of Cebu in the Philippines. It costs more for me to live abroad than it does in Kelowna because i need a certain level of physical comfort, nutrition, and safety. If you want to sit at home and watch TV i guess it can be done on 70%. But boredom and inflation are the real killers. To be safe I would recommend retiring with 100% of your working income plus the ability to tweak it upwards by 2% a year to account for inflation hahahahahahah. Joke eh?…2% … Get it ?

#77 Gravy Train on 09.15.18 at 8:52 pm

#39 Wog on 09.15.18 at 3:54 pm
“How should we consider inflation in the math if retirement is 30 years down the road?” Simply use the Fisher equation, which is a first-order linear approximation of real (vs. nominal) growth rates. It can be used for any number of years. (See links below.)
https://en.m.wikipedia.org/wiki/Fisher_equation
https://en.m.wikipedia.org/wiki/Real_versus_nominal_value_(economics)

#78 Vampire Studies on 09.15.18 at 9:07 pm

A very timely post for me Ryan, thank you and all the
posters for their ideas too.

The 4% rule seems pretty standard, and at 65 with full CPP OAP and $750k savings that would yield close to $70k a year for a couple. With no debt that seems
reasonable.

I am working backwards from that as I want to retire a few years early. So lets say $1M at 62 as the CPP would be reduced and no OAP for 3 years.

But then you have the bucket list, plus whatever other expenses to fix up the house and toy purchases. That can be another $200-300k.

Gaaa. Work on Monday.

#79 Russ on 09.15.18 at 9:17 pm

Hey Ace,

You sound like a good heart. I am sure you will continue to be well and wise.

We too have always “dressed down” and our youngest car is 2009. I like the ones from the 80’s because I can fix them. On the down side, because of the age I have to. :)

Ford 150, GMC Vandura chassis motorhome and the old Westy is in the stable next to a ’87 Gold Wing.

The missus and I went through the 5 year plan update with the advisor and provided him with expense info. Basically 4 grand a month for fixed costs and 30 thousand a year in travel budget for retirement.
He said, “You tell me when you want to retire, you’re ready now.”

Work is still kinda fun. So maybe we’ll keep at it for another year or so.
62 is a good time to bow away from the ol’ plant methinks.

#80 D.D. Corkum on 09.15.18 at 9:24 pm

#73 Samuel on 09.15.18 at 8:15 pm

“Hey Ryan, a nice basket of Canadian energy, bank, REITS and telecom blue chip stocks can pay dividends of close to 6% a year. For 50% more income than the 4% rule […]”

———

The 4% rule is actually based on the assumption of 6% average returns; of which 2% represents inflation and the other 4% is what you get to withdraw.

In other words, your portfolio is actually supposed to keep growing by 2% per year even into retirement so that you keep up with inflation.

#81 arfmoocat on 09.15.18 at 9:29 pm

I’ll leave travel and motor homes out of it, but you’ll be golfing a lot more including the drinking during and after.

A round of golf is $100 on average and your probably golfing minimum 3 times a week.

#82 FredfromKitchener on 09.15.18 at 9:33 pm

This article appears to not agree with the 130%
https://www.theglobeandmail.com/investing/personal-finance/retirement/article-why-arent-retirees-spending-their-savings/

#83 More more more on 09.15.18 at 9:43 pm

What Ryan is saying is don’t bother unless you are boomer with a DB. Taxes, fees, inflation and ever growing cpp payments will chew us up.

#84 FOUR FINGERS WATSON on 09.15.18 at 10:06 pm

#69 Ryan Lewenza on 09.15.18 at 7:36 pm
Wog “How should we consider inflation in the math if retirement is 30 years down the road?”

The numbers provided are in today’s dollars so you can estimate what the current number will be in 30 years by multiplying today’s numbers by 1.02 to the power of 30. I think a 2% long-term inflation number is reasonable. – Ryan L
……………………………..

2% eh ? Does Garth ever let you out of the tower ? Zero credibility.

#85 Tremblant110 on 09.15.18 at 10:09 pm

Read the book Die Broke and thats the aim. Plan to run out of money at 95 and then the grand kids can step up..I hope if we are still around. No 4 % rule.

#86 GreatScott on 09.15.18 at 10:32 pm

If I make 100k and get cost living increases only until I retire in 30 years, then I’ll be making 250K year. If I only intend on with drawing 4% and assume 130% spending in retirement

#87 SoggyShorts on 09.15.18 at 10:45 pm

#68 Piet on 09.15.18 at 7:35 pm
@#58 SoggyShorts
The next trip is to south Asia, which is certain to be interesting, but will by contrast serve as a reminder of the level of privilege we tend to take for granted here in North America.
********************
If at all possible, set aside some time for Vietnam.
Even the “touristy” stuff isn’t that commercialized(yay communism?), and if you can get off the track for some “authentic” experiences, even better. Of the 15 countries I’ve been to, it might be my all-around favorite.

