Weekend Reading – Americans in a retirement crisis, cheap home ownership, Barista FIRE and more #moneystuff
Welcome to my latest Weekend Reading edition where I share some of my favourite articles from the personal finance and investing blogosphere.
Crazy to read that almost 50% of Americans near retirement age have less than $25,000 in savings for retirement. How are they going to overcome their massive retirement crisis? U.S. social security is in a world of hurt.
Want to win a MacBook? Sure, why not eh?! Read this article about my personal finance mistakes – so you don’t have to make the same ones and enter to win by October 15th!
Enjoy the weekend and I’ll be back next week!
This other retirement article confirms pensions and U.S. social security are under siege; because Americans simply aren’t getting ahead. This is despite some massive U.S. stock market gains over the last decade: “…54% of middle-income households (defined as income ranging from $48,000 to $95,000) don’t have enough saved to maintain a decent retirement. That’s the same percentage as in 2010…” Thoughts on the major disconnect besides investor behaviour?
Millennial Revolution fired back about FIRE (Financial Independence, Retire Early) to financial guru Suze Orman. “Suze, I know this is hard to imagine from inside the bubble of your private island, but having a job you like that will take care of you is no longer an option. And it hasn’t been an option for some time. No. We have to find a way to take care of ourselves. “Just find a job you like and never get laid off” is outdated advice. It may have worked for you, but it sure as shit ain’t working for us. THAT’s why the FIRE movement exists.” As a fan or hater or somewhere in between on this FIRE stuff – what’s your take?
Thanks to Rob Carrick’s newsletter: did you know you can get into home ownership in Vancouver by owning shares in a home for as little as $1? Crazy. Soon, will there be a bunch of GoFundMe pages for people wanting to buy a house? Wild times we live in…
Retireby40 updated an older post on his site that included the concept of Barista FIRE. That’s about having a fun, casual part-time job that you enjoy to supplement your passive (investment) income. I don’t want to really work as a barista but I do want to work part-time in another 4-5 years. To be more clear, and I’ve written this on this site a number of times in various posts, I don’t really want to stop working – ever. Rather, I think working on your own terms as you please would be ideal for many other benefits beyond financial – such as social, mental and physical well-being.
Congrats to Daniel and Russell who won copies of Beat The Bank. Your books will be in the mail soon! Also, any investing or other questions you want me to ask Larry Bates, the author of this book? I have an interview planned with him soon – so let me know!
John Robertson aka Holy Potato continues to offer a solid practical index investing course for Canadians.
Partnerships and Deals!
Thanks to my passion for personal finance and investing, some great companies reach out to me and provide reader offers. I’m happy to share those below from my Deals page!
Privately owned luxury garages are growing with various facilities and top security and this is a great opportunity for everyone.
Late to the game this weekend but I’ll throw in my $0.08….
re: GoFundMe pages for people wanting to buy a house
Big whoop. It’s been estimated that a full 1/3rd of the health care system in America is funded by crowd sourcing. I love Canada.
re: 50% of Americans near retirement age have less than $25,000 in savings for retirement & 54% of middle-income households…don’t have enough saved to maintain a decent retirement.
Sigh….again? Really? Attention ALL the people! Americans are POOR! The end! See the first bullet for a clue as to just how messed up that country really is. Doesn’t matter that 20 of the last 30 years have been bull markets if you don’t have the money to participate. One of the myths of Capitalism is that you can get just as rich as your neighbour, however, just as there is staggering income and wealth inequality in America, there is also staggering opportunity inequality. The trend is for fewer people to own more and more people to own less. TLDR: Americans are poor, despite their best media efforts to convince the world otherwise.
re: Mill Revo — “Just find a job you like and never get laid off” is outdated advice. It may have worked for you, but it sure as shit ain’t working for us. THAT’s why the FIRE movement exists.”
Sounds like a case of someone stopping short — very short. So sorry your first $100,000/yr IT job just didn’t check all your boxes. So much easier to blame imperfect jobs than your own imperfect mindset. As always, far easier to expand the bank account than expand the mind.
With that said, gotta go expand the mower across my lawn. Hopefully for the last time this year.
Sad though isn’t it….re: despite 20 of the last 30 years with a bull market – Americans are generally worse off. Crazy when you think about it.
I don’t have the latest stats in front of me but the wealth inequality in America must be off the charts. How much more worse can it really get??
re: Retired and what does it mean. I “retired” from my job of 36 years but I have a small farm that I’ve been playing at since ’94. Am I technically “retired”? I don’t need the income but it’s fun and interesting to do. If I get tired of it I can drop it with no ramifications on the financial picture. Having said that, I’m not *promoting* my retirement in order to gain increased income from the side gig. I consider it dishonest to promote a situation (FIRE) in order to get more income from what has become in essence a new career path. Similar to reading profiles of some that do not show the complete picture. I guess I’m just a skeptic at heart.
