Posted by Tim Stobbs on September 17, 2014
I was talking to a co-worker the other day who was worried about how her report would be received, since my particular group in the company gets to lead investigations into incidents that occur elsewhere in the company. We basically get to stick our noses in, find out what went wrong and make recommendations on how to improve things for the company (but we don’t assign blame). To sum it up, I said “Did you tell them what they needed to hear? Remember we aren’t here to tell them what they want to hear.” I hoped that helped, but in reality that phrase sums up a good part of my career.
I’ve never been an ass kisser at work, I just can’t be bothered. That isn’t to say I’m not thoughtful or polite on how to bring up difficult subjects, but I will always tell people my truthful assessment of the situation. I figure they pay me a lot of money to think on their issues, they very least they can to is hear the results. So I know some people don’t particularly like me because I don’t tell them what they want to hear, but I do think the vast majority of people respect me for being honest.
So with that in mind, might I offer a point of advice to people. The average saving rate in Canada is currently just under 4% and has been as high as 5% in the last few years. If you continue to save at that rate, you will effective never retire without government help. What?!? Why because if you save only 5% of your pay it will take you 66 years to be fully financially independent with no government help (see here for a table of values). So even if you started at 18, you could be financially independent at 84. Yes, you are fucked. Well let’s say, you are bucking the trend and putting away a nice 10% of your pay. Sorry you still have to work for 51 years, so you will be ready to retire at 69.
The long story short on this, if you want a half decent retirement age (like about 60), you need to save at least 15% starting when you were 18. That folks is the floor of the saving rate you should have, you shouldn’t go any lower. Yes, I can hear the screams “But I can’t save that much?!?!?” Actually, you can, you are just choosing to do other things. If you truly want off this treadmill of work, you need to start saving more immediately.
Of course, that assumed you started at 18. If you are a 55 year old boomer with crap all saved (oh, and by the way those values don’t include any home equity as savings…so a paid house is required above that). You are beyond fucked and up the creek without a paddle. Do you feel that panic settling in, do you want to turn away and bury your head in the sand a bit more? Good, then you are human, but perhaps let’s give you the good news.
There is of course an alternative. You need to get your ass to the other end of that table of savings rate, because you can save 80% of your pay you can retire in just 5.5 years, so even if you are age 55 or 60, you can still save enough to have a basic level of comfort. The trick here is you need to give up your currently lifestyle. You can’t spend 95% of what you take home anymore, so prepare for some radical discomfort in the short term. Downsize your home to something half the size NOW, stop buying anything beyond consumables (like food) NOW, sell that second car NOW….I assume you are getting the idea.
Now for your second piece of good news, all of this reduction of spending doesn’t have to impact your happiness much in the long run. Pardon?!? Yes, I’m being honest here and you can go check out the research, but in fact only 10% of your happiness comes from your circumstances. So it is entirely possible to be at least 90% as happy as you are now on a fraction of your current spending.
So that is your trade off 10% reduction in happiness to have a worry free retirement starting in just five years. I know what I would pick, what about you?