# Traditional retirement advice creates a trap



## james4beach (Nov 15, 2012)

Traditional investing advice mostly goes like this: start investing as soon as you can, and keep adding to your investments (mostly stocks) throughout your career. Keep your investments isolated in a RRSP/TFSA and don't touch that money until 30+ years later when you eventually retire. 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 creates two traps:

1. You become very dependent on employment cashflow (and therefore dependent on an employer), _even if you are asset-rich_. This occurred to me today when one my coworkers, a top income earner at our firm, said he has a great fear of being unable to pay his mortgage and losing his house. What this suggests to me is that he's very dependent on this job, and really needs the cashflow. The interesting thing here is that he could, obviously, find ways to pay the mortgage by liquidating his investments. But because the investments are meant to be long term and hands-off, he ends up feeling the stress of short term cashflow needs. So this discomfort is a consequence of structuring investments on a long term retirement framework.

2. You must defer enjoyment of your savings until you are quite old. In practical terms this means things like: time off, leisure, freedom from having to work, etc. You won't get to do these things until you're quite old, and you go through all your working years constantly strapped for time, with barely enough time for leisure and vacations, and certainly with no freedom from having to work.

I see these as unpleasant traps, and unnecessarily. Someone with a large net worth shouldn't have to be so worried about short term cashflow (1), nor should they defer joy of leisure and freedom until old age (2).

I am really interested in what others here think about this. Did you see similar traps during your working years? Or do you see this differently? Have you found a way to escape from these traps?


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## Big Kahuna (Apr 30, 2018)

james4beach said:


> Traditional investing advice mostly goes like this: start investing as soon as you can, and keep adding to your investments (mostly stocks) throughout your career. Keep your investments isolated in a RRSP/TFSA and don't touch that money until 30+ years later when you eventually retire. 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 creates two traps:
> 
> ...


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.


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## milhouse (Nov 16, 2016)

james4beach said:


> 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.


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## OrganicRain (Nov 27, 2016)

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.


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## agent99 (Sep 11, 2013)

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.


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## Daniel A. (Mar 20, 2011)

james4beach said:


> Traditional investing advice mostly goes like this: start investing as soon as you can, and keep adding to your investments (mostly stocks) throughout your career. Keep your investments isolated in a RRSP/TFSA and don't touch that money until 30+ years later when you eventually retire. 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 creates two traps:
> 
> ...


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.


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## Eder (Feb 16, 2011)

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)


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## lonewolf :) (Sep 13, 2016)

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


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## pwm (Jan 19, 2012)

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.


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## like_to_retire (Oct 9, 2016)

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


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## OrganicRain (Nov 27, 2016)

agent99 said:


> 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.


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## Big Kahuna (Apr 30, 2018)

OrganicRain said:


> 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.


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## humble_pie (Jun 7, 2009)

OrganicRain said:


> 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)



gummint needs to stop GIS for canadians with TFSAs. GIS applicants should be strictly evaluated on a household income basis. The GIS is not any kind of earned right, it should be reserved strictly for the provable elderly poor.

OAS, too, should be scaled on a household needs/income basis.

JMHO. But there are already threads in cmf forum - posted by thoughtful civic-minded seniors who are themselves affluent - suggesting that canada already offers plenty of perks for seniors, canada should be preparing to reduce these outlays.


.


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## AltaRed (Jun 8, 2009)

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.


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## Parkuser (Mar 12, 2014)

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.


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## Userkare (Nov 17, 2014)

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.


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## OrganicRain (Nov 27, 2016)

humble_pie said:


> gummint needs to stop GIS for canadians with TFSAs. GIS applicants should be strictly evaluated on a household income basis. The GIS is not any kind of earned right, it should be reserved strictly for the provable elderly poor.
> 
> OAS, too, should be scaled on a household needs/income basis.
> 
> ...


Well, my income will be low regardless. I chose to take earned income (that I paid taxes on) and then put a little into the TFSA instead of blow it on Cigs, Hookers and new cars. Any gov program that is available will be utilized, i'll take it without apologies.


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## Big Kahuna (Apr 30, 2018)

Userkare said:


> 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.


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## humble_pie (Jun 7, 2009)

Parkuser said:


> 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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## Big Kahuna (Apr 30, 2018)

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


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## humble_pie (Jun 7, 2009)

OrganicRain said:


> Any gov program that is available will be utilized, i'll take it without apologies.




& so you should. My point is that you are peering forward 25 years, around a quarter of a century. No one has any idea what canada will look like at that future date.

GIS itself might not exist, other than as emergency payments to the genuinely impoverished. By that far-off future date the gummint will most likely have placed all senior supplements on a needs-based household income framework.


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## humble_pie (Jun 7, 2009)

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.


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## like_to_retire (Oct 9, 2016)

Userkare said:


> 2. There's something I never understood - why do retired people keep investing money rather than enjoying it? ..................................... That's one trap I haven't fallen into.


I think you'll find it's human nature and a matter of habit. When you have spent your life in the pursuit of saving, saving, investing, investing to ensure you have enough for retirement, don't you see how difficult it is to suddenly do the opposite? I've been retired for twelve years now and still haven't cracked that nut. If you have want for nothing more than you have, why would you need to spend more, and especially "_as fast as you can"_?

ltr


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## Userkare (Nov 17, 2014)

Big Kahuna said:


> 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.


I never said or believed that more money = more enjoyment, but most of the things people do enjoy happen to require some money. When I was in my 20's the idea of camping and sleeping on the ground appealed to me; it was cheap, too. Now if it isn't at least a 4 star hotel, I'm not interested in staying there; for sure it's way more expensive than campgrounds. I also owned klunker cars that I loved to work on; now I'm not so interested in spending any time under a car and will pay a shop instead; also not as cheap as DIY repair. I would not go back to doing those things unless I absolutely had no other choice ( i.e. money ).

What I'm saying is that if you know what you need to be happy, beyond basic sustenance, and have that money available to you, why would you deprive yourself so that your heirs can go nuts and enjoy the money you didn't enjoy for yourself? At some point you have to realize that given your chosen lifestyle, whatever that is, and the amount of money you've saved, there is no more reason to try to squeeze a few more percent from the untouched principal. If OTOH if someone is truly happy knowing they'll provide enjoyment to others by their death, then go ahead, be happy!


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## Big Kahuna (Apr 30, 2018)

Userkare said:


> I never said or believed that more money = more enjoyment, but most of the things people do enjoy happen to require some money. When I was in my 20's the idea of camping and sleeping on the ground appealed to me; it was cheap, too. Now if it isn't at least a 4 star hotel, I'm not interested in staying there; for sure it's way more expensive than campgrounds. I also owned klunker cars that I loved to work on; now I'm not so interested in spending any time under a car and will pay a shop instead; also not as cheap as DIY repair. I would not go back to doing those things unless I absolutely had no other choice ( i.e. money ).
> 
> What I'm saying is that if you know what you need to be happy, beyond basic sustenance, and have that money available to you, why would you deprive yourself so that your heirs can go nuts and enjoy the money you didn't enjoy for yourself? At some point you have to realize that given your chosen lifestyle, whatever that is, and the amount of money you've saved, there is no more reason to try to squeeze a few more percent from the untouched principal. If OTOH if someone is truly happy knowing they'll provide enjoyment to others by their death, then go ahead, be happy!


The thing is-simply looking at someone's lifestyle from the outside you don't know if they are depriving themselves or if they just don't care-here is an example-if I won 100 million in a lottery tomorrow, I could obviously afford to wear a $50000 wristwatch-would I? Probably not-I have no interest-I might just pick up a $10 watch at Walmart to infuriate those people who know I have 100 million plus.


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## Userkare (Nov 17, 2014)

like_to_retire said:


> I think you'll find it's human nature and a matter of habit. When you have spent your life in the pursuit of saving, saving, investing, investing to ensure you have enough for retirement, don't you see how difficult it is to suddenly do the opposite? I've been retired for twelve years now and still haven't cracked that nut. If you have want for nothing more than you have, why would you need to spend more, and especially "_as fast as you can"_?
> 
> ltr


It wasn't difficult at all for me to cash out all non-guaranteed interest investments and to start spending the principal; we had planned for years what we wanted to do once I retired. Seeing that come to fruition was more joyous to me than any yearly statement listing the pittance that I had made from not touching the money. Mind you, I truly suck at investment decisions, and had enough setbacks to make me wary of the whole process. If others have had 'Buffett-esque' results from their investment strategy, and are making astronomically more money than they could ever spend in their lifetime, I could see how they would want to continue on that path and leave a family trust in their name for many future generations of heirs to enjoy. 