#88 Old Man Too on 09.15.18 at 10:56 pm

I always wondered why I was supposed to “plan” to be in a lower tax bracket when I retired. It didn’t make sense to want to have less money.

#89 AlbertaGuy in AB on 09.15.18 at 10:57 pm

Heres a pretty good list of books to read on the subject…

https://www.thesimpledollar.com/52-personal-finance-books-in-52-weeks/

#90 Ace Goodheart on 09.15.18 at 11:22 pm

#79 Russ: the older the car, the better.

I like mid 40s crash box internationals.

Indestructible.

Yeah you have to match the engine speed to the vehicle speed when you shift.

But they are tanks. Thick steel. Motors can be rebuilt easily many times.

The modern stuff doesn’t last. Rusts through so fast. So fragile.

I wish people knew how tough a pick up truck used to be.

They used to pass them down from father to son.

Those were the days….

#91 AlbertaGuy in AB on 09.15.18 at 11:23 pm

#53 Penny Henny on 09.15.18 at 5:32 pm

Re: longstays in Cuba…a place to start…

https://www.holasunholidays.ca/our-products/long-stays/

#92 A Yank in BC on 09.15.18 at 11:44 pm

Hey Ryan.. ten years ago today.. Lehman Bros. Remember what that felt like?

#93 fishman on 09.16.18 at 12:12 am

Tony, “Don’t put any money in B.C. Credit Unions? Have you checked out the level of the Colorado lately? How about the cubic metres of potable water coming down the Fraser & Columbia? B.C. real estate is a good as bet as any

#94 Ace Goodheart on 09.16.18 at 12:27 am

So an experiment. Summer fun really. Figure out a block and build a simple but, well, slightly inappropriate diarama and then leave it in a conspicuous place.

Sign it. Be ambiguous.

If we could capture the character of the block in a way that exposed something, we win.

Our art projects became items of discussion in the local paper. They would pop up randomly. There was speculation as to where the next one would be.

No one knew who we were. We were detached from the system.

Being attached gives you addictions.

There is a certain amount of freedom gained from knowing how the power works and being part of the system. When you know things about the decision makers, and they know you know, as honest as you might want to be, you get sucked in anyway. The freedom becomes the poison.

The only way to know that the system is rigged is to either be the one rigging it or the one watching.

The only way to watch is If you’re connected to it.

It gives you addictions. When you get to the point of knowing that there is no right or wrong, that it gets too close and you can’t see it anymore, that the foam on the top is covering all this stuff and you thought the foam was morality and it was just the garbage churned up during the deed. You end up seeking out ways to cope.

Knowledge is power and it also kills you slowly when you are connected to those you know about.

Ah the days of youth. I long for that disconnection again

#95 Half Full on 09.16.18 at 12:44 am

Thanks. That was really informative and useful!

#96 The Wombat on 09.16.18 at 1:23 am

Ace: is that resort in the orient or west?
Russ: hAve you taken over my life? That’s exactly my situation except it’s a Mustang convertible instead of the GW. And not a westy but a camper van.
Four Fingers: you must be living large if it’s more $ than home. We went and checked out S-E Asia and northern Thailand was about 50% of our small town costs.

#97 Keith in Rio on 09.16.18 at 1:28 am

Retire someplace where your dollar buys you 3-4 times as much, and it is warm all the time.

Spread your money around the globe.

Why would anyone in their right mind want to retire in “Soviet Kanuckistan” is beyond me.

Live the dream, and deprive the criminal left of another taxpayer to fund their stupid schemes. Vote with your feet people……..you should have no loyalty to this shithole anyways………..it’s only “Kanaduh” in name now………any vestige of what made this country Canada has been diminished by liberal pallbearer.

#98 Not poor on 09.16.18 at 1:31 am

When I was working, I chose a standard of living on the west coast where I spent 35% of my income on my mortgage, 20% on retirement savings/education for the kids – essentially living on about 50% of my income.

While it’s true that retirement costs more because I spend more, it’s not an accurate comparison because I COULD spend more now – but I don’t. To live with a comparable standard of living to when I was working full time, it only costs me 50% (not including my savings for dining out, transportation and parking at work etc.).

