“Inside every older person is a younger person wondering what happened.”- Jennifer Yane.
In a recent BMO survey 42% of Canadian baby boomers said that if they could go back in time, they would have started saving up for retirement much earlier in life.
Baby Boomer Mistakes
As they say, hindsight is 20/20 and many boomers regret their “live for today” mantra now that they’re trying to figure out how they’ll make ends meet.
The majority of boomers are woefully unprepared for retirement. In large part this is because they made too many critical financial mistakes.
As a result, boomers advise younger people to put more thought into what their retirement might look like and to budget properly for it.
Alas, much of the younger generation is just not getting it. A TD survey found that two-thirds of their respondents have no financial plan for retirement and 16% have no financial assets whatsoever.
Related: Why Your Financial Plan Sucks
What could be a true story
Jeremy is in his mid-thirties and is married to stay-at-home mom Jessica. They have two pre-school children.
He works at a good managerial position earning $85,000 a year. They have no prepared budget and spend his entire take home pay each month.
Jeremy and Jessica have never been able to save money for a down payment on a house, so they rent in an upscale neighborhood.
Related: Why Do We Save?
They lease two late model SUVs. They own several credit cards (look at the reward points they can earn!) and an unsecured line of credit.
Jeremy belongs to a pension plan at work so he doesn’t think he needs an RRSP or TFSA. He thinks his children are too young yet for him to consider saving for their post secondary education.
Because they have no emergency savings, whenever they’re in a financial bind he looks to his mom for help.
Fast-forward twenty years (and they do go fast!). Mom has had some health issues and she, unfortunately, had to sell her house and move into an assisted living facility.
The proceeds from the sale are used for her rental payments and medical assistance.
Jeremy has been forced into early retirement. He receives a lump sum severance package, just in time to pay for his daughter’s lavish wedding to be held in Jamaica.
Since they’re now retired, they decide to take it easy and spend the remainder of the money on a luxury month-long cruise.
On their return they receive notice that Jeremy’s former employer must cut his proposed pension payments in half due to an underfunded pension program.
Meanwhile, they haven’t kept up with their debt payments while they were away and their creditors are demanding payment. What will Jeremy do?
Mom! Can you help me out? This is the last time, I promise!
Boomers could be somewhat excused for being unprepared for retirement. After all, we had no model to follow. In general, the majority of us overspent and under-invested for most of our lives.
We never thought about retirement planning because we were too focused on living in the moment. Why worry about getting old?
The “hope I die before I get old” generation didn’t anticipate our longevity and the probability of spending about one-third of our lives in retirement.
Related: Are You Counting On An Inheritance?
Likewise, we didn’t realize that we’d likely have to take responsibility for much of our retirement income.
In the BMO survey, 59% of boomers urged young people to open RRSPs and TFSAs as early as possible and maximize their contributions.
They advised them to pay off their mortgages faster and control their debts.
The boomer generation has done an excellent job of teaching others retirement planning lessons using the “don’t do what I did” technique.
You now have a model to (not) follow. Younger retirement savers would be wise to learn from the mistakes made by the “buy now – pay later” bunch.
Sometimes the best way to prepare is to learn from other people’s mistakes.
It would be a shame to have the opportunity to look after your financial health – but fail to do so.