Retirement is a touchy subject. Like, genuinely, deeply touchy.
Anytime it’s brought up in polite company (thanks to me, the bull in the conversational china shop. I don’t know why I keep getting invited to things, you all should know better by now) there are a few classic reactions.
The most frequent one?
“I’m never going to retire.”
Seriously, I have heard this from literally everyone who has ever spoken to me about money, in various degrees of joking tones.
There are all sorts of underlying things at play here, because it’s never just about not retiring. It can be pessimism about the future, it can be fear of not saving enough, it can be disappointment in how the market has treated you, it can be a genuine ‘I love my job’ or it can be about a million other things.
But can I just say what I want to say every single time this comes up?
You are almost definitely going to retire.
Yes, fellow millennials, you too.
You need to plan for it, no matter what you believe about the future of work or building a career you don’t have to retire from. You especially need to plan for it if your beliefs skew more towards the I’m-never-going-to-be-able-to-afford-it side of things.
Maybe you’ll do it later – much later, even – than your parents did, and the chances are good that unless you work for a government, you’ll be doing it without a pension.
But I find it very hard to believe that you and I and all our friends are going to work until we literally die on the job. When you really think about that, it seems crazy. Especially because hi, your health may have seriously different ideas about that plan.
This might be just as crazy, but I plan on retiring someday. Maybe I’ll be over 70, but dammit, I’m going to retire. And here’s what I’m doing now to make that happen (someday.)
I promise it’s not rocket science.
Putting money aside regularly
I save money, every month, and it’s totally automated. Every time I get paid, money just magically disappears into my Wealthsimple account.
If you’re looking to figure out how much you should be putting aside every month, the rule I go by is to aim for 10% of your salary (yes, 10% of your pre-tax income – that was a hard one for me to hear if we’re being perfectly honest.)
Factoring it into other big life decisions
There are far too many major life choices that happen in the first decade of being an adult. You choose post-secondary education, you choose your first few jobs, the city you’re going to live in, romantic partners, whether or not to have a pet, and the list just keeps going.
Seriously. It’s a lot.
But every time I’ve made a big decision, even if it wasn’t at the front of my mind, my retirement savings factored into it (which sounds like just about the most boring thing ever, again if I’m being really honest. Seriously do not know why people still invite me to parties.)
It’s not like I’m sitting there thinking about whether or not my new apartment is going to ruin my life 45 years from now, but I am calculating my budget based on the assumption that I’m always saving something for retirement. Since that’s a given, every other decision has to shift to accommodate that.
The same goes for all future decisions, including buying a house someday. If 10% of your income is locked away, with no possibility of being touched for anything other than retirement, you need to buy a house you can afford on the remaining 90%.
Be nice to your future self, and keep them in mind when you make these kinds of choices.
Not leaving it in a savings account
They oh-so-wisely reminded me that leaving your money in a savings account is a guaranteed way to lose money.
I know what you’re thinking – isn’t the stock market supposed to be the risky bet?
Think about this. Most savings accounts will pay you somewhere in the neighbourhood of 1% interest over the long term, if you disregard promotional rates that don’t last. Inflation in most years hovers around 2%.
So every year that you keep your money in a savings account, it’s losing about 1% in purchasing power. What does that really mean?
*cue jazz hands, they make finance stuff way more fun*
Let’s say that 30 years ago, in 1986, you had $100. (I definitely didn’t, because I wasn’t alive yet, but just go with it.) Thanks to inflation, by 2016 you’d need $197.07 to buy the exact same things that $100 would have bought you back in the 80s.
If you put that $100 in a savings account earning 1% of interest for that time, you’d have… $134.78.
You lost $62.29 in buying power.
But if you had invested that money, and gotten the average market returns over the exact same 30-year period, you’d have $447.00. And yes, some of the years in between, you would have lost money. But overall, if you had kept your money in the market, you came out ahead – because you had a chance to.
That’s why I invest my money, even if it took me way too long to get started. It’s also why I’m a big fan of Wealthsimple, and buying the market as a whole – not picking stocks. Also, given the sheer number of investment books I haven’t read… I just don’t care enough to pick stocks. Luckily, I can still invest – thanks, roboadvisors!
At the end of the day, if you do these three things – put money aside regularly, factor “retire someday” into your other life choices, and invest your money – you will retire.
Yes, even though the media is all about that doom-and-gloom life when it comes to talking about retirement for millennials.
Ignore the media. Plan to take care of future you, and save your future employer the hassle of finding you keeled over at your desk. I hear the paperwork is just horrendous.
Are you planning to retire someday? Or do you think that retirement is an outdated concept or unattainable? I’d love to hear from both sides of the fence on this one! (Especially from my incredible early-retirement friends!)
PS. If you want to start investing, you can get your first $10,000 managed fo’ free with Wealthsimple.