Thankfully, I planned on living on 75-80% replacement income and I’ve been able to max out tfsa’s each year and afford a much nicer holiday than before – without spending anything near 80%. Obviously I’m not golfing everyday and cruising around the world, but I wasn’t doing that before and honestly don’t miss it. Like everything, It comes down to expectations.

#99 will on 09.16.18 at 2:05 am

On the loooooong weekend (retirement) I plan to be riding my bicycle to the library twice a week or more and filling in all the gaps in my knowledge of history and other stuff. I also hope to work part-time at something physical to stay in shape. I’m not one for the gymnasium. Also plan to go down to the big smoke once or twice a year to see the opera. want to take at least one train trip a year to somewhere in Canada. Not interested in Vegas in the slightest (or any other American city for that matter), so the picture is a turnoff. I understand that I live in an economy, ie. a largely despiritualized world. But as I get incrementally a little closer to death the stuff that is not economics and money forces itself on me and I will have to live more and more in this non-economic world as time goes by. This is the meaning of conscious ambiguity. So will I Have enough money? Probably. I will let you know how it goes. I know you will be waiting with bated breath for my report. Love – will

#100 Deplorable Dude on 09.16.18 at 2:13 am

#73 Samuel…”Hey Ryan, a nice basket of Canadian energy, bank, REITS and telecom blue chip stocks can pay dividends of close to 6% a year. ”

Yep, thats what I do. Big fan of the Tom Connolly method….simple dividend growth income based on solid companies with history of increasing dividends. Based on original book price my dividend portfolio is currently paying out 4.9%….and increasing every year…my dividends have increased 6.7% so far ytd. And will continue go up every year as the holdings increase their payouts…..

Downsides? Not as diverse as etfs….so you can take a hit if a company goes under. Also bigger hit in a correction. My portfolio is down about 3% ytd due to that correction we had in Q1. But I don’t care, I’m not relying on selling the capital……to quote Buffet….buy and hold forever.

#101 FOUR FINGERS WATSON on 09.16.18 at 7:41 am

#96 The Wombat on 09.16.18 at 1:23 am
Ace: is that resort in the orient or west?
Russ: hAve you taken over my life? That’s exactly my situation except it’s a Mustang convertible instead of the GW. And not a westy but a camper van.
Four Fingers: you must be living large if it’s more $ than home. We went and checked out S-E Asia and northern Thailand was about 50% of our small town costs.
………………………………..
Not really living large Wombat, I only want what i have at home which is comfortable secure lodgings with aircon, a pool and a gym, good cable and wifi, roughly the same western food, and i take taxis wherever I go instead of having a car. And I never cook. Not really living large at all. If i wanted to live in a cardboard box and eat rice and dried fish every day I could live real cheap but I wouldn’t be comfortable. Equivalent lifestyle and diet to Canada is not cheap.

#102 Wrk.dover on 09.16.18 at 7:56 am

Debt free since 35, then both retired at 55. Had saved little, had bought homestead sustaining everything.

Lived next ten years on $1300 CPP, then $600 OAS kicked in as an inflation adjuster, followed by another OAS kicking in just now.

The DBP is just gravy, allowing two TSFA’s to be stuffed the whole time so far and much frivolous travel.

A garage full of tools for all projects, a garden, some friends, cherry picking sale items, and it is all good, never have time to think it is boring.

The trick is to live on this income until you actually do.
We did, and do, with two registered/insured cars each on this figure.

The inflation protector will be to scale down travel, then scale down saving, then scale down the savings.

Should take a long while, hopefully the savings go to final stage care, with the proceeds of the downsize auction.

Easy numbers.

M65NS

#103 Ryan Lewenza on 09.16.18 at 9:37 am

Samuel “Hey Ryan, a nice basket of Canadian energy, bank, REITS and telecom blue chip stocks can pay dividends of close to 6% a year. For 50% more income than the 4% rule, and never needing to sell your holdings (which will also likely grow if not stay steady), why is this approach flawed?”

This assumes investors are rational and will be unemotional to a 30% decline in their net worth. If you’re 100% invested in equities, even high quality dividend stocks that you referenced, you have to be prepared to see your net worth decline by 30%+ every 4-5 years. The average bear market sees the S&P 500 and TSX decline 30% and lasts roughly 1 year. Many investors cannot handle this and in turn sell near the bottom. So we protect against this by including 40% of fixed income to smooth out the ride. We can get the 6% return over the long-run by including bonds, but with far less volatility. – Ryan L

#104 Ryan Lewenza on 09.16.18 at 9:42 am

Leebow “Oh come on Ryan. We all know it’s Starbucks. Just admit it.”