On a totally different topic, I redeemed a few of the 1 year term redeemable GICs in the past four weeks to take advantage of the increased rates (2.5% to 2.7%). I’ve got these things sort of laddered so that if rates go higher after the BoC announces in a couple of weeks I’ll have one redeemable every two weeks. It’s a bit more work but it’s kinda fun.
Good work on the GICs. Fun is a bonus.
I see Fortis raised 5.9% and gave guidance for 6% raises through 2023. Nice.
Perfect. That should add another $20 per year to my portfolio with that FTS dividend increase this year.
Nice. Just over $50/yr increase here, not counting payout from drip on more shares. Maybe another $32 or so if my math is right!
Nothing wrong with being a skeptic when it comes to some FIRE folks. Again, I will try to be very clear on my site if/when (?) I reach semi-retirement. It will be great to earn a bit of money from this blog but it’s certainly not making me rich earning less than minimum wage.
How long have you had the GIC ladder in place? Do you roll them over every year over a 5-year or 3-year window?
I suspect rates will go higher after the BoC announces in a couple of weeks. Just my guess!
This ladder is just some unregistered parked cash that I don’t know what to do with in the short term. I had it sitting in a HISA but then starting using a 1 year escalating term (link below) that is redeemable every quarter. I set up six so that approximately every couple of weeks one of them will be redeemable. When interest rates went up I redeemed to renew them at the new rates. If I need some money I’m only two weeks away. Gains me about half a percent over the HISA. I agree rates look like they will go up shortly and I *hope* the GICs follow as I will just keep redeeming and renewing.
Interesting…ok. So, any thoughts on a 3-year or 5-year ladder? Seems like a lot of work to set-up 6 every few weeks? Or is that more of the fun?
It’s always good to read about what you retirees are doing now, what’s working for you; what’s not. I mean, we’re not there yet but your experiences are invaluable in terms of shaping how things might play out for my wife and I.
I’m still largely convinced some sort of cash wedge + investment income stream + blog/part-time work + other will work for us.
1) Keep about one-year worth of retirement living expenses (about $50,000) in cash savings. Inside a savings account, no GICs.
2) After the one-year cash fund is tucked away I will create a 50/50 split of the remaining portfolio in equities in this way:
2a) 50% invested in 20-30 dividend-paying stocks from Canada and the U.S. I will use the dividend income generated from these investments for living expenses. I figure $500,000 invested in these stocks should generate about $20,000 or so in dividend income per year for us before taxes.
2b) 50% invested in a couple of low-cost, diversified, equity or dividend ETFs that invest in hundreds (or thousands) of stocks from around the world. ETFs like VYM, IDV, other. I figure about $500,000 invested in such ETFs will provide extra diversification and close to another $20,000 per year in income.
3) We’ll start drawing down the portfolio in our 50s and 60s and 70s – exhausting the RRSPs/RRIFs by age 70 or 75.
I think you’ve got a great plan there Mark. With your work pensions and government benefits backing it all up it seems to be well thought out and doable.
The money in these GICs (unregistered) is just parked until I can figure out what to do with it. I’m leery (gut rather than intellectually) of the markets right now and running 6, one year terms, isn’t difficult at all. I only redeem and re-invest if the applicable rates rose that it would be advantageous. I’m hesitant to go too long of a term on GICs as everything I’ve read seems to lean towards rates rising in the next year or so. Might as well ride that up and I’ll strongly consider building a proper longer term ladder maybe next year or shortly after that. Some renos may be in the works as well and I’ll have to be prepared to replace the 2003 PT cruiser. He’s starting to really show his age. 😉 I’ve also still got a couple of memorial trusts to set up and will be working on that this winter.
I do have a bit of a short term ladder set up in the RRSPs but even there I have a lot in one year terms (for now).
I hope so Lloyd. There is always the odd second-guessing with the plan but as long as I see the income growing over time, I know I’m on a good path via reinvested dividends and dividend increases (like FTS). With some stock prices so low (looking at ENB) it will be interesting to see if these companies increase their dividends again due to shareholder pressure. I would think paying down debt (ENB again) would be wise with interest rates climbing – unless they plan to hike costs back to consumers.
I’ve said many times I think you’re on great path that seems right for you. Multiple income streams = very good. Second guessing done with critical thinking/examining other ideas like you are is always good.
