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  1. #1
    insert random title here Randomnity's Avatar
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    Default Retirement savings

    Ok, so it's pretty much a given that if you're somewhat young now, your retirement will probably have to be mostly or entirely self-funded and is likely to be later than 65, too.

    What are your thoughts on:

    1) percent of income to save (well obviously more is better and it's easier for higher earners to save a higher %...but what's your own goal or actual saving %?)

    2) starting retirement savings vs. paying off student loans (> min payments) - which should come first?

    3) what's your preferred vehicle(s) for your savings? Especially Canadian options, though a lot of things are similar.

    4) What about shorter-term investing (e.g. starting a business, stock market, real estate, etc), or aiming for an early retirement? How does this balance with retirement savings?

    5) Do you think you're on a good track for retirement? Late retirement? Early retirement?

    6) Any comments or recommendations?

    -----

    I'm aware there's tons of professional and nonprofessional advice out there, which I can (and do) look at every so often. But I'm interested in the opinions of people here.
    -end of thread-

  2. #2
    Senior Member SensEye's Avatar
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    I guess I don't really qualify as "people here", but what the heck, a random drive by posting seems in order.


    1) percent of income to save (well obviously more is better and it's easier for higher earners to save a higher %...but what's your own goal or actual saving %?)
    I don't really have a percentage, I save what I can, which is usually enough.

    2) starting retirement savings vs. paying off student loans (> min payments) - which should come first?
    Pay down the loans as soon as they start having interest (there is a six month grace period after graduation no?). Same goes for when you get a mortgage. Investment returns come and go, reducing interest payments are a fail safe guaranteed return on your money. Unlike Americans, Canadian mortgages provide no tax deductability.

    3) what's your preferred vehicle(s) for your savings? Especially Canadian options, though a lot of things are similar.
    As a Canuck, try to maximize your RRSP every year. Then your TFSA if you can afford it. If you can cover both of these - point #1 should take care of itself.

    4) What about shorter-term investing (e.g. starting a business, stock market, real estate, etc), or aiming for an early retirement? How does this balance with retirement savings?
    I'd suggest the Stock market for long term investments (retirement), a geographically diverse set of index funds probably. Shorter term - interest bearing vehicles, maybe bond or mortage funds, or just a high interest savings account if you are just saving for six months or something.

    5) Do you think you're on a good track for retirement? Late retirement? Early retirement?I'm on track for between age 50-55. Anything past 55 is not early IMO. Anyone can probably achieve 55 if you start in your 20's and can control your urges to over consume (i.e. fancy cars and houses etc).

    6) Any comments or recommendations?
    Start early. Self educate about basic investing options. I never really took any interest in saving outside of a bank account until about age 30.

  3. #3
    Honor Thy Inferior Such Irony's Avatar
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    Quote Originally Posted by Randomnity View Post
    Ok, so it's pretty much a given that if you're somewhat young now, your retirement will probably have to be mostly or entirely self-funded and is likely to be later than 65, too.
    What are your thoughts on:

    1) percent of income to save (well obviously more is better and it's easier for higher earners to save a higher %...but what's your own goal or actual saving %?)
    About 7% of my gross pay is taken out of my paycheck for retirement. I'd like to save a little more but that's really difficult considering the little money I make.

    Quote Originally Posted by Randomnity View Post
    2) starting retirement savings vs. paying off student loans (> min payments) - which should come first?
    Both are important but I'd say the latter because the earlier you start investing, the better off you'll be. Your savings compounds over time so starting to save for retirement just a few years later can reduce your retirement savings significantly.

    Quote Originally Posted by Randomnity View Post
    3) what's your preferred vehicle(s) for your savings? Especially Canadian options, though a lot of things are similar.
    What my workplace takes out of my paycheck goes towards mutual funds and of that most is invested in stocks and rather than bonds. Stocks are more risky but have far more growth potential. Most of the time in the long run stocks make money and you come out ahead. I'm young enough that if I lose alot on my stocks, it has plenty of time to recover. When I get older, I'll probably go with a more conservative portfolio.


