This article, The Myth of Freedom 55, first appeared September 17, 2010 on Walletpop.ca.
One growing pain or realization that we’re all going to need to get used to in the future is that “freedom 55″ is largely a myth.
Somehow, at some point after this marketing slogan was introduced, it became part of the public consciousness. (Well done, marketers!) At the time it wasn’t a wholly unattainable goal, but things are different today. Really different.
Forget for a minute that we’re all living longer and that retirements have stretched from 10-15 years, (when people were only expected to live until 80 or so), to some 30+ years in cases. For a lot of people too, those later years will be expensive – think medications and long term care.
On top of this we’re all progressing through our life stages much later than we did in the past. People are having children well into their 30s today which means funding your kids’ educations, not your retirement, when you reach the 55 mark.
The level of consumerism out there today is another big factor impacting the picture.
All of this adds up; so much so that experts like Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, say a comfortable, debt-free retirement for those in their mid-50s is no longer possible.
As usual, these things always boil down to spending and saving.
On the spending side
Marketing on billboards and on television is nothing new but there’s a lot more of it today than there was 20 years ago. Spending holidays – back-to-school and Christmas most notably – are stretched out longer than they were and our telephones, with us always, deliver advertising to our pockets. In television land, instead of 99 channels, there are now 2,000 or more and entire networks are built around selling certain products; the home renovation craze is a good example.
“We are convinced that we need to be consumers,” says Schwartz. “That drives our cost of living up.”
He says grocery bills are a good indication of whether or not a person might have problems in this respect: If someone is spending “an equal amount on groceries as they do on their fast food and snack items, they’re going for convenience,” he says. “They’re picking up a sandwich they could have just as easily made at home and they’re paying two or three times as much, if not more.”
Work your savings
Compounding interest “is the eighth wonder of the world” and tax free savings accounts are “fantastic,” as are registered education savings funds, says Schwartz. “I mean, what investment out there can guarantee a 20 per cent return every year, even before they’ve done anything in the market?” (In this case he’s referring to RESPs.)
Finding ways to work all these opportunities starts with making saving habitual. “Make your savings invisible,” he says. Preauthorized chequing and debit cards that automatically round purchases up to the nearest $5 or $10 before depositing the difference into a savings account are both ways to do this.
Want a comfortable retirement? Make a plan and practice.
You can approach this in the same way project managers do – have a plan, then work the plan. For something as big as retirement though, I’d modify this a little:
1. Have a plan.
2. Work the plan.
3. Live the plan.
The number you’ll actually need to save for retirement is different for everyone, depending on varying tastes in travel and given that the cost of living is very different for someone living in northern Ontario compared to, say, downtown Vancouver.
Practice living on 70 per cent of your income to see if it can be done. “The more you get into good shape before you retire,” says Schwartz, the better. “Understand what’s available to you from the government and set yourself up so that you can live on those numbers.”
Related Links:
How much cash do you need to retire?
Are you one of the 40% of Canadians who retires with debt?
Kate McCaffery is a freelance writer in Toronto, Ontario. Visit mccaffery.ca/kate2.0/ for more information.
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