My parent's generation were born in the early 1920's; everything was booming. People believed they would get rich in the stock market. We saw how that turned out; by the time they were teenagers, the world was in a global depression. Finally, they reach the age of 20 where they could go out and make their own living, and BAM, a global war that takes them away for a few more years. Post-war, I could see why they drilled into our heads the importance of saving money; they knew what it was like to "go-without". When an unexpected windfall comes our way, I honour their memory by spending it as fast as I can, and not to go-without. We actually spent it on replacing our eaves-trough, some new furniture, and having a backyard deck built. That helped the local economy, too!


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## Userkare (Nov 17, 2014)

Big Kahuna said:


> The thing is-simply looking at someone's lifestyle from the outside you don't know if they are depriving themselves or if they just don't care-here is an example-if I won 100 million in a lottery tomorrow, I could obviously afford to wear a $50000 wristwatch-would I? Probably not-I have no interest-I might just pick up a $10 watch at Walmart to infuriate those people who know I have 100 million plus.


I hope you bought a lotto ticket, good luck!!!!. At least spring a few more bucks than a $10 Walmart watch; maybe buy a custom hand-made MAGA hat!


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## ian (Jun 18, 2016)

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.


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## james4beach (Nov 15, 2012)

humble_pie 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.



ian said:


> 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.


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## humble_pie (Jun 7, 2009)

james4beach 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
> 
> ... Do any of you do something like this? It's completely unlike the traditional retirement advice.




jas4 sorry i didn't reproduce your entire quote, nor have i looked at your video yet. But i will.

in the meantime i think your complete post is very fascinating & it's right-on-the-money, in the sense that people nowadays want to get highly creative about how they will mix & shape work, play, finances, study across their lifetimes, not to speak of relationships, kids, family. You're onto some excellent ideas imho.

i have a few good examples & they are doing everything upside down. But like the best peach upsidedown cakes, everything is turning out delicious. Even some whipped cream here & there. 

on the whole, the examples are youngish. The oldest is a couple barely into their 50s. 


.


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## Parkuser (Mar 12, 2014)

james4beach said:


> I think I have a slightly better plan...


Well, life is what happens to you while you're busy making other plans. Are you sure you will never have a significant other with other plans? Are you sure there will be no kid(s) you will be responsible for, requiring stability?
Now you are at a peak of your abilities, you experienced only being on a raising part of a curve. You do feel invincible. But pretty soon you will notice a need for stability, and your sight will be going, problems with your back, memory problems, etc.

Recently, I’ve met a couple in their fifties, with grown-up kids, embarking on a remote year. The husband experienced burnout at his hi-tech job. Decided the only way to survive was to quit. They sold their house. They planned to move from place to place every few months and work remotely on freelance jobs. Something like this:
https://remoteyear.com/
Looks amazing. But I wonder how they are doing because their freelance job plans (e.g. travel writing by somebody who has never done it before) looked very iffy.


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## james4beach (Nov 15, 2012)

I completely anticipate having kids and raising a family, and I don't see any reason I won't be able to do that. I'm still talking about working _most_ of my next 50 years.



Parkuser said:


> Now you are at a peak of your abilities, you experienced only being on a raising part of a curve. You do feel invincible. But pretty soon you will notice a need for stability, and your sight will be going, problems with your back, memory problems, etc.


No, I'm past my peak. These days, after having my *** kicked daily at my job, I come home on Friday and then sleep to about noon on Saturday just to recover from the exhaustion of work.

I don't feel invincible. In fact what prompted me to shift in this direction is realizing I'm getting old. Burn out from work, and the health consequences of not ever taking vacations, is far more dangerous. It will accelerate the mental deterioration, physical deterioration, create more back problems, heart & stroke due to stress, etc.

I didn't say I will move from place to place every few months, or live off freelancing or odd jobs. I mean that I will have real career jobs, but with plenty of breaks in between. I believe this is healthier and more sustainable in the long term.

There's also the important matter of a changing economy. On my time scale of 50 years, the economy will change a lot. Entire industries will collapse, and new ones will form. I think one really has to stay on their toes and be dynamic -- constantly changing -- rather than settling into a routine of some particular job.

*Parkuser, to put it another way, the job and career stability you describe does not exist any more*. Every job I've worked at so far has laid off virtually everyone after a few years. Employers don't offer stability or pensions. Industries will not last for 50 years. Diversifying my skill set, which means frequent breaks and retraining, seems like a safer path.

If one settles into a single career path, and becomes married to their employer, then what exactly is that person going to do once they are laid off, as that industry restructures, especially when they have back problems, failing eyesight, memory issues and nothing else they can do? It would be enough to shatter someone's outlook on life. The path you describe... though quite normal 40 years ago, sounds awfully dangerous to me.


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## Parkuser (Mar 12, 2014)

james4beach said:


> ...
> *Parkuser, to put it another way, the job and career stability you describe does not exist any more*. Ever job I've worked at so far has laid off virtually everyone after a few years. Employers don't offer stability or pensions. Industries will not last for 50 years. Diversifying my skill set, which means frequent breaks and retraining, seems like a safer path.
> 
> If one settles into a single career path, and becomes married to their employer, then what exactly is that person going to do once they are laid off, as that industry restructures, especially when they have back problems, failing eyesight, memory issues and nothing else they can do? It would be enough to shatter someone's outlook on life. The path you describe... though quite normal 40 years ago, sounds awfully dangerous to me.


When my kid talks about getting old I find it cute. Sleeping till noon Saturday, this is the proof? Going to bed at 10 pm every day, this would be more like it.

We are talking about professional technical jobs. I am sure things are different now, but it is bizarre to think that in the past one would do the same thing the same way for years. Even in the same position, in the same job, you had to constantly upgrade your skills, because what you were doing kept changing dramatically. That’s my experience. Support jobs disappeared (secretaries, draftswomen, Xerox machine operators, etc.), not professional. Do industries keep disappearing? Well, IBM is what, 70? HP, keeps splitting but around 80. Even Apple certainly 40. Microsoft is getting there.

I have no experience of hopping from job to job (4 job changes over 40 years, less than my kid in 10 years), but while you are getting older, even with retraining and upgraded skills, these hops are becoming more and more difficult. Myself, when hiring, I preferred hiring somebody younger I could mold, rather than an older person settled in his/her ways. When you enter the management track, hopping is even more difficult, because in order to keep your brand up you have to move higher and higher. This is difficult without doing your time.
I am not arguing with you, just suggesting that a career plan based on 40-50 years of incessant change may in practice be untenable, life will mess it up.


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## OrganicRain (Nov 27, 2016)

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.


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## james4beach (Nov 15, 2012)

Parkuser said:


> We are talking about professional technical jobs. I am sure things are different now, but it is bizarre to think that in the past one would do the same thing the same way for years. Even in the same position, in the same job, you had to constantly upgrade your skills, because what you were doing kept changing dramatically.
> 
> I have no experience of hopping from job to job (4 job changes over 40 years, less than my kid in 10 years), but while you are getting older, even with retraining and upgraded skills, these hops are becoming more and more difficult.


I realize it's difficult to re-train or switch jobs. But if you can point me to a good career/industry and employer, that you think can employ me for the majority of my next 50 years, I'm happy to consider it. I need a place where I won't feel like a slave, where I will be intellectually stimulated, with a pension and great benefits. I need the people in my surroundings to be interesting and pleasant. If you know of such a place, I'm all ears.

I've been working in tech and let me tell you, tech (Microsoft, Amazon, Google, etc) are not places that will employ me for 50 years. For one, it's a young man's game. There are way too many software developers around, and the newer methods in computer science are already automating away many of the automation jobs. Most managers are redundant and the managers will be eliminated over time. The staff will shrink over the years. And the cultures are very stressful, constantly pushing employees to work harder and faster. There's a reason they only employ young people.