Starbucks is too bitter for me and I’m too cheap to pony up $5 bucks for a cup of coffee. It’s my Scottish roots! – Ryan L

#105 Ryan Lewenza on 09.16.18 at 9:52 am

Old Man Too “I always wondered why I was supposed to “plan” to be in a lower tax bracket when I retired. It didn’t make sense to want to have less money.”

You could still be in a lower tax bracket because not all your income will be taxable. Withdrawals from your RSP/RIF accounts will be taxable but withdrawals from your non-registered account and TFSA will not. So it’s fair to assume your retirement tax rate will be lower if you’ve structured your savings correctly. – Ryan L

#106 Almontage on 09.16.18 at 10:21 am

We retired late 50s are now close to 70. Our income is close to 70% of our 2005 pre-retirement amount as we now start to melt down our RRSPs.
We don’t travel as much as we did earlier and should be fine. We have enough left over to gift our grandchildren for education and the odd vacation.
House was long paid for when we retired and we have no debt. We are grateful.

#107 MF on 09.16.18 at 10:25 am

#97 Keith in Rio on 09.16.18 at 1:28 am

Radical Liberalism is present in all western countries..not just Canada. The political tide will eventually turn as it always does.

To call Canada a “shithole” while living in Brazil shows your little comment is nothing more than an emotional outburst from a miserable and bitter person than anything else.

Btw, it looks like Brazil suffers from the same plague that affects nearly all Latin countries: rampant corruption.

It’s also coming out of deep recession with the OECD saying recovery is weak and at risk of failing…again:

http://www.oecd.org/eco/outlook/brazil-economic-forecast-summary.htm

https://www.transparency.org/news/feature/corruption_perceptions_index_2017

That dollar you mention that goes further in this Latin paradise does so because Brazil’s currency just another worthless “peso” that reflects corruption and recession like most other former Spanish/Portuguese colonies.

MF

#108 JohnAB on 09.16.18 at 10:56 am

I’ve calculated… If I want to retire at 60, I have another 25 years. Let’s say I want 1.5 mil in today’s money by then, and that’s 2.5 mil in 2043. If I don’t invest, then I’ll have to save ~8300 CAD per month. If I invest, and I have a 5% yearly return, then I’ll have to save 4166 per month. And now a question: WTF are the people saying when they talk about early retirement???

#109 Gravy Train on 09.16.18 at 11:06 am

#89 AlbertaGuy in AB on 09.15.18 at 10:57 pm
“Heres a pretty good list of books to read on the subject…”
https://www.thesimpledollar.com/52-personal-finance-books-in-52-weeks/

I’ve read many, if not most, of the books on this list. One excellent book missing from the list is Stocks for the Long Run by Jeremy Siegel.

#110 Russ on 09.16.18 at 11:52 am

#96 The Wombat on 09.16.18 at 1:23 am
Ace: is that resort in the orient or west?
Russ: hAve you taken over my life? That’s exactly my situation except it’s a Mustang convertible instead of the GW. And not a westy but a camper van.
Four Fingers: you must be living large if it’s more $ than home. We went and checked out S-E Asia and northern Thailand was about 50% of our small town costs.
………………………………..
Not really living large Wombat, I only want what i have at home which is comfortable secure lodgings with aircon, a pool and a gym, good cable and wifi, … could live real cheap but I wouldn’t be comfortable. Equivalent lifestyle and diet to Canada is not cheap.
===============================

Hey Watson & Hodaka (Combat Wombat),

What say you is a good budget estimate per month for a 6 month sojourn around Vietnam -> Thailand areas?

Local food is part of the experience and mid-level hotel is normal for us.

Cheers, R

#111 Wrk.dover on 09.16.18 at 11:56 am

#108 JohnAB on 09.16.18 at 10:56 am

WTF are the people saying when they talk about early retirement???

——————————

Having time to NEVER have to pay labour ransom to anyone for anything, until you are infirm. Plus, the luxury of never having to neglect the things you have worked for, including not following the salt truck down the highway.

The only labour I pay is dental.

I am in the house right now on break from having fun.
Menu: fresh haddock, new potatoes, picked-small-string beans, three varieties of scratch fruit pie cooling on the counter, or peach upside down cake in fridge.

Early retirement on chump income.

#112 Shawn Allen on 09.16.18 at 12:35 pm

Tax Bracket in Retirement?

105 Ryan Lewenza on 09.16.18 at 9:52 am responded to:

Old Man Too “I always wondered why I was supposed to “plan” to be in a lower tax bracket when I retired. It didn’t make sense to want to have less money.”