Fair comment on ENB re debt, rising rates, future dividend increases, share price etc. This seems to be an issue with a number of capital intensive companies. Although ENB seems to be on a path reducing debt by selling non core assets, realigning other co’s like ENF etc. I’m guessing div. hikes continue but lower than typical.
Yeah, lots of second guessing some days!
I see both as sell, sell, sell.
You’ve got that right Rich – one at each end of the spectrum – self promotion extreme. Both Suze and Firecracker are advocating lifestyles/positions that are not applicable or attainable by the vast majority of people and fall into the “do as I say” and not “the do as I do” shills (imo).
Full disclosure – I do follow Firecracker just to see what extremes are being pushed – wrote off Suze, after reading one of her books (from the library), years ago as being totally out of touch with reality.
I’m fully with you Mark on doing what works for you – the “personal” in Personal Finance.
Thanks for being a fan and sharing some great comments!
“We have to find a way to take care of ourselves. “Just find a job you like and never get laid off” is outdated advice. It may have worked for you, but it sure as shit ain’t working for us. THAT’s why the FIRE movement exists.”
I have not taken the time to read the articles the above refer to, but the statement by itself is contradictory. Yes, people have to take care of themselves, but what is wrong with finding a job one likes, even if it doesn’t provide a company pension. For most people, at least those who “plan to take care of themselves”, will probably advance in their job, especially if they enjoy it, earn higher wages and enable themselves to save more for their future. Retiring early is a personal choice and should only be a goal for those who wish it, not something everyone should try to achieve. Even they type of retirement is personal and not everyone wants the same thing or has the same financial needs to make them happy.
Retiring early, or late, is absolutely a personal choice. Certainly more sacrifices doing it in your 30s or 40s, vs. 50s and 60s. You gotta do what is aligned your goals and values – not anyone else’s when it comes to personal finance.
RBull, if you listen to sanctimonious Suze’s interview from the podcast in question, she makes a lot of outrageous statements (80k per annum not enough to live on, a few million not enough to retire on at an early age) you’d understand the anger from Millenial Revolution.
I didn’t want to have to sign on to view the podcast.
Both Suze and Firecracker are motivated to be bold and outspoken and have different ideas on what it takes to be “retired” at a young age, although one of them has successfaully been in the financial world a much longer time.
It makes no difference but my goals/needs/ideas and comfort level seem to be much closer to Suze’s suggestions.
As I said before, FIRE away; everyone’s free to do whatever they want.
Fully agree with you on that last line!
It’s really insane that Suze believes you need millions to retire on, as in $5 M in the bank. She is nuts.
Yes, with that info. I agree that’s WAY out there.
I’m basing my opinion above on needing much more than 1M CDN to “retire” on at age ~30. I wouldn’t dream of doing that with less than twice that in investable assets, and/or with pension value considered, plus a home. Now if was earning income working for myself PT or FT too somehow that would make a difference.
Yeah, that’s the thing. At age 30 $2 M invested is outstanding (but rather impossible too)! But at age 60 $2 M invested is even better but also doable. You know what I mean?
I think so, however my numbers also consider pensions and PT gig / other income – not personal financial assets only. Big difference. Very few @ 60 will also have 2M personal assets invested, but certainly more than @ 30!
I’m thinking few if any are going to truly retire ( in the traditional sense) at age 30, so they probably will not need near $2M. Someone like Firecracker may have soured at the world and found her own way to leverage/generate employment income, as well as from investment income. Good for her. Probably what many “FIRE” folks do. However without other decent ongoing income 1M is not nearly enough – “for us” even retiring 25 years older, let alone if we had all those extra years to plan for. Not looking to backpack around the world etc. for our travel. LOL
I respect everyones numbers will be different.
I intend to meet many of these FIRE-folks at an upcoming conference next year. It will be interesting for me to understand how much of their income derived from their books, blogs, etc. actually fund their lifestyle. I recall FIRECracker and her husband “retired” at just over $1 M in the bank, about 70/30 or 60/40 stock/bond mix in their portfolio. They “lived off dividends” only and with the recent bull run I suspect their portfolio is likely worth more now than when they quit working full-time.
Everyone’s retirement numbers are absolutely different. If we didn’t want to own our condo in the city in a few years, and simply wanted to live in hostels around the world – my wife and I wouldn’t have to work another day. That’s not what we want obviously so we’re not doing that.
I simply want a nice blend: a good (debt-free) home/condo to call home/home base, a bit of money in the bank to cover needs and some wants, and first and foremost my health as long as possible. All the dreams in the world aren’t any good if you don’t have your health.