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. If you go back to the video I posted, you might understand my reasoning. I like the idea of diversifying my skill set, not becoming a super expert in X or a senior manager who specializes in X and can't possibly land any other job.

Will my income suffer as a result? Absolutely! There will be a price to pay, and I'm willing to pay it. There's more to life than just a salary. I refuse to become a salaryman.



> Myself, when hiring, I preferred hiring somebody younger I could mold, rather than an older person settled in his/her ways. When you enter the management track, hopping is even more difficult, because in order to keep your brand up you have to move higher and higher. This is difficult without doing your time.


There are lots of advantages of the traditional track, starting in a field when you're young, and working your way up -- all within the same field. But there are disadvantages too. Our different opinions on which is preferable probably has a lot to do with our personal values, interests, fears, etc.



> I am not arguing with you, just suggesting that a career plan based on 40-50 years of incessant change may in practice be untenable, life will mess it up.


I don't think a career plan that assumes 40-50 years of stability is doable either. For one, such an employer (or a field) has to exist for that long. Secondly, I'd have to be comfortable doing essentially the same thing, with the same kinds of people, for nearly half a century.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> 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


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## hboy54 (Sep 16, 2016)

like_to_retire said:


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


Likely fails the "intellectually stimulating" test.


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## humble_pie (Jun 7, 2009)

Parkuser said:


> I have no experience of hopping from job to job (4 job changes over 40 years, less than my kid in 10 years)




there you have it. Your kid changing jobs more than 4 times within 10 years. This is what jas4beach is writing about.

your stable career pattern of steadily-upward promotions with almost no employer or even job changes across 40 years is a wonderful model. Every congratulation to you. But it's a model that's actually disappeared in our times.

"working" is more what jas4 describes. It requires a lot of ingenuity, a lot of creativity, a lot of flexibility. Most of the under-50s i know have several income irons in the fire. They may have contract jobs w salaries but they're also free-lancing, teaching a course here or there, running a nano-business through the internet. 

the quebec economy is booming. Canadians are moving here in noticeable numbers from other provinces because there are jobs plus affordable housing plus all that lively latin culchah. I don't know if it's a trend but i see a noticeable number of young people going into the trades, or wishing they had attended trade school instead of graduating college with a BA in sociology.

.


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## humble_pie (Jun 7, 2009)

hboy54 said:


> Likely fails the "intellectually stimulating" test.



that it does!

in addition, are civil services still offering full-pension-w-benefits to newbie hires? very doubtful, imho


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## like_to_retire (Oct 9, 2016)

hboy54 said:


> Likely fails the "intellectually stimulating" test.


Not everyone in the government is a clerk. Lots of engineering positions.



humble_pie said:


> ..in addition, are civil services still offering full-pension-w-benefits to newbie hires? very doubtful, imho


The only change I know of was in 2013 when they raised contributions to employees and also raised the official retirement age from 60 to 65.
There is a bill now being considered (C-27) that would allow federally regulated private sector and Crown Corporation employers to offer a TBP pension to their employees, or to convert an existing DB pension plan into a TBP (Target Benefit Plan).

ltr


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## ian (Jun 18, 2016)

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.


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## bgc_fan (Apr 5, 2009)

hboy54 said:


> Likely fails the "intellectually stimulating" test.


How many opportunities are there to manage a small division of 200 people? Or manage $100M+ procurement or infrastructure projects? 

Not everyone is a front line clerk. Just about any sort of capability that private sector has is available to those in the federal government and then some. Or maybe you prefer working on policies that affect the Canadian population on the whole? You don't think that is intellectually stimulating?


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## james4beach (Nov 15, 2012)

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.


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## OhGreatGuru (May 24, 2009)

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.


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## james4beach (Nov 15, 2012)

OhGreatGuru said:


> 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.


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## agent99 (Sep 11, 2013)

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


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## Daniel A. (Mar 20, 2011)

james4beach said:


> 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.


James I think you are coming at it in the wrong direction.

First I have been retired for the past 8 plus years from a company I spent over thirty years with, I have a DB pension no I didn't have to contribute as a matter of fact they would not allow it. Its fully funded and doing fine.
In all the time I spent working for this company the work was stimulating and varied process controls updated in the process, could work outside or inside as I decided each day, very little manual work, six figure income, at times roll was emergency response goes with the job. When I started a high school education was all that was needed by the time I left they wanted college or university with an amazing array of skills. 

If your background is computers look at process controls in the chemical field plenty of work internationally you would never be out of work.

No one can predict the future we all are faced with the same thing when making decisions health is one DNA can help with your personal risks.
I and many others have stressed over the same things you face going forward.

I could not help my kids with a resume when they finished school as I had only really had three jobs in my life and the first being nothing more than a proving ground. Even in the company I worked for as things progressed they stated that to get this or that job one needed to apply with a resume so 25 years in I need to apply with a resume as if they don't already know me what a messed up world we live in.

So where was I yes my daughter she is 26 and has had 4 jobs so far always going forward, she is bright has interpersonal skills that she uses, knows the way politics go is always planing for the future.


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## ian (Jun 18, 2016)

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.


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## cainvest (May 1, 2013)

james4beach said:


> 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.


There are many fields now that'll give you employment for many decades. Sure you might change employers but still be in the same field.
Of course one can't bank on this so you may have to adapt and learn new things, hopefully while you're still young enough to do so.



james4beach said:


> 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.


Not sure I understand the issue with this ... you have to play the cards you're dealt. If you're 60 and had a good job for 40+ years you can likely retire, albeit in bad health.


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## My Own Advisor (Sep 24, 2012)

pwm said:


> 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.


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## Eclectic12 (Oct 20, 2010)

like_to_retire said:


> Userkare said:
> 
> 
> > ... 2. There's something I never understood - why do retired people keep investing money rather than enjoying it?
> ...


AFAICT ... it is less of an addiction and more of force of habit. 

I don't think it will be an issue for me as my dad commented on:
a) those who were taking occasional work as they hadn't planed to save for retirement.
b) his mother whose frugal ways had become so ingrained while raising her kids that when her children had good jobs so that they could give her gifts - she could no longer enjoy what was being given.
c) noticing those who retired slightly ahead of him talking about the hobbies/activities they would take up in retirement who didn't.


That's why part of the $$ go into saving for retirement, part are spent on something that is enjoyed and part is to allocate time to what I want to do in retirement.


Cheers


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... 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 ...


Not me ... but my cousin as well as my university friend's uncle were close to this. They skipped the university part to invent things or be entrepreneurs. They had too many interests to do the same things so they'd switch between project/time off/project.


The one Habitat for Humanity team lead I met would intersperse build trips with working ... sometimes finishing up proposals or contracts as a fraction of the build trip.


Cheers


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## Eclectic12 (Oct 20, 2010)

cainvest said:


> james4beach said:
> 
> 
> > ... 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).
> ...


Bigger question for James ... why is his hypothetical 60 year old who had been "trapped by saving for retirement" described as having "deferral of savings for later years" and presumably investing?

Isn't this an example of someone who "avoided" the trap of the traditional advice?
If he'd been trapped by the traditional advice, shouldn't he have savings/investments instead of "nothing to show for it"?


Or to put it another way - the example seems aimed to have factors that have nothing to do with traditional or non-traditional retirement advice that would clobber any plan.


Cheers


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## Eclectic12 (Oct 20, 2010)

My Own Advisor said:


> Very interesting. I'm doing both right now. [mortgage plus saving for retirement]
> 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.


Or it's going with the hand on was dealt.

For the first mortgage, I knew I would leave the company so when the company had an employee discount plus offered the best mortgage rate - the discount was rolled into paying off the mortgage early as I didn't want to deal with my payments increasing when I left.

For the second mortgage, there was a Heloc that let me buy low in early 2009 then cash in over the next five years to maximise the early payment options. The end result was the mortgage was done in five years. I was making extra payments so the mortgage wouldn't have lasted the term but having the option to maximise each year was a big bonus acceleration.


Cheers


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## ian (Jun 18, 2016)

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.