You could still be in a lower tax bracket because not all your income will be taxable. Withdrawals from your RSP/RIF accounts will be taxable but withdrawals from your non-registered account and TFSA will not. So it’s fair to assume your retirement tax rate will be lower if you’ve structured your savings correctly. – Ryan L

*************************************
Agreed, most will be in a lower tax bracket. Even people with good DB pensions and some RRSP income will usually be in a slightly lower tax bracket. (Though not if they are making 100% plus of their working years income – inflation adjusted).

But I also agree with Old Man Too that being in a higher tax bracket is not such a bad thing. I like to say that the only thing worse than having to pay a large amount of taxes is … not having to pay a lot of taxes … which in most cases is due to lack of income.

If I should make enough money after age 65 to be in a higher tax bracket, I shall learn to live with it.

#113 NoName on 09.16.18 at 12:44 pm

#108 JohnAB on 09.16.18 at 10:56 am
I’ve calculated… If I want to retire at 60, I have another 25 years. Let’s say I want 1.5 mil in today’s money by then, and that’s 2.5 mil in 2043. If I don’t invest, then I’ll have to save ~8300 CAD per month. If I invest, and I have a 5% yearly return, then I’ll have to save 4166 per month. And now a question: WTF are the people saying when they talk about early retirement???

your numbers is bit wrong. Here is monter carlo that i run with some mock up 8 funds portfolio with almost no upfront savings (1000 was minimum) and circular of years boot strap, it looks likes you need to save “only” to save 3000 and 5.5% to be at that inflation-adjusted 1.5M, or 1.3M at 4.6% return.


i really dont know what bootstrapping so i chose circular sounds more serious, but dis dude and dudette seem to know. here is link to cache of pdf file, funny they did research by using Serbian stock market index values from 2009 – 2014…

https://webcache.googleusercontent.com/search?q=cache:HhnU8Js5jjQJ:https://hrcak.srce.hr/file/197357+&cd=2&hl=en&ct=clnk&gl=ca

#114 Deplorable Dude on 09.16.18 at 12:48 pm

#103 Ryan Lewenza…”This assumes investors are rational and will be unemotional to a 30% decline in their net worth”

I think it was John Boogle who said ‘The stock market is a great distraction from investing’….

Yes you have to deal with greater volatility…but only in net worth…..not dividend payouts. Even in the 2008 crash pretty much no one cut dividends.

I still get my nice juicy dividends regardless of stock price…and they are increasing every year. I also don’t worry about having to sell stock in a falling market to live off.

If you can ignore the noise of volatility the dividend growth seems a really simple option to follow, as long as you do your homework and pick good stable companies with increasing dividend payouts.

#115 joblo on 09.16.18 at 1:00 pm

BEST idea I heard of in a long time.
NO nursing home for me, Just week after week of cruising.
What’s not to like, Food, drinks, recreation, new friends every week, doctor on board, ports of call etc. etc.
beats freezing in Kanadastan and listening to endless political stupidity.

#116 Newcomer on 09.16.18 at 1:11 pm

#108 JohnAB on 09.16.18 at 10:56 am

And now a question: WTF are the people saying when they talk about early retirement???

—–
For example, this:
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

#117 IHCTD9 on 09.16.18 at 1:57 pm

#28 Damifino on 09.15.18 at 2:19 pm

I have more wealth than I am ever likely to use. I see it as an economic engine that will outlast my stay here…

Take the advice of this blog. Build yourself a good engine then get on with living as long as you live.
————

I like this approach, a cash flow engine for living in retirement; then passing it on when you’re done with it.

We’re going to also have more than enough if all goes forward as it has in the past. I have no plans to draw down the principal, only to get as much of it as possible out of RRSP’s as efficiently as possible, and to put it into TFSA’s and taxable investments.

With any luck, we’ll live off the small pension and 2 CPP’s and OAS’s, while the portfolio is prepped to be passed on to the kids with a minimum usurped by the CRA. Then it can be their cash engine.

#118 IHCTD9 on 09.16.18 at 2:05 pm

#104 Ryan Lewenza on 09.16.18 at 9:42 am

Starbucks is too bitter for me and I’m too cheap to pony up $5 bucks for a cup of coffee. It’s my Scottish roots! – Ryan L
———

Ha! Bitter coffee is awesome, but 5.00?

Forget it!

(Dutch roots)

#119 Re., stone on 09.16.18 at 2:21 pm

1% of the population has a residence and $1 mill portfolio ?

Where did you get that number ?