The circumstances are different for everybody, so the number will be very different too. I understand the mandatory expense for some people would be absolutely unnecessary for other people. As long as your number meet your needs, all is good. But in any sense, $5M is just not realistic for 99% people no matter how old or how young they are.
I think we will need much more than people like @Mark and @RBull, as we have two young kids and we don’t have any pension. But still, not $5M.
…and that’s the thing eh May? As long as you are meeting your own goals, “all is good”. Gotta Tweet that to the masses.
I would argue having $5M invested is nowhere near possible for 99.99% of Canadians.
You might need more $$ May given your kids but then again you’ll have some healthy real estate to draw from as well – eventually. A paid off, large family home, will be worth a great deal now and even more in 10-20 years.
May, if you’re planning on retiring with dependants no doubt you’ll need more assets/income than otherwise. Good point on meeting your needs.
However it occurs to me you also may have much more potential benefit to leverage real estate value by downsizing or moving in time.
Agreed, having a sizeable paid off home means you will probably have more options as you get older.
That will be pretty interesting to connect with those folks and get a deeper understanding of how they are doing.
I think we’re all pretty much after many of the same things. Stable income to live a good scure lifestyle with our cherished ones and foremost good personal health.
I consider my house as my insurance for the kids going to a top university in the States, just in case they desire and are able to do so. Thus I don’t count it as part of my retirement plan. If they didn’t go, I will take some luxury vacations instead. LOL.
Ha, I like the idea of luxury vacations but we don’t have any kids!
That’s a heck of a commitment to your kids May. I hope it all works out the way you want.
I don’t count my home as a retirement investment either. At best we might sell at some point and it will help with future living costs.
Millenial Revolution sounds like she was ranting as much as she decribed Suzie Orman was preaching. I don’t get this “pretend” FIRE thing. How is a million bucks or so for 2 people at age 30 safe for someone who is really “retired” so you’ll “never run out of money”, and who can prove there are “no jobs” out there that you can enjoy and that will take care of you. Millions of people prove that wrong. From what I read on Firecrackers blog I’d say Suzie probably raised some reasonable points.
It also seems to me rather disengenuous to promote yourself achieving FIRE when what you’ve really done is leveraged your profile having lived frugally and saved some money early on, to create a new career. Blog, books, TV, movies etc. Are you really practicing what you preach? Firecracker, Derek Foster etc. Plus its WAY too early to prove it works over the long haul. However to each their own.
I enjoyed Retireby40’s take on the subject.
RE Rob Carrick- IMBY Garth Turner had a take on it a while back that I read. Sounds like pretty high risk for desperate people.
Have a great weekend all. Headed out for a hike soon.
I think Suze has raised some valuable points when it comes to healthcare costs, etc., longevity risk but the reality is you don’t need multiple millions to retire on.
I fully agree on the “retired” aspect if you make money on books, blogs, etc. to fund your lifestyle. Even though I don’t want to work as a barista that is absolutely what I intend to do in a few years – work part-time on any side gigs or other jobs. I’m looking forward to it 🙂
Agree on longevity risk, health costs etc but I think 2M isn’t at all unreasonable if a couple are very young and have no other income/benefits. Although that’s going to be prohibitive for most all firecracker age. 5M – NAH. Pretty much wiping out 99%+ of all retirees let alone early ones.
Good plan to do exactly what you want.
99.99% of retirees will never have $2 M I would think let alone $5 M invested.
It would be interesting to know that number. $5M is probably safe on the .01% but $2M might be higher. My wife has 2 good friends well over that lower number.
Also would be interesting to know regarding pension values. We know several couples with 2 good govt pensions who retired @~55-58 and I’m guessing values are approaching that, depending on how calculated.
Also considering with pension values the 2M number could be much higher. You have a very good chance getting there yourself.
Yeah, I’ve heard that every 25 years into a gov’t DB plan is worth about $1 M – give or take – rule of thumb. Retirees with x2 DB plans with >25 years into them don’t have any idea by and large how good they have it.
If we worked at our current employer until age 65 each I have no doubt my wife and I would have >2M. But, that’s not our plan working full-time for another 20 years. There is far more to life than working.
Yeah, when I consider my wife has collected a quarter of that from her non indexed pension before age 60 with 30 yrs, that seems very reasonable.
Everyone is going to have different ideas on work. However my idea was more like what you’re saying. Enjoyed it while I was doing it (mostly) but preferred to leave earlier with less. Same with spouse.
I’m getting to the point whereby I can’t even begin to quantify what my personal health is worth. I should always think this way I know.
I find it becomes more precious as the years go by, and really appreciate what I can do now and how long I might have to continue being active and doing what I really want.