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## My Own Advisor (Sep 24, 2012)

Eclectic12 said:


> Or it's going with the hand on was dealt.
> 
> For the first mortgage, I knew I would leave the company so when the company had an employee discount plus offered the best mortgage rate - the discount was rolled into paying off the mortgage early as I didn't want to deal with my payments increasing when I left.
> 
> ...


Certainly having the option to make/to maximize mortgage payments is intriguing _and valuable_ but I suspect for many folks (e.g., 30-somethings and 40-somethings) busy raising kids it's a delicate balancing act. I think only saving for retirement vs. only paying down debt falls into the minority. There are benefits of doing both at the same time. Although I don't know for sure, families are probably trying to do both for the most part.

Kids (maybe I should say many millennials because I sound old....in my 40s(!)) are likely paying down consumer debt, student loan debt and likely trying to save a bit where they can. At least hopefully they are doing that but maybe they also feel the latest iPhone is very important as well.


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## ian (Jun 18, 2016)

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.


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> Bigger question for James ... why is his hypothetical 60 year old who had been "trapped by saving for retirement" described as having "deferral of savings for later years" and presumably investing?
> 
> Isn't this an example of someone who "avoided" the trap of the traditional advice?
> If he'd been trapped by the traditional advice, shouldn't he have savings/investments instead of "nothing to show for it"?
> ...


Here's what I'm getting at (and something I fear personally): the hypothetical 60 year old in my example, has dedicated himself to a specific career. Let's say he's one of the best cathode ray tube (CRT) engineers around. He built up expertise, with the rising popularity of the TV industry. Worked hard, consistently, taking minimal vacations all those years, and saving his money for a future retirement.

But by age 60, the CRT industry is dead. His skills have become useless, and he didn't put the time into additional learning or diversification to other fields. My argument is that at age 60, *he doesn't yet have enough money to retire comfortably* (like most people). Or call him 50, if you prefer.

He has savings, yes, but not enough to retire. He still needs to work and needs to earn income, but now that's very difficult. Now he's scrambling to suddenly learn new things at age 50 or 60, but he finds it difficult because _he's never tried adjusting or diversifying before_. And earlier in life, back when he was young and energetic, he deferred things like vacation (time off, leisure) all for these future retirement years.

So he sacrificed a lot (all that leisure time back when he was 30 and 40) and pushed it to the future, taking on more stress and more wear and tear during his prime years, but now his ability to retire in comfort is seriously at risk.

Here's what I think he could have done better... what I'm trying to do, almost literally.

Instead of getting comfortable and complacent in the early years of his CRT career, I think he could have studied and diversified his skills to other aspects of engineering. Maybe gotten some experience in management and other people areas, e.g. sales. Tried a different, related field. Taken some time off when he was young, while he's healthy and able bodied, instead of banking it all for the future.

If he had done that, then yes he might have a smaller nest egg by the time he hits 50 or 60. That's the down side to going "off track". The benefits however are:

+ he's less dependent on an employer throughout his whole working life, because he's gotten used to exercising his savings and hasn't structured his investments to be "for retirement age only". He has more freedom.

+ he has not deferred all these goodies (namely vacation and leisure time) just to old age, but enjoyed it while he's young too. He's had more leisure.

+ he has more diverse skills and interests and is better prepared in case his industry changes dramatically. He has flexibility.

+ he's got other marketable skills to fall back on if he gets tired of doing CRT engineering

+ he's become used to a pattern of learning and changing, a kind of resilience

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.


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## pwm (Jan 19, 2012)

_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.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Here's what I'm getting at (and something I fear personally): the hypothetical 60 year old in my example, has dedicated himself to a specific career. Let's say he's one of the best cathode ray tube (CRT) engineers around. He built up expertise, with the rising popularity of the TV industry. Worked hard, consistently, taking minimal vacations all those years, and saving his money for a future retirement.
> 
> But by age 60, the CRT industry is dead. His skills have become useless, and he didn't put the time into additional learning or diversification to other fields. My argument is that at age 60, *he doesn't yet have enough money to retire comfortably* (like most people) ...


Keeping skills relevant is a valid concern but IMO irrelevant to the "traditional retirement traps" you are talking about.

Where this hypothetical person does not have enough money to retire at age 60 - not only did they skip diversifying their employment skills/income sources, they did not follow traditional retirement advice which also means they avoided the traps you are concerned about.

Recall that your statement said in post #1:


> I see these as unpleasant traps, and unnecessarily.
> Someone with *a large net worth shouldn't have to be so worried about short term cashflow (1)*, nor should they defer joy of leisure and freedom until old age (2).


Where this sixty year old can't handle five years to CPP and OAS because of a small net worth - they clearly fell for different traps.


It's great to broaden out into related risks/factors but this was a response to:


OhGreatGuru said:


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


I don't think your example fits with the original traps.





james4beach said:


> ... If he had done that, then yes he might have a smaller nest egg by the time he hits 50 or 60. That's the down side to going "off track". The benefits however are:
> + he's less dependent on an employer throughout his whole working life, because he's gotten used to exercising his savings and hasn't structured his investments to be "for retirement age only". He has more freedom.


I can understand the part about being marketable - but less nest egg = less non-employer income = more of a problem if the switch over to whatever is currently marketable takes time.

This reads to me to be more of issues around having all ones eggs in the retirement accounts with nothing in savings/taxable accounts and being unwilling to spend before some arbitrary retirement age. Possibly this could be waiting too long to start saving for retirement but again, that's not relevant to the traps under discussion.




> 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.


That's great ... and more power to you, including others who are in your situation.

With it being reported that 39% believe RRSPs are pointless as taxes have to be paid on withdrawal, 57% believe saving for retirement is complicated and 90% having a retirement magic number but no plan to get to that number - I suspect you (and most of CMF regulars) are in the minority.


Cheers


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## CalgaryPotato (Mar 7, 2015)

Very interesting topic. 

Houses & Cars while assets, are very expensive things to own. Even when you discount the original cost, owning these things typically costs thousands of dollars per year. Is it a trap? Maybe, it's definitely something to be aware of, and to avoid owning more of than you need. (not talking about a rental home that has positive cash flow, or a business vehicle)

I think that is true regardless of whether you pay off your mortgage first or after.

I also see a lot of different definitions on what invest first vs. pay mortgage first means. A couple people noted that filling up your RRSP first, and then paying your mortgage off is the best strategy. To be realistic 18% of your salary invested every year, is as much (or more) than the average person will ever achieve. I would not consider that a mortgage first strategy.

As for the point of deferral of enjoyment. I find that ironic, because this forum is full of people who seem to live extreme frugal lives, and often have crazy goals for the amount of money they need to save up for retirement. I wish you all the best at living your healthy lives until 105 but based on my family history, I'm not that optimistic for myself, and I always try to balance enjoying my life now with being prepared for the future. Also I think taking my kids to Disneyland now will be more fun for them, then if I take them when they are in their 50's or 60's. 

I like your idea about working longer, but enjoying your time along the way James... I have a friend who did something similar recently, "retiring" in his very early 40's from his day job, to spend more time with his school aged children, and work on some interests, which he makes some money off of now, and plans to monetize more in the future.

But it's a personality thing, not every adapts as well to change as others. And again for myself, assuming I'm going to be healthy enough to work into my late 60's and beyond isn't a given. Also on the flip side with the child thing, as the sole provider for my family, I can't just leave my health and disability insurance, let alone my salary behind very easily. My friend has a wife who has a decent paying and extremely secure job with all the benefits.


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## My Own Advisor (Sep 24, 2012)

Interesting indeed.

You may also want to consider home-ownership as a forced-savings plan (i.e., you are forced into RE equity based on your borrowing costs). Leveraged investing could be considered something similar.

To CP's points, cars are a very poor investment since there is no, for the most, appreciation opportunity. So, people that buy fancy cars either a) have lots of money to spend or b) don't know they don't have lots of money to spend - and want to pretend.

IMO there are BIG differences between investing first vs. pay mortgage first.


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## ian (Jun 18, 2016)

The buy vs rent decision if often clouded by two issues. The first is the real estate market. We had every intention of buying but instead rented a condo for four years. Why? Real estate in our area was worse than slow. We came out well ahead financially simply by investing our equity in the market, renting for four years, and then buying. Buy when everyone is selling, sell when everyone is buying.

