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The new middle class reality

Are you worried about your retirement? Will you be working longer than you planned?


 

The new middle class realityTell us how your savings have been affected by the downturn.


 
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The new middle class reality

  1. I’m in my early 20’s, I come from a middle class family and I have a university education and I currently have a job with a small company.
    I am extremely worried about my parents, both in their late 50’s. I am so afraid they will run out of money, as they might not have saved enough, having to support 4 kids through university. Also, what if they live to be over 80, 85, 90? Money will eventually run out and I don’t think we can count on the governement the whole way there. Also, as they are living, they will clearly not be able to afford their lifestyle right now and I worry how that is going to affect their mood, they day to day life and generally their quality of life. Also, on a selfish note, for which I am truly sorry, I am now sure my parents will have no money to help my brothers and sisters and I purchase a home, have a nice wedding, help the eventual grandkids with all things children.
    So while my situation is not dire at the moment, I greatly worry for my parents.

    • It is in no way a parent’s responsibility to help a child buy a home (nor finance a wedding for that matter, althought it is a more emotional issue). Here’s a thought – you are in your early 20’s and your parents helped put you through university. Why don’t you pay back all the money they spent on you (tuition, books, room and board, etc). They can then invest in something stable and will still have time for their money to grow. Decades ago, there was no public safety net to support people as they got older. With four children in the family, at various points in their lives they could likely put away some money to help out.

      • Problem is I do not have the money to pay them back as I have to pay back student debts to the governement and last time I checked students (who could contribute to the economy greatly) were not going to receive a bailout like the auto industry. So no chance of me being able to “pay back” my parents, who don’t want money from me either way.
        Furthermore, I know it’s not a parent’s responsibility to finance a house or car or wedding, but it is tough when you see kids who have had everything given to them whether because they were only child or their parents were very well-off, but they get to have everything paid for by their parents, including rent, travel, cable bill, phone bill, everything! To even try and compete against those people is impossible. I know I sound defeatist but such is the situation right now.
        Also, what do you do if parents don’t want to invest, or simply don’t have the means to invest because they are still paying off their mortgage or other debts? Then what do you do for the parents?

        • but it is tough when you see kids who have had everything given to them whether because they were only child or their parents were very well-off, but they get to have everything paid for by their parents, including rent, travel, cable bill, phone bill, everything! To even try and compete against those people is impossible. I know I sound defeatist but such is the situation right now.
          Julianna,
          I sincerely hope that, well before you exit your twenties, you will exit your adolescence. Good luck.

          • I hope so too! I’m waiting for the adult reflex to grab a hold of me and drag me out of the early 20’s, they truly are bothersome.

    • Julianna, you sound like a spoiled brat. Your parents did more than enough by helping you and your siblings through school. Their responsibility for you life expenses should end there. You are in your prime and your parents having four kids, which they supported through school should be able to depend on you for some help in their old age.

  2. I plan to retire at 60. I am 47, have 0 debt, do not own a house or anything else of value, have a few grand saved. The majority of my retirement income will come from CPP and, eventually OAS.

    I will retire to a place where the cost of living is a fraction of what it is here. There are plenty of places in the world were one can feed and shelter oneself on a few hundred dollars a month.

    I look forward to a lost decade in the world economy. It will mean a decade of lessoning ecological damage, leaving enough around for my retirement years.

    • Friendly advice, asp. If a few really truly means less than ten, then get some financial advice (twenty years ago!) NOW. Your plan is for a retirement of slightly subsidized poverty. Start saving, retire later, whatever. Plan a little more now.

      • You have a pretty extreme definition of poverty. It only costs about $200 a month to feed and house oneself in a lot of countries. Poverty is when one does not have enough for that. CPP & OAS add up to a lot more then $200.

        • You are aiming for deliberate dependance on others with OAS. You are consciously choosing now, when you could be doing something about it, to be so poor as to qualify for additional taxpayer support via OAS in your golden years. Slightly subsidized poverty. Way to aim high, asp. Somebody explain to me how social democracy, as currently practiced in Canada, is working out…

          • I had no idea OAS was considered a scam. Are you saying that most retired Canadians do not collect OAS? From http://www.servicecanada.gc.ca: “The Old Age Security program, the cornerstone of Canada’s retirement income system..”

            Anyway, CPP by itself adds up to more then $200. As for aiming high, if that means an unecologically high consumption of material goods, I’ll pass. Do you find that offensive?

          • Yikes, I guess I confused OAS and GIS. Sorry about that. I had in my mind that the OAS was much more means-tested than it is. Tooling around the website, one can see taht there is a clawback, but only for pretty high-income seniors.

            It is the GIS that one would hope your senior loved ones (and one day, you) would not require.

            Reminds me of my just-over-eighteen days. The letter from the Minister or Revenue went something like this: “Revenue Canada provides the GST Credit to assist low-income Canadians. I am pleased to report that you qualify…” Pleased? Really? Shouldn’t you be more pleased that I am taxpayer instead of a tax drainer?

  3. My wife and I are in our early 50s, just retired. We have no kids, we always lived well below our means. We lived all our lives in rented apartments and never bought stocks or mutual funds. We invested in garden variety GICs inside and outside RRSPs and made sure everything is CDIC insured. I’ve spent half my life getting ridiculed for not investing in real estate and mutual funds. In my opinion, the average person should stay away from stocks and mutual funds and should avoid owning a house if at all possible. The housing market is prone to bubbles and busts and I don’t think that owning real estate is a slam dunk money maker even in the “long run”, however defined. You might do ok but it is easy to get burned. Same with stocks and mutual funds. I think securities markets are rotten to the core (ie worthless debt ratings, dishonest analysts, crooked accounting, you could go on for ever) and, to the big players, the average wage earner is a minnow in a shark tank. Save all you can – plus use common sense, don’t take stupid chances and don’t get greedy.

