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Family Finance Retirement Readiness Sanity Check

Before I get into my small rant, I must express I enjoy the Family Finance articles in the Financial Post.  I read them every week and do so because I enjoy learning about the financial challenges Canadians have and the challenges I have in common with them.  I also enjoy reading about the expert opinions and recommendations in these articles.  They are insightful but often puzzling.  On that note, I don’t get the Retirement Readiness five-star ranking system.

Here is what I think this system means…

  • Five stars, you’re set for retirement; congratulations!
  • Four stars, I presume you’re not far off; nicely done!
  • Three stars, I suppose you’re doing OK but you’ve got room for improvement; keep going!
  • Two stars, I suspect your retirement plan needs some significant attention; pick up the pace!
  • One star, you’re nowhere near ready for retirement; get your act together!
  • No stars, I guess anything is an improvement; wake the _____up!

Let’s walk through some examples…

1. B.C. couple Max and Portia, 28 and 27.  I think they’re doing fairly well for 20-somethings but based on their net worth, they are nowhere near ready for retirement.  If they continue to pay off both properties in another 20 years, that’s great work but that’s a long ways away.  Their 2-star rating today is beyond generous for folks who just started their working careers.

Family Finance 1 Max and Port

 

2. Health care professional Simone, 56, lives in Quebec.  Her work in palliative care is saint-like and bless this woman for doing it, yet with $78,000 in investments and no pension plan, I’m surprised she got a 3-star rating.

Family Finance 2 Simone

 

3. Lucille “is broke and bewildered”, even with $1.5-million in financial assets.  Sadly she has an autoimmune disorder that costs her dearly each month in prescription drugs.  The article says her Ontario home is co-owned with her sister and she has no debts.  Lucille has a modest budget of less than $3,000 a month.  So, this frugal millionaire has a 1-star retirement rating?

Family Finance  3 Lucille

 

Surely the Retirement Readiness ratings for these Family Finance articles have nothing to do with net worth because if they do these ratings make absolutely no sense.  I’ll keep reading these articles for now but in the meantime if someone knows about a secret Financial Post formula for determining these ratings – I’m all ears.

Filed in: Investor Profiles

6 Responses to "Family Finance Retirement Readiness Sanity Check"

  1. jmrudow says:

    After reading a couple of the articles, it seems that the biggest factor outside of net worth is their current lifestyle costs.

    A lot of their financial situations look fine until you consider how much they’re spending on housing (outside of a paid-off mortgage, they still have property taxes, maintenance, insuarnce, utilities – in fact, a bigger house means a higher net worth but also a higher cost of ownership); day-to-day living (food, clothes, etc.); and gifts to children (I didn’t realize how much of a drain this is on so many people near retirement – I should let my parents and in-laws know how lucky they are that I’m not sponging off them!).

    • Good point, maybe lifestyle costs are involved but that still does not explain our frugal millionaire with a 1-star rating.

      Just odd….don’t you think?

  2. Steve says:

    The ratings do seem really wonky. I’d hate to see what my rating would be…

  3. Calgary_Girl says:

    After reading the article on the 1-star frugal millionaire, it seems like they gave her 1-star due to her investments. She’s only 58 but the majority of her assets are in high-risk investments and she’s been losing money on them.

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