The second is buying the amount or real estate that you need. Don't be tempted to buy big. Better to buy a small property in a higher end neighbourhood/complex than a big home in a new development. 

Depreciable assets are the absolute worst kind of assets. Why on earth float a loan and pay interest on a depreciable asset. You loose twice over.


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## Speculator (May 9, 2018)

I have found as a retiree that life is now about cash flow. I could care less about accumulating assets unless they pay me to own them. BUY what appreciates and RENT/LEASE what depreciates.


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## agent99 (Sep 11, 2013)

Speculator said:


> I have found as a retiree that life is now about cash flow. I could care less about accumulating assets unless they pay me to own them. BUY what appreciates and RENT/LEASE what depreciates.


Being retired, I agree 100% with first part of your post. 

But second part, have some trouble:
- A home appreciates over long term, so presumably we should buy one.
- A car depreciates, so we should lease one? But the leasing cost includes the depreciation and they want you to replace tires, fix scratches etc when returning. 
- A hot water heater depreciates. But it is usually much better bet to buy one than lease one. 

Could go on, but you get the idea. Most rentals and leases include depreciation.


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## like_to_retire (Oct 9, 2016)

agent99 said:


> ..... Most rentals and leases include depreciation.


And don't forget a profit for the owner. No one rents you something for cost. I always figure it's best to own most things rather than rent.

ltr


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## My Own Advisor (Sep 24, 2012)

agent99 said:


> Being retired, I agree 100% with first part of your post.
> 
> But second part, have some trouble:
> - A home appreciates over long term, so presumably we should buy one.
> ...


It's not a black and white issue for sure.


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## cainvest (May 1, 2013)

james4beach said:


> Here's what I'm getting at (and something I fear personally): the hypothetical 60 year old in my example, has dedicated himself to a specific career. Let's say he's one of the best cathode ray tube (CRT) engineers around. He built up expertise, with the rising popularity of the TV industry. Worked hard, consistently, taking minimal vacations all those years, and saving his money for a future retirement.
> 
> But by age 60, the CRT industry is dead. His skills have become useless, and he didn't put the time into additional learning or diversification to other fields. My argument is that at age 60, *he doesn't yet have enough money to retire comfortably* (like most people). Or call him 50, if you prefer.
> 
> He has savings, yes, but not enough to retire.


The above doesn't really add up. An engineer who saved it all for the future can't retire from at 60?
Of course many assumptions here but a professional working hard for 40+ years should be able to retire.
Now if you shift his age to 50, yes, it might be an issue. 




james4beach said:


> + he's less dependent on an employer throughout his whole working life, because he's gotten used to exercising his savings and hasn't structured his investments to be "for retirement age only". He has more freedom.


What exactly is "structured his investments to be for retirement age only". You just mean he won't touch the savings until retirement? Don't really see a problem with this specifically but I believe this is tied in with your next point.



james4beach said:


> + he has not deferred all these goodies (namely vacation and leisure time) just to old age, but enjoyed it while he's young too. He's had more leisure.


Definitely believe you have to live life "now and later" ... strike a good balance between saving for later and living now. I know a few that'll work 7 days a week if they can passing up "fun time" for money, even though they don't need to anymore. 



james4beach said:


> + he has more diverse skills and interests and is better prepared in case his industry changes dramatically. He has flexibility.
> + he's got other marketable skills to fall back on if he gets tired of doing CRT engineering
> + he's become used to a pattern of learning and changing, a kind of resilience


One always needs to watch their industry and adapt which the changes. If you're in a techie field you're likely changing on the fly as new things come out, you are constantly learning. If you see others in close by fields gaining ground you may want to expand your knowledge base to include (some) those skills. The catch is, when are you going to learn it while holding down a job ... that's right, it digs into your leisure time and possibly your savings if you're going to school! 



james4beach said:


> 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.


This is where the balance comes into play and planning a realistic retirement amount to meet your needs. Also, what if those values were 500k vs 1.25M at 65, would you still live for the here and now?


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## ian (Jun 18, 2016)

People change careers. Sometimes within the same employment arrangement-sometimes well outside of it. I did both-several times. The IT industry is full of engineers who are functioning in different roles outside of their professional qualifications. I know of executive sales people with business degrees who completely changed careers. And a lawyer who went into IT sales to name a few. This is becoming more common. Not only that, it is a trend that many younger workers will have to adapt to. The notion of the nature of your employment at 30 could be, and probably will be completely different at 45, and again at 60. I think that you have to manage your financial plan and your retirement plan with this in mind. And it could be a situation of some employment and a great deal of self employment-contracting or otherwise. This is one of the reasons why DC pensions may be much better for some current and future workers.


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## james4beach (Nov 15, 2012)

cainvest said:


> The above doesn't really add up. An engineer who saved it all for the future can't retire from at 60?
> Of course many assumptions here but a professional working hard for 40+ years should be able to retire.


Ah I think I see my mistake in my earlier text. You're right, if someone actually *saved* money all those years, they should be able to retire.



> Definitely believe you have to live life "now and later" ... strike a good balance between saving for later and living now.


I agree, needs some kind of balance. Working full time at "full steam" is not giving me anywhere close to the amount of leisure time I need. Savings are adding up very fast, but life is also passing me by. For example I'm single and don't have the time/energy to meet potential partners. I've heard similar complaints from women friends of mine who work too hard in professional fields.



> This is where the balance comes into play and planning a realistic retirement amount to meet your needs. Also, what if those values were 500k vs 1.25M at 65, would you still live for the here and now?


You're right, it depends on the amounts we're talking about. In my case, I think I have enough savings that I won't be compromising a comfortable retirement by slowing down my pace or taking detours. I've been working for about 20 years now and my savings have added up very fast. The way I see it, I've earned lots of breathing room.

That came at a cost of course. Too much hard work, too much career focus early on. Passing up relationships (e.g. moving away for a new job and having a relationship fall apart). Countless hobbies and interests that I turned my back on, many of which would have been great opportunities for building social circles and enriching my life.

Working in these computer & technology circles has been particularly bad, as my coworkers tend to be extremely serious, analytical people and there tends to be little interest in artistic or social endeavours. In hindsight, I wish I had gone into law. Also very sharp analytical people, but they seem to know how to party, plus there are more women around.

I'm just trying to correct all this before I get past a point of no return. These patterns I'm talking about (over-working, over-saving, very little leisure time) don't seem healthy or conducive to long term success.

Sometimes I think back to things I used to be able to do in my 20s, and it's shocking what I've left behind. I used to produce music almost at a professional level and perform in the theatre. I played on sports teams, wrote poetry, built bicycles, etc.

I've actually heard this complaint voiced by several older engineer as well. Maybe it's a universal complaint from busy professionals. I think I can do something about it... but it will cost money. Thankfully I am frugal and know how to live on a budget.


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## cainvest (May 1, 2013)

james4beach said:


> I'm just trying to correct all this before I get past a point of no return. These patterns I'm talking about (over-working, over-saving, very little leisure time) don't seem healthy or conducive to long term success.


I don't think there is a point of no return providing you "want" to change. I always have at least one or two hobbies on the go changing them out or trying new ones from time to time. Over the years I've built a nice little basket of hobbies/interests that I'll dip into during retirement and I think this is important for people to do as many don't know what to do with themselves after regular work ends. I also adjust my savings goal a little based on what I think I'll be doing in retirement and have a numbers of things to do that are more time and less money dependent to keep my budget intact.


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## cainvest (May 1, 2013)

james4beach said:


> For example I'm single and don't have the time/energy to meet potential partners. I've heard similar complaints from women friends of mine who work too hard in professional fields.


Seems to me you stated a problem in the first sentence and solution in the next! 

P.S. BTW, never fish off the company pier. Seen that go bad sooooooo many times.


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## kcowan (Jul 1, 2010)

james4beach said:


> That came at a cost of course. Too much hard work, too much career focus early on. Passing up relationships (e.g. moving away for a new job and having a relationship fall apart). Countless hobbies and interests that I turned my back on, many of which would have been great opportunities for building social circles and enriching my life...