    Quote Originally Posted by Randomnity View Post
    4) What about shorter-term investing (e.g. starting a business, stock market, real estate, etc), or aiming for an early retirement? How does this balance with retirement savings?
    I don't do any other investing other than what my company takes out of my paycheck. I'd like to retire early but I don't know how easy that will be. Even if I'm retired, I'll probably volunteer or still work some odd jobs here and there. I like doing something useful to society that utilizes my skills.

    Quote Originally Posted by Randomnity View Post
    5) Do you think you're on a good track for retirement? Late retirement? Early retirement?
    Okay. I think I'll have enough to retire at a typical age (which will probably be more like 70 rather than 65 by the time I'm ready to retire). I can't rely on social security to pull me through (who knows, the Social Security system maybe be dissolved by then).

    Quote Originally Posted by Randomnity View Post
    6) Any comments or recommendations?
    I don't like having to think about retirement and I get overwhelmed by all the investment options. That's why I'm going with mutual funds and having the company pick the stocks for me and pray they make a good decision.

    I just don't have the patience and time to learn the stock market and pick my own stocks and the like.

    I wish I didn't have to think about investing for retirement but I see it as a necessary evil. If I don't do it, my distant future might be in jeopardy because like I said, I can't count on Social Security to pull me through.
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  4. #4
    Emperor/Dictator kyuuei's Avatar
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    Quote Originally Posted by Randomnity View Post
    1) percent of income to save (well obviously more is better and it's easier for higher earners to save a higher %...but what's your own goal or actual saving %?)
    I usually put aside 10% of any paycheck I get for savings. I've done this since I was 16.

    2) starting retirement savings vs. paying off student loans (> min payments) - which should come first?
    I still say paying off debt is important, so I'd focus on that, but there's always room to stick a little aside.

    3) what's your preferred vehicle(s) for your savings? Especially Canadian options, though a lot of things are similar.
    Hm. I'm not Canadian, I'm American.. I have a savings account. I'm going to be opening a Roth IRA soon, and contributing to that, but I'm still waivering on how I want to invest some of the money I have set aside.

    4) What about shorter-term investing (e.g. starting a business, stock market, real estate, etc), or aiming for an early retirement? How does this balance with retirement savings?
    Starting a business is nothing short term. Ever. My parents have one. It's blood, sweat, and tears, all the way through.

    5) Do you think you're on a good track for retirement? Late retirement? Early retirement?
    So far, I'd say so. I have military retirement options open to me if I continue my service with them, and if I continue to contribute to my funds I should have a decent amount by the time I retire. If I play my cards right, I can be self-sufficient on property I own.

    6) Any comments or recommendations?
    I highly, highly recommend to anyone to start an emergency fund. You basically take what you spend on an average month, and you put 3-6 months worth of expenses into an account that you can easily access. Doing that has saved me so many times. I don't know how in debt I'd be right now if I didn't do this.

    Also, if you do have debt, I recommend a snowball effect. Start paying off the smallest debts first, and keep contributing the money you were using on the smaller debts into larger debts once the smaller ones are paid off. Etc.

    I also recommend creating a budget that works for you and sticking to it however you can. I generally use an envelope technique (I stick different budget amounts in different envelopes for different things..) that's simple but requires will power. I've had the ability to save and buy things upfront in cash because of my budgeting techniques, and I've never gone without things I've really wanted. It just forces you make things priorities. You find out what you really want, and what you don't give a crap about.
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  5. #5
    Iron Maiden fidelia's Avatar
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    I think pay off your debts first. They are costing you interest all the time, even if you get a low interest loan. Make it a high priority and have an account where you can throw the extra $5, $20 etc you have left over from something. It really does add up surprisingly quickly. The other big thing is don't use a credit card unless you can pay for it. I've found that leaseback places often have almost new cars, but for much better prices. I'm still driving my 1997 Tercel and it was paid off right away the first year I got it. Much better than dealing with a car payment! Then start contributing the money you would spend on a car payment towards either your loan or savings.

