Why the ‘culture of now’ is making it difficult for Canadians to save for retirement.
Updated: 7 hours ago
Original article by:
Barbara Balfour
THE GLOBE AND MAIL
March 16, 2022
📰 Read the FULL ARTICLE here.
I spoke with The Globe and Mail about why a "culture of now" mindset is making it harder for Canadians to save for retirement. Here are the highlights and my contributions.
Key Takeaways
In a Co-operators survey, 85 per cent of financial professionals blamed a "culture of now" mindset for keeping people from making retirement planning a priority.
RRSPs and TFSAs are often underused and poorly understood, and many people rush to make RRSP contributions at the deadline without a broader plan.
With home ownership feeling out of reach in many cities, more Canadians are turning to do-it-yourself investing and looking for more liquidity.
Growing interest in crypto and other speculative assets is often fuelled by the belief that high-risk bets are easy wins.
Advisors say addressing the emotions around money, like shame or doubt after a loss, can help clients move past indecision and make better long-term choices.
My Perspective
I often see the "make it up later" mindset among young adults who have spent years aggressively saving for a down payment.
"There is a creeping belief that any savings deficits today can be easily made up for tomorrow by essentially gambling on a high-risk asset rather than making steady contributions into a well-balanced portfolio."
A competitive housing market can push buyers to bid far more than they planned, using up every dollar they have. After that, retirement saving feels like the last thing on their minds.
"They're financially exhausted afterward. They feel like they've already spent the past decade saving, and now they deserve a break."
That's why I counsel clients to consider delaying saving for a home rather than delaying saving for retirement. I show them projections of what renting and putting their potential down payment into a "financial freedom fund" for retirement could look like.
"I tell them to think of the cash flow freedom they could have if they didn't need to worry about making any further retirement contributions."
From there, they can save for a down payment when they're older, further along in their careers and earning more. Clients who take this approach tend to feel far more confident and optimistic about their financial future.
Originally published in The Globe and Mail by Barbara Balfour on March 16, 2022. Use the link at the top of this post to read the full article.
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