Step one: Realization and acceptance. Step two: Action?


cainvest said:


> BTW, never fish off the company pier. Seen that go bad sooooooo many times.


There are a few notable exceptions but it is a pretty good general rule, especially in the #metoo era.


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## ian (Jun 18, 2016)

I do not think that this is rocket science. It is simply a matter or prioritizing your life goals. 

Clearly someone who over works, over saves, and has little leisure time is prioritizing those activities ahead of a healthy social and/ or family life and probably all else. That is the long and short of it. Excuses and explanations are fine but I think the results is where the rubber hits the road. The real question is whether you truly want or desire a different path and how much effort, sacrifice, whatever you are prepared to put into the goal.

I have a nephew who is always bemoaning his station in life. He knows that the way to change his life is to change his eating habits, his set of friends, get some training or education so that he can move forward. But he does nothing. He is not willing to invest in these goals or to invest in himself. That tells me he is not really interested in change, just in talking about it.


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## Plugging Along (Jan 3, 2011)

james4beach said:


> I agree, *needs some kind of balance.* Working full time at "full steam" is not giving me anywhere close to the amount of leisure time I need. Savings are adding up very fast, but life is also passing me by. For example I'm single and don't have the time/energy to meet potential partners.
> 
> 
> You're right, it depends on the amounts we're talking about. In my case, I think I have enough savings that I won't be compromising a comfortable retirement by slowing down my pace or taking detours.
> ...


This post shows awareness and is really the crux of what you are getting at. This isn’t about follow tradional advice for retirement. Is about how does one get balance and happinesss their life. The answer is simple, choose the things that bring you the most joy and minimize the things that don’t Much harder to implement though. 

First you have to know what brings you happiness and to what degree. Often people don’t even know or these conflicts. People buy things thinking it will make them happy, without considering what they truly value. If you financially totally secure what would spend your time and money on? 

Why aren’t you doing those things then? If it’s the money, then you have to ask in the big scheme of things does it make a huge difference? My spouse is the spendthrift and the more impulse buyer. He buys things I just shake my head at. I HALF jokingly use the guideline ‘is this cheaper than a divorce?’ Pretty much that is the only thing (other than illness) that will stop us from having a retirement close to what we planned. Everything else may delay it bit, but is part of the journey. I did put my foot down when he tried to get a builder to ‘just add a third floor’ over the summer without plans or anything. That would have caused a divorce, so he stopped. 

My point is, if you are already financially okay and on the right track, then it’s time to make choices that bring you more happiness or time. These are all choices you make. So wherever you are in life, it is a result of the choices you have made thus far.


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## james4beach (Nov 15, 2012)

Thanks Plugging Along for your comments, you and everyone else have given me great feedback and ideas to digest further


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## canew90 (Jul 13, 2016)

james4beach said:


> Traditional investing advice mostly goes like this: start investing as soon as you can, and keep adding to your investments (mostly stocks) throughout your career. Keep your investments isolated in a RRSP/TFSA and don't touch that money until 30+ years later when you eventually retire. 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 creates two traps:
> 
> ...


I disagree. Everyone should learn to save and invest early and continue the process, increasing their savings as their earning grow. The problem which you refer to, IMO arises because many people "Live Above Their Means". Buying a $500k house when they can only afford a $250k house. Spending more than they earn and using credit to make up the difference. There is a happy medium where one can save for their future and enjoy life without going without.


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## Big Kahuna (Apr 30, 2018)

canew90 said:


> I disagree. Everyone should learn to save and invest early and continue the process, increasing their savings as their earning grow. The problem which you refer to, IMO arises because many people "Live Above Their Means". Buying a $500k house when they can only afford a $250k house. Spending more than they earn and using credit to make up the difference. There is a happy medium where one can save for their future and enjoy life without going without.


Having enough money is two-fold: 1. How much money you have and 2. how much money you need. All MSM financial planning stresses accumulation and ignores the need side (which is just as important)-in fact. the sole focus on accumulation tells your subconscious constantly that the more money you can spend the better your life will be-literally running on a treadmill.


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## ian (Jun 18, 2016)

Saving money for retirement has more than one obvious advantage. The second is that it reduces you consumption habits which in turn tends to reduce the amount of funds that you require in retirement. It is somewhat counter intuitive and when I first read it I found myself questioning it. But when I looked at our finances and our retirement spend I have to agree that saving did this to a certain degree. It tempered our spending, focused us on value and away from things that depreciate as soon as you get them home to experiences that we value for an extended period and have made a difference in our lives.


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## james4beach (Nov 15, 2012)

canew90 said:


> The problem which you refer to, IMO arises because many people "Live Above Their Means". Buying a $500k house when they can only afford a $250k house. Spending more than they earn and using credit to make up the difference.


That's a very good point. This coworker of mine who has cashflow problems despite earning a high income is just living above his means. He bought more house than he can afford!



ian said:


> Saving money for retirement has more than one obvious advantage. The second is that it reduces you consumption habits which in turn tends to reduce the amount of funds that you require in retirement.


That is very interesting, and I agree. Really good point!

In my case I am saving towards retirement, and plan to keep growing my savings over the long term. This activity motivates me to keep my consumption in check. I'll also have periods where I take time off work (possibly for years). Managing my consumption and investments are equally important, because the only way I gain the ability to take the leisure time I want is by limiting my annual spending and boosting my savings rate.


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## james4beach (Nov 15, 2012)

Bloomberg article: Why It’s Time to Quit Your Job, Travel the World



> Millions of Americans obsess over their careers and fret about saving, terrified they won’t have enough to ever retire. The advice now being offered by some experts may surprise these worried souls: *Take months or years off from work, travel the world, and enjoy yourself.*
> 
> There’s prudent logic behind a relaxing midcareer break. With longer lives come longer careers and longer retirements—the first so that you can afford the second. But a 40-year career, ending at age 60 or 65, is a very different prospect from a 50-year career ending at 70 or 75.


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## Big Kahuna (Apr 30, 2018)

I have a question for everybody: How much money is enough? Obviously if you have two people-one has a 100 million dollars and one has a billion dollars-just knowing those facts does not tell you which person has the higher standard of living-so the question remains-how much is enough?


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## OnlyMyOpinion (Sep 1, 2013)

Interesting read, and interesting subtitle:_ "Experts say career-obsessed workers need more breaks—and financial firms are here to help._
I'd still choose early retirement over 50 years of working with a 2 year sabbatical along the way. 

_“It’s just too grueling. We have to take breaks.”_ It seems to me that these folks must have life-work imbalance. If you are working towards burnout, you need to examine your priorities. Everyone gets vacation time 2, 3, even 4 weeks. Everyone has a day or two off every seven.

The article example blew me away: _the company estimates a 32-year-old who earns $250,000 a year, with $100,000 saved and a 20 percent savings rate, can comfortably afford a two-year trip costing $3,000 a month... Those two years of lost income—and the subsequent loss of years of compounding gains on those savings—definitely comes with a price. Wealthfront estimates this 24-month, $72,000 trip ultimately would reduce this hypothetical client’s net worth at age 65 by $1.1 million, from $8.2 million to $7.1 million. That’s still more than enough to cover her estimated needs in retirement, however. _ 

Pretty much a typical 32-year old I guess. Only $7.1MM, yes I'd say that should be enough. Remind me again why they need to work till 70?
As much as selling people that they need more money invested to be able to retire, selling a majority of people that they are going to live to be 100 is disingenuous.

My conclusion is that financial firms are out there now trying to carve out a new niche/product,"your planned sabbatical" to sell you - for a fee.


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## OnlyMyOpinion (Sep 1, 2013)

Meanwhile, our comrades in RUSSIA are protesting a move to raise the government pension age from the current 60 to 65 for men, and from 55 to 63 for women. They figure te move will cost a person $16,000 in lost pension. Given that the average life expectancy is 71, I can see why they'd prefer to retire earlier. 
https://ca.finance.yahoo.com/news/tens-thousands-russians-protest-retirement-135731218.html 

Now as we were sayiing, is that $7.1MM going to be enough in America...


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## cainvest (May 1, 2013)

lol, so this article is targeting the top 1%? Of course if you don't get the same level of job back when the trip is over you're pretty much screwed.