    • I disagree about owning a house. Bubbles or busts aside, owning the home that you live in has a number of benefits, it’s typically cheaper than rent (especially if you go with variable mortgage rates) for a rental property of the same size, is better for your credit rating (useful for emergencies), is better for your insurance rates (on pretty much everything), and has the bonus that mortgage payments eventually end. Of course, if you expect to be moving a lot, whether intentionally or just following work, then yes, you probably want to stay out of the ownership market.

      My partner and I are late 30s, working professionals, no kids, in an industry that generally improves during recessions, with no plans to retire as we enjoy what we do. We own our home and are debt and mortgage free. Our savings, juggled across several high-interest savings accounts (no lock-in, no risk) have taken a small hit as we got involved in the markets about a month after Mr. Harper suggested it was a great time to do so. Thank goodness we didn’t act sooner — we’re still underwater, but not by much, and with an amount of money that we both agreed we could live without if we lose it completely.

      We hope to use the downturn in the market to purchase a second house with our savings and turn this current starter home into a rental property for residual income.

      • I agree that owning a house can have benefits ie the ones that you listed. I was not suggesting ownership is a sure fire money loser. For example if you bought a house in the Toronto area in the mid 1990s you could do OK. But if you bought in the late 1980s that’s another story.

        I think home ownership is much riskier than commonly believed. I don’t think you can discount the risks posed by bubbles and busts because we’ve been living in bubbles and busts now for a long time. They are the result of serious misbehaviour by many actors but mainly by our central banks and financial markets. I’ve seen two awful real estate meltdowns in Canada that screwed up a lot of family finances – Toronto in the 1990s and Alberta in the 1980s. I was a loans officer in Calgary in the 1980s and I saw first hand a lot of financial grief and I worked for a large real estate development company and home builder in the 1990s that went bankrupt – more grief, and this time it was personal.

        I think there are real estate myths out there ie that paying a mortgage is forced savings. I think it is rather the opposite, it is forced spending. Paying down a debt is not the same thing as saving ie setting aside money from your paycheque in a saving account. Paying a mortgage is the opposite of saving. In the one instance you are keeping your cash but in the other you are giving it to the mortgage company. When you pay a mortgage you are increasing your home equity and net worth. This is not the same as saving. Your equity depends on the value of your house which, until you sell, is just an appraiser’s opinion. A savings account on the other hand is a hard number. It is a legal and financial liability owed to you by your bank and you get monthly proof in a bank statement. There is no element of opinion in a savings account. You have the cash or you don’t. But in a real estate bust home equity can vanish like smoke. We’re seeing it in spades in the US, we’ve seen it in Canada in prior decades and now indications are that its happening in this country again. I don’t want to be a real estate bore. I just want to point out that home ownership can pose huge risks. If you buy you need to be really careful.

  4. Like Julianna, I too am worried about my moms retirement, but unlike her I come from a single parent home and my mom never had an opportunity to save because of limited funds and was not fortunate enought to have a ‘job’ with a pension. She is currently collecting CPP after being laid off work over a year ago. I am expecting for her to move in with my husband and I eventually because CPP is not very much to live on.

    I don’t think anyone should count on the government to help them with their retirement, that is why I people should be proactive in their own retirement savings. I am in my mid thirties and I honestly don’t think CPP will be around when I am ready to retire, unfortunetly. If I have to work longer for retirement, that is life.

  5. I’m in my mid-40’s and not really concerned about retirement. I focus on max’ing my RRSP’s and paying down my mortgage. I am also quite focussed on helping my 16 year old with her university education…2 – 3 years away.

    In a former life, I was a financial planner and am confident that the market, be it housing, investments, job, or other, operates in cycles. We haven’t had a big correction in several decades, so unfortunately were due. I’m thankful that I’ve got 20 years until retirement…I’ll need every part of that. My parents are in their 80’s and are more concerned than I. Thankfully my dad has an indexed public service pension, so money is not really an issue for them.

    I agree with ‘Cash’ that this current economic bubble is based on greed. Several million of us believed the good times would never end, so threw common sense to the wind with the hope of making it big. Unfortunately, many got caught. Living within your means is the correct, and hardest thing to do. Identify your priorities, then save your money to purchase things. Don’t use your credit card like it is your debit card.

  6. I am 65. Retired 11 years on a pension of less than $25.000 a year and making the most of it. True, other than basics it does not allow luxury holidays or new car. I am a little concern about my health costs. But I have come to the conclusion that a will live with same results as affected the cave man. When my teeth fall out, I will eat softer meals. When the body gives up I will not fight it with knee relacements, herat transplant etc. I will just accept my fate and die knowing that at least with the pain killers available it will be tolerable. I know that with 6 billion people on the planet, one will not make much difference. But it may result in one meal more a day for some child that may be doing with out.

  7. No, I’m not worried about retiring, I did that six years ago…now I’m too old to find a job and too broke to live!

    • PS: The Canadian equivalent of US TIPS are Canadian Real Return Bonds.

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The New Middle Class Reality


 

 
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