    As far as putting aside money, I have a pension plan with my job, but I try to split whatever I save between the tax free savings account and RRSP. I just want the freedom of having a little more money accessible, but still having it work for me a little bit. I had always equated RRSPs with mutual funds and so didn't feel good about them, but then realized that with both that and tax free savings you have the three choices: mutual funds, GIC or savings account. President's Choice offers no fees and usually a pretty high interest rate. TD Bank is also generally one of the better choices for getting good returns on your money.

  6. #6
    Emperor/Dictator kyuuei's Avatar
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    ^ The car thing is important to me, I'm almost done paying off my fairly new car. I always set aside money for "car payments" though when I'm done paying off my car. I'll put 100$ aside until I get a decent amount and let it just sit around incase a sudden repair bill comes up.

    "Just in case" funds are really what save me. I stash money everywhere for everything except volcanoes. ... Hm..what if a volcano--..
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  7. #7
    Analytical Dreamer Coriolis's Avatar
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    1) percent of income to save (well obviously more is better and it's easier for higher earners to save a higher %...but what's your own goal or actual saving %?)
    I save at least 20% of net pay, and have done so for some years.

    2) starting retirement savings vs. paying off student loans (> min payments) - which should come first?

    If the loan interest is higher than the likely rate of return on savings/investment, pay it off first. If the return on investment is higher, pay the minimum on the loan and maximize your savings.

    3) what's your preferred vehicle(s) for your savings? Especially Canadian options, though a lot of things are similar.

    Well-managed mutual funds, and employer-sponsored investment-based savings plan.

    4) What about shorter-term investing (e.g. starting a business, stock market, real estate, etc), or aiming for an early retirement? How does this balance with retirement savings?
    Shorter term investments usually have lower rates of return, and are sometimes riskier, especially those you list here (starting a business and real estate especially). I would only be interested in early retirement if health problems required it. I enjoy my work too much.

    5) Do you think you're on a good track for retirement? Late retirement? Early retirement?
    Yes. Late retirement, but not for financial reasons.

    6) Any comments or recommendations?
    Save as much as you can, starting as soon as you can. Learn to live below your means, so you can save at a reasonable rate. Avoid debt/wasting money on finance charges, with the exception noted above (loan interest rate is lower than investment return rate). Also consider any tax advantage to debt, as in deductions for home mortgage often available in the U.S. If you invest, diversify your investments: stocks, bonds, domestic, international, big established comanies, small startups, different sectors of the economy. Mutual funds are good for this. Take note of management quality and fees. Also be sure to keep some of your savings in readily accessible form in case you need quick cash for an emergency. Rate of return will be lower, but it may save substantial penalties should you need the money.

  8. #8
    insert random title here Randomnity's Avatar
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    Interesting replies, nice to see a bit of variation. I'll answer, then.

    1) percent of income to save (well obviously more is better and it's easier for higher earners to save a higher %...but what's your own goal or actual saving %?) - I have a low fixed income from grad school which is at least not taxed so I'm trying to decide on a manageable %. I'm thinking 10% short-term savings, 10% retirement...but this may be a bit ambitious. I've set up automatic payments to my savings account to prompt me to do this. Usually I just transfer "extra" money there whenever I have it, which is sadly not really that often. I live cheaply compared to a lot of people and pay low rent (new arrangements are dropping my rent in sept by 100$ ) but I do like to enjoy some things, too - usually food .

    2) starting retirement savings vs. paying off student loans (> min payments) - which should come first?
    I'm thinking student loans, although a lot of experts will say otherwise "compound interest, yadda yadda" But my view is if I pay them off first, that payment money can be rolled into savings afterwards so while I'm losing the compounding effect, I'm eliminating the compounding of my own debt. But I'm still thinking about it since I have a few years before I graduate and the interest starts to accumulate.

