Wednesday, February 13, 2013

Saving for Retirement

I just read an article on the Out of your Rut Blog. It talked about whether or not people could save $1M for retirement and if it will be enough. Saving for retirement covers some 40 to 45 years (if you retire at 65), less if you retire earlier.

It is also rather interesting to note that Canada's first pensions paid were at age 70. The current OAS is at age 65, but due to move to 67 in a number of years. A lot of civil servants have pension beginning at age 55.

One big item that no one seems to talk about is that stuff happens. This is not all bad. Yes, one thing is loss of a job, but you could also receive money you had not expected to receive.

Also, current return rates will not remain. Since I have been an investor, interest rates have been north of 19% and south of 1%. This is a massive change. The stock market went nowhere in the 1970's. It was on tear between 1982 and 1999 and since 2000 as done very little.

I would suggest that if you are young and looking forward to retirement, perhaps you are in the wrong job or career. To expect to spend half your adult life in retirement involves a huge amount of savings when people are working. I do not expect that most people will do this.

If you want to retire at age 55, you then expect to work for 30 to 35 years and retire for 25 years or maybe a lot longer. Life expectancy is 79 for males and 83 for females. See Stats Canada. Do not forget, these are averages, so only half the people are dead at 81 years, but half are still alive. However, there are more and more people living until 100. (That means spending some 45 years in retirement.)

If you look at life expectancy at age 65, then it is 85. That is, if you live until 65, you could live for another 20 years. It is a little less for men (83) and a little more for females (86). See CBC article.

If anyone is wondering why pension plans are underwater, need look no further than the increase in life expectancy (and the drop in retirement age from 65 to 55). Pension plans were not set up for people to be on pension for the same length of time as they contributed to a pension. Of course, this is not the only reason lots of pension plans are underwater, but it is a big problem.

If you want to live long and well see CBC article with advise from Heart and Stroke Foundation. Basically, if you do not eat a healthy diet and do not exercise, you will spend the last 10 years of life sick and disabled.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.


  1. Thanks for sharing! I have been trying to save for retirement, and it is getting closer and closer. I decided that in addition to saving, I am going to try to sell my annuity payment. I hope to have some luck in the near future!

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