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## Big Kahuna (Apr 30, 2018)

7.1 million USD is a new record for the highest amount I have seen the MSM claim you need to retire-the previous record was 6 mill. According to this global rich site (who knows how accurate this thing is)-99.978% of the world's population does not have 7.1 million USD-so no retirement for them. http://www.globalrichlist.com/wealth


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## james4beach (Nov 15, 2012)

Yes I was also shocked to see numbers like that. So disconnected from reality (unless of course there is very high inflation).


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## OnlyMyOpinion (Sep 1, 2013)

James, to your OP. I think all a person can do is live within their means, save some manageable targeted % amount for retirement - which may have vary as other needs come & go - and manage their work-life balance. If things become untenable, there is only person who can change them.
There is not much point in comparing generations or even other peers.

I'm a big fan of the adage: There is no point complaining or worrying about things you can't change, or about things you can change (work to change them rather than complain).


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## james4beach (Nov 15, 2012)

I agree with that, OnlyMyOpinion.

I think what brought me to write the OP was this observation that seemingly wealthy people (with high net worths) seem to be stuck working excessively hard and don't have the freedom in life that you'd think would come with large wealth. In particular I'm thinking of some of my coworkers who have high incomes and large savings, yet who still appear to be slaves to their employer. They don't even have much excess cashflow. I was trying to understand what's happening there. Is it as simple as living beyond their means?


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## Spudd (Oct 11, 2011)

If they have high savings, they aren't living beyond their means. 

Financial media tend to push the "you need 5+M to retire" narrative because the more AUM the people sponsoring their articles have, the more money they make. The financial advisors of the world don't want people to retire as soon as they have the bare minimum, that would mean less commissions for them. 

A lot of people drink the kool-aid fed to them by the financial media without applying critical thinking to it. 

Another factor for your current co-workers is they are American, and health care is a huge issue there. I sometimes go to an American early retirement forum, and the folks there talk about budgeting 15-20k per year for health insurance. So you need a higher nest egg to be able to afford that. Of course currently, if your income is lower, you can get subsidized insurance via Obamacare, but people are concerned that will go away.


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## humble_pie (Jun 7, 2009)

james4beach said:


> In particular I'm thinking of some of my coworkers who have high incomes and large savings, yet who still appear to be slaves to their employer. They don't even have much excess cashflow. I was trying to understand what's happening there. Is it as simple as living beyond their means?



but if they have "large savings" after years of "high income," isn't it reasonable that they would not have "excess cashflow?" according to the script above, what they've been doing with the high income is savings & investing a good part of it. How is that such a bad thing, per se.

they might not necessarily feel they are "slaves to their employer." 

turning now to the question of rolling sabbaticals, a visible problem is that north american business isn't geared for these. A party who drops out of the corporate rat race for a few years - for whatever reason - will have a hard time returning to the same field, let alone the same salary level.

an evolved canadian employer such as the TD will grant an official leave of absence for up to one year, last i heard. I don't know the fine print, i don't know if employee has to file a valid reason such as extended paternity leave; but i'd be surprised if employee is encouraged to file about his reasons for extended leave anything like, _Just want to Goof Off for a Year, Ta!_

beyond a year i don't believe the TD will commit to finding a similar job at the same pay scale. Nor will any other employer.

no one understands this better than working mothers. It is extraordinarily difficult to handle family obligations successfully while building a demanding career. I've known women who have sandwiched in leaves of absence for reasons having to do with children - more children, teenage children, etc - but nearly always when they return to full-time employment after multi-year absences they find that opportunities are greatly reduced.

this shouldn't mean that sabbaticals cannot or should not be undertaken. What it does mean is a revolutionary way of re-working the entire work/career matrix in north american business. Which is probably a good thing, but good luck with the sabbatical search in the short term.


.


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## james4beach (Nov 15, 2012)

I agree, whether it's a mother, father, or anyone else who takes time off for other pursuits (e.g. having a baby, caring for elderly relatives) the corporate world is not geared towards that.

On the flip side though, the corporate world is also no longer geared towards _continuous_ employment. There may be some firms that still offer long term jobs, but it's becoming rare. Instead if a worker wants the experience of "continuous employment" they will have to constantly jump from one company to the next, jump cities, or even countries -- as I had to.

Staying continuously employed is much harder & more stressful in the modern economy. Most of us can't just find a job and hang around there for 20 years. Speaking for myself, I'm going to embrace the non-continuity.


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## ian (Jun 18, 2016)

The high consumer debt numbers would suggest that very few people can afford to take a month off, let alone five, six, or more. We took five months in our late twenties to travel. No children, no debt. We have always traveled. But.....it was a choice. We did not own new cars, our children did not get the latest fad items, and we did not have a house full of new furniture.


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## OnlyMyOpinion (Sep 1, 2013)

Rob Carrick in the Globe today (paywall):
*People are vastly more interested in paying down debt than investing. Is it the right approach?*

_A recent survey by Manulife Bank asked 2,003 people this question: “If you were given an extra $1,000 a month, what would you be most likely to use it for?” 
Fifty-two per cent of survey participants said paying off debt or a mortgage, while 30 per cent picked saving. Travelling was the next most popular choice at 22 per cent, followed by investing at 16 per cent.

Here’s a suggestion if you somehow luck into an extra $1,000 per week -- $450 to debt repayment and $450 to investments. The other $100 goes to a travel fund. You gotta live, right?_


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## cainvest (May 1, 2013)

OnlyMyOpinion said:


> Fifty-two per cent of survey participants said paying off debt or a mortgage, while 30 per cent picked saving.


They should have broken out the percentage of paying debt vs mortgage.


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## Longtimeago (Aug 8, 2018)

james4beach said:


> Traditional investing advice mostly goes like this: start investing as soon as you can, and keep adding to your investments (mostly stocks) throughout your career. Keep your investments isolated in a RRSP/TFSA and don't touch that money until 30+ years later when you eventually retire. 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 creates two traps:
> 
> ...


I never understand where people get these 'traditional' ideas from. Who decides what is 'traditional' advice? Someone who 'traditionally' passes down through the generations, the lesson that the best way to live life is to get on government welfare payments and stay there, obviously has a very different idea of what their 'traditional' investment advice is. Whenever I hear the word 'traditional' I tend to think 'avoid'. ie. the world is flat was a 'traditional' belief too.

So in regards to escaping these 'traps' james4beach, I'd say stop believing in 'traditions' and start thinking for yourself (no insult intended, just a way of phrasing). Most people do think in 'traditional' ways even when contemplating early retirement. They still think of 'retiring'.

I have an acquaintance who is a Psychologist. Not many years after graduating and setting up her own practice, she went to a 3 day work week, bought a home a 5 minute walk from her office and took out some large insurance policies for life, loss of income, etc. She has no intention (now in her 50s) of ever 'retiring'. She fully expects to at some point be unable to continue to work for whatever reason and at that point her insurance will kick in. That's a pretty non-traditional approach to life. Most people posting here are pretty traditional as shown by their even using the word retire.

I never thought of retiring, I just started asking myself how I could live in the world we live in, without having to work for a living. I haven't retired from life, each year is just another chapter in my life. Does someone really 'retire' if they stop having to work for a living? If you were born with the proverbial 'silver spoon' in your mouth and never even had to work to start with, how then could you ever retire?

I do agree with you that 'traditonal' investment advice etc. has traps associated with it, but I think you need to move even further back to be able to see the forest rather than just the trees.


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## lonewolf :) (Sep 13, 2016)

You cant buy what is popular & do well. If everyone is saying do x with your money it is not going to work


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## ian (Jun 18, 2016)

There needs to be more focus. My data is six years old but as a senior manager I regularly spoke to our teams about taking full advantage of the the pension plans (there were two based on age, service), and on taking an active part on managing funds on an ongoing basis. This is what surprised me...

-how few people in the DB plan actually took advantage of a matching DB enhancement RSP plan that matched the 3 percent contributions with 1.5 from the employer. This is over and above a DB plan that did NOT require ee deductions-entirely company funded

-the percentage of ees that either did not participate in the DC plan or did not nvest the full 5 percent to get the company 5 percent match. Manulife told us that this was a universal problem with huge amounts of money left on the table by ee's of all their client companies not taking advantage.