Guess I’m in the 1%

#120 SoggyShorts on 09.16.18 at 2:31 pm

#108 JohnAB on 09.16.18 at 10:56 am
I’ve calculated… If I want to retire at 60, I have another 25 years. Let’s say I want 1.5 mil in today’s money by then, and that’s 2.5 mil in 2043. If I don’t invest, then I’ll have to save ~8300 CAD per month. If I invest, and I have a 5% yearly return, then I’ll have to save 4166 per month. And now a question: WTF are the people saying when they talk about early retirement???
If you’re talking about really early retirement, like FIRE around age 30 or 40, the formula is pretty basic

A couple making $60K each
Spending 60K
Saving 60K
=
1 million in 11 years (with 7% returns)
=
40K per year in retirement (with rule of 4%)

Better is probably working 4 more years for another half mil to make that retirement income 60K.

That’s it really. A 15 year career instead of the “standard” 45 years.

The reason that the FIRE movement has become so popular recently is the incredible bull market since the crash. If you add in a little bear market during your 15 years, expect to add a few more years.
Or if it takes you a few years to hit $30/h, then add a few more as well.
Or if “Retirement” means working part-time at something you enjoy, then you can shave off a few years.

#121 Debbie Downer on 09.16.18 at 2:42 pm

I’m in my mid-30’s, so realistically and pragmatically speaking, the world is going to be a far different place by the time I reach the ripe old age of 67. The confounding variables will be: Climate Change, Water Scarcity, Food Scarcity, Droughts, Wars, Overpopulation, to name a few. By 2050 (my retirement age) I don’t think the future will be bright. My generation is blaming the baby boomers, while the baby boomers are blaming my generation and at the end of the day, we’ve quietly passed the point of no return because of all this arguing and nobody bothered to listen to those pesky scientist’s about it. C’est la vie folks and enjoy the time you have today with your family, friends and loved ones. That’s what I’m doing and that’s how I’m choosing to live my life today.

#122 IHCTD9 on 09.16.18 at 2:44 pm

#102 Wrk.dover on 09.16.18 at 7:56 am
Debt free since 35, then both retired at 55. Had saved little, had bought homestead sustaining everything.

Lived next ten years on $1300 CPP, then $600 OAS kicked in as an inflation adjuster, followed by another OAS kicking in just now.

The DBP is just gravy, allowing two TSFA’s to be stuffed the whole time so far and much frivolous travel.

A garage full of tools for all projects, a garden, some friends, cherry picking sale items, and it is all good, never have time to think it is boring.

The trick is to live on this income until you actually do.
We did, and do, with two registered/insured cars each on this figure
———-

Man, I could live so cheap it’s not even funny. I still have some big bills to pay, but there is a light starting to form at the end of the tunnel. From there on in, cost of living is going to drop like a stone.

Take your retirement situation with the big shop full of tools, then add a couple of small off road Yamaha’s, 20 tons or so of yellow iron, and a 12’ Jon boat with a 5 hp outboard, and that is about as good as it gets for me.

Despite the expected portfolio value, I’ll be living on a pretty low income – likely OAS’s and CPP’s only – can’t see needing much more than that. The rest is security for us, and for helping others. Whatever’s left goes to the kids.

The best advice in your post is to live your retirement lifestyle well before you get there. I’ve always lived an anti-baller lifestyle, and I love it. Not going to change, no desire to. I know my retirement is going to be low cost, because that has been the story (and desire) of my life.

Sure, We might blow 10-20 grand a year on fun for a few years after we hang up the gloves, but it won’t have legs. I might buy my first new Truck ever, and maybe a new SxS – but that’ll be it – they will last till I’m dead most likely.

#123 IHCTD9 on 09.16.18 at 3:05 pm

#114 Deplorable Dude on 09.16.18 at 12:48 pm

I think it was John Boogle who said ‘The stock market is a great distraction from investing’.
———-

Sounds like a recycled Twain quote:

“I have never let my schooling interfere my education”

(One of my fav’s!)

#124 Shawn Allen on 09.16.18 at 3:10 pm

Who Can Save 25% of gross pay?

It may take saving 25% of gross income to fund a retirement that will replace income for a 40 year retirement. Who can do that?

Well, as an example a government worker in Alberta making $100k gross contributes 12.24% to the pension and the government matches that with another 12.24% totaling 24.48% or roughly 25%.

And this happens AUTOMATICALLY with zero disciple required.

