Three Reasons Why I Might Be Poor When I Retire

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(1) I Really Don’t Know How Much I Will Need

>> Baz Luhrmann said it best in the song Everybody’s Free (To Wear Sunscreen)

Don’t expect anyone else to support you. Maybe you have a trust fund, maybe you’ll have a wealthy spouse; but you never know when either one might run out.

I contribute periodically to my RRSP via automatic monthly withdrawals out of my bank account. At my age, it’s only been in the last few years that I have been doing this because “it’s better than nothing”. Currently, as I am building up my offline and online businesses .. I still feel that I am at the stage where, as I was an employee .. it’s like I’m living ‘paycheque to paycheque’. Whenever I get big hits of cash or accounts receivable collections are good .. there always seems to be equally hits of unpaid bills or expenditures that needs to be paid, or reasons to just toss extra payments in hopes to reduce my debts.

I pretty much know that my retirement will not end up as I originally dreamed (to be filthy rich and famous when I retire) .. because I started late. But with what I do contribute – will it be enough so I can at least eat and live? I really do not know because I haven’t taken the time to really do a pro-forma budget of what my wife and I will need when we retire. I should be asking myself these three questions:

* How much do we need to live comfortably in our retirement years every year?
* How long do we expect to live after we retire and will we be healthy?
* Once we stop working in my retirement .. will there be enough funds to sustain us?

We have taken the initial steps of recognizing that something must be done, and now have a financial advisor. Currently, our plans are trying to reduce debt and increase after-tax cash flows .. while contributing in a way where we both end up at the same place financially, in our retirement. Once we figure out how much we really need .. we will know if it’s going to be a ‘comfortable’ retirement or a ‘frugal’ retirement.

In the meantime, we are striving to maintain the minimum and look for opportunities to increase our current annual contributions and reduce our current debt.

(2) I’ve Underestimated The Power Of Future Money Growth

See my previous post: The Power of Compounding Interest. This is all OLD NEWS to me, because I pretty much “knew” the power of compounding interest and investing way back during my University days. It was a good time to start to invest in my retirement early! I had “Book Smarts”!

Unfortunately, I didn’t have “Street Smarts” because over the years when I needed money .. my retirement fund was always the second last available source for me to dip into – to help me pay my own way. After that it started to affect me tax-wise (bumping up my gross income into a higher tax bracket more that I was able to reduce it by re-contributing back to my plan). I then began to invest in my non-registered plan and have a “President’s Account” at TD Waterhouse – unfortunately, I take too many risks (but that’s another story!).

I wish I had the balls to leave my contributions from my early days and not cash them out early. In my middle days, I wish I just kept investing in mutual funds in a registered plan rather than the non-registered plan .. so I didn’t have easy access to it. Spreadsheet calculations (like the one I linked above) and other software programs pretty much prove the power of compound interest.

To seriously invest in our retirement and to be able to have a big chunk when in our “retirement days” .. requires much better cash management on our part – in the “now and current” days .. meaning reducing debt, paying off bills, earning more income so there is more to contribute each year to our plans while there is time for money to grow.

(3) Tomorrow Never Comes

It’s hard to put money away for your retirement … especially when you have house bills to pay or your phone is going to be disconnected or there are other mundane reasons that you have to raise cash in order to NOT ruin your credit rating. The phone company does not like the excuse that you were unable to pay your phone bill this month .. because you were investing in your retirement.

Believe me .. there are a gajillion reasons why we might not be contributing more to our RRSP or towards reducing our debt and creating anti-cash flows .. like new flooring for example.

But, we made the decision and hope to recover. But .. procastination is a powerful enemy. It’s easy to say that we will forfeit one year’s contributions for new laminate flooring and double up next year to get back on schedule .. but when you are living practically paycheque to paycheque .. what if we can’t do that? Worse yet .. we also need new carpeting .. what if one of our cars break down and we need to buy another one? We missed one year, what’s another year to wait? We can just triple up in the following year, when we are able!

Well, tomorrow never comes and we decided that we are just ‘writing it off’ today, being the accountant I am. We never took a real vacation in 2005 and we also reduced our retirement contributions to have new flooring. There will be no doubling up – but, just getting back on schedule – back on plan .. which is to consciously remember that we want to be able to HAVE a retirement .. and that we are the only ones that can orchestrate how well it could be. We must contribute something every year, as much as we can.

As suggested in one article .. that 43% of us won’t have enough in our retirement .. we hope we are in that other 57% of the population.


[…] Three Reasons Why I Might Be Poor When I Retire by HART (1 800-HART) […]

Jersey Girl says:

It’s hard to look 20 years ahead and plan for it sometimes…luckily my husband is a 20 year ahead thinker…

MamaDuck says:

I think we do the best we can, obviously we can’t see into the future and know exactly what we will need, but I think it’ll work out. Our list is up if you’d like to look… have a great day!

Hi Everybody! I was adding the ‘subscribe to comments’ plugin – in case anybody wants to follow responses .. now you can.

Jersey Girl – you are lucky to have a 20 year ahead thinker – unless you are 10 years from retirement! I must say .. thanks for shortening Darren’s 2 day list of a gajillion entries to your favorites! I’ll start with your list second 🙂

MamaDuck & Josh Maher .. I’m on my way to read your lists FIRST 🙂

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[…] NOTE: This is part of Darren Rowse’s Problogger Group Writing Project with the theme “HOW TO”. Participants may be eligible to earn or win a random prize graciously provided by his readers. This is the second group writing project that I have entered .. (the first for the theme “LISTS” called Three Reasons Why I Might Be Poor When I Retire over on my And You Retire Blog. If you know “HOW TO” do something special or unique or anything really (just know how to write in your blog!) .. check out Problogger […]

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