-the abysmal rate of inspection or re-allocation by employees of monies allocated to the various DC investment options. Very few ee's ever revisited this once after making their initial allocations when the first signed up to the DC plan.

-the poor turnout rate when the company hosted retirement planning/investment seminars for employees and explained every year why an employee would be foolish not to participate to the fullest extent possible

This is fairly basic stuff. It makes me wonder about the rest of the planning that typically goes into retirement planning. The only ones who seemed to get it were those in their late 40's. 

I doubt very much whether these stats have changed over the past few years.


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## Eclectic12 (Oct 20, 2010)

Big Kahuna said:


> 7.1 million USD is a new record for the highest amount I have seen the MSM claim you need to retire-the previous record was 6 mill ...


Reminds me of the first bank retirement calculator I used in the '90s ... $30K before taxes income was covering everything with some savings yet the calculator estimated $6.5 million was needed for retirement.

For some reason - I thought the numbers were out of line. :rolleyes2:




james4beach said:


> Yes I was also shocked to see numbers like that. So disconnected from reality (unless of course there is very high inflation).


With the numbers seemingly so far out of line, I'm not sure why how many should be taking the expert advice. Especially when the relative who did similar had severance to pay for the time off but ended up behind as the time to find a similar job after the break was something between double to triple the time off.


Cheers


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## Eclectic12 (Oct 20, 2010)

Spudd said:


> james4beach said:
> 
> 
> > ... I think what brought me to write the OP was this observation that seemingly wealthy people (with high net worths) seem to be stuck working excessively hard and don't have the freedom in life that you'd think would come with large wealth. In particular I'm thinking of some of my coworkers who have high incomes and large savings, yet who still appear to be slaves to their employer. They don't even have much excess cashflow ... Is it as simple as living beyond their means?
> ...


+1 ... the co-workers I think of that are living beyond their means are on a merry go round of opening new low interest CCs to keep the debt owing at a lower interest rates. They clearly do not have savings as simple things like car repairs increase their debt.




james4beach said:


> ... I was trying to understand what's happening there.


From what I have observed, there is a range of issues ... starting with a lack of financial literacy with the belief that only the financial experts can help out.


Cheers


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## Eclectic12 (Oct 20, 2010)

ian said:


> There needs to be more focus. My data is six years old but as a senior manager I regularly spoke to our teams about taking full advantage of the the pension plans (there were two based on age, service), and on taking an active part on managing funds on an ongoing basis. This is what surprised me ... I doubt very much whether these stats have changed over the past few years.


Not much has changed AFAICT. 

Canadian sources report that the employer matching $$ left in the company bank accounts is in the billions. US sources report similar where in one study, the change that increased participation to get the matching was automatic enrollment where the employee had to do something to opt out.


Part of the problem with younger folks seems to be the idea that retirement is so far away, there is lots of time to learn/make plans in the future. Pointing out that starting early gives more time for learning, makes recovering from mistakes easier and may be cheaper fell on deaf ears.


Interesting that those in their late '40's got it ... so far, I haven't noticed many improvements based on age. 


Cheers


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## My Own Advisor (Sep 24, 2012)

Really though, for 99% of the 20-somethings out there - they think they'll live forever. Why do they want to listen to people older than them anyhow?


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## ian (Jun 18, 2016)

It is not just young people. I have two SIL's, one still working in her 70's, the other one in her early sixties still working and still wearing out her credit cards. Neither has a dime saved for retirement. It is the 'I can't afford it but I am going to buy it anyway' crowd. Probably one of the reasons why Canadian bank stock performs so well.


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## hboy54 (Sep 16, 2016)

ian said:


> It is not just young people. I have two SIL's, one still working in her 70's, the other one in her early sixties still working and still wearing out her credit cards. Neither has a dime saved for retirement. It is the 'I can't afford it but I am going to buy it anyway' crowd. Probably one of the reasons why Canadian bank stock performs so well.


The thing is, I am no longer convinced that they don't have the right idea. People like me without great careers or much by way of lifetime employment earnings can run their finances to build wealth, and when they get wealthy become the scorned rich by people like sags, even though I carry 3 or 5 other Canadians on my shoulders. One or two of them might even be sitting on 2 million dollars of never to be taxed RE gains in Vancouver, all the while collecting OAS and GIS. Yet the popular narrative is that I am the big bad rich guy, when the truth is for 3/4s of Canadians not encumbered by excessive disability, their poor financial circumstances are mostly a choice.


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## ian (Jun 18, 2016)

We know of a couple in Vancouver who are doing exactly that. And believe me, they are not exactly painting the town red, travelling,or spending their time shopping with their OAS and GIS. 

This is purely by choice. They don't want to sell their house and land because they want to leave something to their dear son. So they continue to live a life in retirement that is of their own making. 

There will always be people like this. But that is no reason not to have social safety nets that cover the majority of situations.


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## peterk (May 16, 2010)

ian said:


> There will always be people like this. But that is no reason not to have social safety nets that cover the majority of situations.


Safety *net* is the right word.

A safety net should be small. It keeps you from the hitting the ground hard and dying, and lets you walk out easily, to the ground level. A large safety net catches a bunch of people who all flail around on top of each other, caught in the ropes. It's also supposed to be a safety _net_, not a safety trampoline (OAS, corporate bailouts, etc.). Once you get out, you're on the ground, and you might have a lot of ladders to climb to get back up to where you were.


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## My Own Advisor (Sep 24, 2012)

ian said:


> It is not just young people. I have two SIL's, one still working in her 70's, the other one in her early sixties still working and still wearing out her credit cards. Neither has a dime saved for retirement. It is the 'I can't afford it but I am going to buy it anyway' crowd. Probably one of the reasons why Canadian bank stock performs so well.


Geez....and you're probably right ian - more big bank profits announced this week.


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## james4beach (Nov 15, 2012)

Very few of my coworkers (mostly in their 30s) invest at all. For the home "owners", this makes sense though. They spent all their money on a house and have a huge mortgage that will take a long time to pay off. These people are not in a position to invest anyway and I think they're prioritizing paying off the mortgage. From what I can tell, excess cashflow all goes to kids & mortgage & home maintenance.

But there are also some of these coworkers who have large cash balances sitting around, and I'm surprised they aren't at least putting the money into a balanced fund or something.


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## ian (Jun 18, 2016)

Just found out that my dopey SIL and husband went with a reverse mortage. Probably to pay off consumer debt. So they can run it up again. Only this time they are just about fully retired and have little employment income. I can see the end of this story in the tea leaves now.

In any event, I did some research on reverse mortgages. Apart from all the pros and cons, what really surprised me was the YoY growth. Almost 30 percent. The wags put it down to boomers retiring with no savings or with piles of consumer debt, mortgages, or overextended HELOCS.


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## diharv (Apr 19, 2011)

ian said:


> Just found out that my dopey SIL and husband went with a reverse mortage. Probably to pay off consumer debt. So they can run it up again. Only this time they are just about fully retired and have little employment income. I can see the end of this story in the tea leaves now.
> 
> In any event, I did some research on reverse mortgages. Apart from all the pros and cons, what really surprised me was the YoY growth. Almost 30 percent. The wags put it down to boomers retiring with no savings or with piles of consumer debt, mortgages, or overextended HELOCS.


Are the tea leaves saying that you will be asked to help bail them out ?


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## AltaRed (Jun 8, 2009)

ian said:


> In any event, I did some research on reverse mortgages. Apart from all the pros and cons, what really surprised me was the YoY growth. Almost 30 percent. The wags put it down to boomers retiring with no savings or with piles of consumer debt, mortgages, or overextended HELOCS.


This is, indeed, a worrisome trend and does not bode well 10-20 years from now. What isn't said in much of the material is the trend of boomers going into debt themselves to help their millenial children. The bank of mom and dad is becoming more prevalent for whatever reasons.


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## ian (Jun 18, 2016)

The tea leaves may suggest a bail out but it will not come from our direction. 

We have no intention of bailing them out. For them it would simply be a reset and they would be in the same position in a few years. It is akin to a bad movie.

You can't fix stupid.


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