So basically at this time all government workers are having sufficient savings invested to fund lucrative pensions (Amounting to 70% of gross at 35 years of service if CPP is included). (Contributions were far too low decades ago but this has been corrected probably ten years ago)

And probably something like I don’t know 2% or so of private sector workers would have the discipline to set aside 25% of their gross income.

Of course a teacher “making” $100k is REALLY making $112.24k just when the employer’s pension contribution is added in and probably at least $120k if all employer-paid benefits are added it.

The moral: get a government job. Or make big dollars in the private sector AND be among the top few percent most disciplined of savers.

#125 Re., Ryan on 09.16.18 at 3:12 pm

It’s not every day you post nonsense

-100% equity portfolio does NOT correct 30% every 4-5 years . Cmon , you’re an advisor for heaven sakes !

Also a 100% dividend portfolio will outperform a 60/40 , the ride won’t be as smooth as you correctly noted

#126 Remembrancer on 09.16.18 at 3:24 pm

#116 Newcomer on 09.16.18 at 1:11 pm
#108 JohnAB on 09.16.18 at 10:56 am

And now a question: WTF are the people saying when they talk about early retirement???
—————————————————————-

Many (not saying all) of the FIRE (Financially Independent Retire Early) crowd are either Finance or Tech industry who made out well over a decade or two and pulled the rip cord on a f/t career while using investment income + keeping a smaller side gig like web design, skilled labour like carpentry etc to pay the bills + significantly downsized expenses / living location + DIY themselves through life…

MMM, who I’m sure appreciates the click through link is one of more successful examples who you could argue has turned the topic into a career…

#127 Remembrancer on 09.16.18 at 3:28 pm

#119 Re., stone on 09.16.18 at 2:21 pm

While its all relative, anyone reading this blog is likely better off then a very high percentage of the world’s population now or ever depending on how you are measuring it…

Its the 0.1% with the real money though :-)

#128 IHCTD9 on 09.16.18 at 3:39 pm

If an 18 year old put $105.00 per week, into a TFSA – every week till he turned 65, this is what it would look like:

Total life long deposits: $269,000.00
Total portfolio value at 65: $1,546,000.00 (6%)
Annual passive income at 65: $87,000.00 (6%)

Any teens reading GF?

This is the power of time and dedication. Ms. IH and I started at 26, and we (combined) won’t likely be hitting 1.5, but we sure as hell will have shoveled in a lot more than 269k for whatever we do end up with.

Time trumps just about anything when it comes to investing. Every year you make additional deposits after the 4th decade racks it up like crazy in actual dollars.

With the TFSA now a days, kids could really produce something amazing – big bucks, no taxes, and no headaches when it’s time to bid farewell. Set it and forget it. Big time 100% tax free passive income – the holy grail.

I wonder which kid will be the first to actually make it happen.

#129 Shawn on 09.16.18 at 3:41 pm

The vast majority of Canadians retire with less than $500K in savings and do just fine. Most retire with less than $100K in savings, many with zero. People simply adjust. Wants and needs tend to change in retirement also – less keeping up with the Jones’ and the work related rat race.

The financial industry has been insisting that Canadians haven’t saved enough for retirement for decades. They simply want your $ under management in order to extract a never ending flow of fees.

Do the best you can with saving according to your means. Visit the Vanguard Canada website for some basic investment advice. Keep the $ you have under your own control.

#130 J on 09.16.18 at 3:50 pm

Great post Ryan. Regarding taxation, you touched on this with some of the comments. Would be nice to have a summary of the taxation points – registered, non- registered, tax on growth in types of investments…claw backs on OAS. (Future post?) Lots to consider, but it feels like knowing how to optimize taxation could help with what you need to save…granted governments can change that picture in a hurry.

#131 IHCTD9 on 09.16.18 at 4:23 pm

#121 Debbie Downer on 09.16.18 at 2:42 pm
I’m in my mid-30’s, so realistically and pragmatically speaking, the world is going to be a far different place by the time I reach the ripe old age of 67. The confounding variables will be: Climate Change, Water Scarcity, Food Scarcity, Droughts, Wars, Overpopulation, to name a few. By 2050 (my retirement age) I don’t think the future will be bright. My generation is blaming the baby boomers, while the baby boomers are blaming my generation and at the end of the day, we’ve quietly passed the point of no return because of all this arguing and nobody bothered to listen to those pesky scientist’s about it. C’est la vie folks and enjoy the time you have today with your family, friends and loved ones. That’s what I’m doing and that’s how I’m choosing to live my life today
———-

Bad way to look at life, too pessimistic with no regard given to the amazing changes happening right now. We are on the brink of wide spread lights out AI/robot driven manufacturing. Costs of consumer goods are going to absolutely plummet, food costs have never been lower compared to incomes than now, global poverty has been on a steady downward trend for decades, never has so much food been produced by so few workers.