    3) what's your preferred vehicle(s) for your savings? Especially Canadian options, though a lot of things are similar. Right now it's all in savings accounts earning a paltry 1.5% (yes, it's the best I can find right now). I'm interested in index funds and rrsps, but I'm unclear on the advantages of an rrsp over non-rrsp savings/investing. Other than the tax advantages which don't help me now, the rates seem identical.

    4) What about shorter-term investing (e.g. starting a business, stock market, real estate, etc), or aiming for an early retirement? How does this balance with retirement savings?
    I'm thinking about investing in real estate in several years - either renovating or more likely, renting out. But the risks and stress are considerable so I have to think and research some more - I could technically invest now if I wanted to with the money I have saved for paying off my student loans, but I would have to figure out if the investment would pass the interest I'd be paying (unlikely). I'd like to retire early or at least to part-time, but definitely not counting on it!

    5) Do you think you're on a good track for retirement? Late retirement? Early retirement? No idea at this point, it'll all depend on the job I find and how life goes.

    6) Any comments or recommendations?
    For now I'm going on the principle of spending consciously on things I enjoy and always being aware of what I'm spending money on and whether it's a good value to me. And of course saving as much as possible - trying to save enough to pay off all my student loans when I graduate, which is probably not going to happen given my currently low income, but I might shrink it down to a very reasonable size. The difference between my loans and my savings now is about 10-15k, which is not crippling but not the greatest either. But, a decent job would take care of it pretty quickly, though any interest is too much interest in my books.

    Quote Originally Posted by fidelia View Post
    . The other big thing is don't use a credit card unless you can pay for it.
    I use a rewards credit card for absolutely everything I can, I rarely carry cash (currently the PC one but i'm applying for one that looks better for rewards) I do earn quite a lot of rewards on it but I also forget to pay the bill on time every few months and end up paying interest then which pretty much cancels out the rewards. I'm trying to improve my habits though, because the rewards really add up.
    I've found that leaseback places often have almost new cars, but for much better prices. I'm still driving my 1997 Tercel and it was paid off right away the first year I got it. Much better than dealing with a car payment! Then start contributing the money you would spend on a car payment towards either your loan or savings.
    I'm trying to avoid getting a car for as long as possible, but good info to know for the future (my bf has a car though ). I'm planning to save in advance for a used car when I absolutely need one and hopefully pay for it upfront.

    President's Choice offers no fees and usually a pretty high interest rate.
    This is my current bank, despite their problems and outrageously absent customer service and highly irritating tendency to lock my card for no good reason, they still always seem to have the highest rates.
    This is good advice, too:
    Quote Originally Posted by Coriolis View Post
    Save as much as you can, starting as soon as you can. Learn to live below your means, so you can save at a reasonable rate. Avoid debt/wasting money on finance charges, with the exception noted above (loan interest rate is lower than investment return rate). Also consider any tax advantage to debt, as in deductions for home mortgage often available in the U.S. If you invest, diversify your investments: stocks, bonds, domestic, international, big established comanies, small startups, different sectors of the economy. Mutual funds are good for this. Take note of management quality and fees. Also be sure to keep some of your savings in readily accessible form in case you need quick cash for an emergency. Rate of return will be lower, but it may save substantial penalties should you need the money.
    I'm getting a little frustrated right now because all the rates are so low, I don't want to lock my money into a GIC if the rates might go up in the meantime! Even a 5yr term is barely more than my savings account earns. Starting to look at index funds though, they seem the most lucrative option that will let me sleep at night - I'm fairly risk-aversive. I just want something I can throw my money into for a long time and not have to worry about it, while getting the highest rates possible. I'd be ok with having a portion of my investments higher risk though, but I think that'll come later.
    -end of thread-

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