Vlog Episode Two
According to the latest census data, 65% of Canadians say they are saving for retirement.
That’s good right? But the same census showed that average the rate of savings is only 4.6% of household income.
The average household income in Canada is $70,336. So that means we are saving just $3,235.46 per year.
Now most of us are pretty conservative with our investors.
We stick with medium and low risk mutual funds, bonds and so called “Blue Chip” stocks, those are the world’s biggest companies with the longest and most stable track records. After we consider things like inflation, taxes and fees most of our investment portfolios are giving us a real rate of return somewhere in the 3% range.
So if you’re an average Canadian and you invest $3235 per year and get a 3% return in 40 years you’ll have amassed a Grant-Total of just $215,156.
Can you retire on that?
Is that sustainable?
I can hear you already – “But we can’t afford more right now”. “I have a pension so I’ll be okay”. “What about the government programs like CPP? Won’t they support me?” “Maybe we can increase our savings once the kids are grown up”.
Those are all valid points and one of these days I intend to address them all. For now, if you have a company pension I just of one word for you – “Nortel”. And CPP is great but it won’t be enough, you still need to supplement it with your own savings.
But let’s do the math on that last one.
What if you stuck with the average savings for 20 years while you were raising your family and then doubled or even tripled your it for the next 20 years?
Well in that case, if you double your savings you would end up with $260,777, tripled – about $356,000.
Better, but still not really enough.
We clearly need a different strategy. One that starts with taking a more wholistic approach to things like lifestyle goals, takes into consideration your age and stage, and most importantly your debt ratios.
So let me ask you one more question.
If I could show you a way to sustainably grow your savings for the future – without significantly changing your lifestyle now – would that be a conversation worth having?
Write to me in the comments below or send an email at the address on your screen and let’s talk.