Compared to 30 years ago, there is less pollution, less war, less murder, less nuclear weapons, and less terrorist related deaths.

Compared to 250 years ago, our life expectancies have more than doubled, child mortality is down 100 fold, famine is now non existent in the 1st world, we get by working 50% less hours than even just 100 years ago, the list goes on and on.

Give a listen to Steven Pinker tell it like it is:

https://m.youtube.com/watch?v=yCm9Ng0bbEQ

Life will surely be good for us Northern 1st world retirees in 2050, especially if you’ve got a mattress full.

#132 Shawn on 09.16.18 at 4:32 pm

I stand corrected – you did post it. Thanks for not censoring. Much appreciated.

#133 majik on 09.16.18 at 6:05 pm

https://globalnews.ca/news/3265369/why-living-longer-than-85-years-will-be-common-by-2030/

Politicians, corporate executives and so on don’t seem to retire until well into their seventies. This thinking is going to filter down into the general populace. The idea that people retire at 60,63 or 65 will be alien to us by 2030. It’s one of the reasons why retirement ages are being raised, the other, the greying of Western populations and the dwindling of pension funds.

But it’s not all doom and gloom. We’re going to live longer, healthier lives in the future which will allow us to be productive well into our seventies. You have to remember that ‘retirement’ and pensions are a 20th century concept only invented in the early 1900s. Previously people worked till they died, life expectancies were low. So how about retiring at 75 or 80?

So many people I know now are looking for that quick exit by the time they hit 40. I say if you hit 40 and all you think about is retirement or a career exit then you’re probably in the wrong career. Yes plan financially for a lower income in later life but why abandon aspirations to be productive in those later years? Deep down I think it is greed and laziness, actually I will say it is mostly laziness. Society is only as good as the contribution you make.

BTW I am not an old dude!

#134 Charles on 09.16.18 at 7:19 pm

Garth, how much will the Canadian dollar tank against the USD as interest rates continue to rise?

#135 The Druid on 09.17.18 at 3:50 pm

The Government hates you, The Government would like nothing better than to strip you of all your wealth and have you as a slave, How are you going to fight back? 6000 years ago Gold and Silver were money, JP Morgan said ONLY Gold and Silver are money the rest is just a unit of account. If Canadians are in 2Trillion in debt and the Government KEEPS getting deeper in debt, they will be looking at YOU to bail them out, hence Trudeau put into the 2016 budget that if and when the banks fail, they can take YOUR money to refinance the banking system. When you put your hard earned money into the bank LEGALLY you are giving the bank an unsecured loan, yes folks they don’t have to pay it back. Silver is pretty cheap right now, better load up, and don’t tell the government where you hid it.

There is absolutely no bank bail-in provision that will take a single dollar of depositors’ money (and this was designed by Harper, not Trudeau). If you rock-humpers must lie and fabricate to scare people into your corner, you’re more pathetic than I realized. Gold is not money and never will be. – Garth

#136 M. Towne on 09.17.18 at 4:39 pm

#16 Shawn Allen “For one thing, that a $50,000 per year guaranteed by government pension allows the same spending as about $1.25 million in RRSP. (Another reason to hate government workers)”

Ah, the government-worker envy.

I checked with my friend Mr. Spreadsheet and his FV function. In fact, if you contribute $13k a year into a pension fund you’ll put in $396k over a thirty-year career.

The total value of those payments at year 30, if they were made independently and assuming 7% a year growth, ends up being $1.25 million, of which 4% per year is just shy of $50k.

Which, if you’re in a pension system, you collect until you die, and then whatever’s left of the $1.25 million (minus a relatively small death benefit) goes to the fund.

It’s fun to whale on government workers because of their guaranteed pensions, and there’s a whole bunch of dishonest and politically-driven talk about how somehow gov’t pensions are paid for out of general revenues. But that $50k/year is nothing you couldn’t get if you invested an equivalent amount of dough yourself.

The difference, of course, is that independent investors panic and sell at bad times, or they believe their own hype about being able to beat the market, or they buy Bitcoin, and they lose their nut. Government workers put the money somewhere it’s protected from their own lack of financial expertise, and let professionals manage it, and in the end it’s much safer, but they pay for it.

If you’re so jealous of government employees, just invest the same amount as we are, and in thirty years get your $50k per annum PLUS, unlike us, you get to keep the million-two. And quit your innumerate bitching.