Why saving too much for retirement is just as risky as saving too little | General financial discussion | Discussion forum

Thanks, Top It Up.

For those wanting to read the actual academic literature from Morningstar referenced in the article, I've found it for you:

http://video.morningstar.com/c.....010517.pdf

Cheers,
Doug

The article's logic is plain silly.

If you saved enough for retirement to live a comfortable life, lived that life and died before running out of money, why would you care what happens with remaining money?

Listen, I would rather have a billion at retirement, spend 10 million every year on myself, die at the age of 95 and leave 700 million for whoever, than die penniless after spending last 30 years of my life counting pennies from CPP+GIS+OAS and not having enough.

If someone gifts me $1B for my 65 years birthday, I won't be having regrets on a death bed my remaining $700M are going to waste.

How about you?

Alexandre said
The article's logic is plain silly.

If you save enough for retirement to live a comfortable life, lived that life and died before you expected, why would you care what happens with remaining money.

Listen, I would rather have a billion at retirement, spend 10 million every year on myself, die at the age of 95 and leave 700 million for whoever, than die penniless after spending last 30 years of my life counting pennies from CPP+GIS+OAS and not having enough.

If someone gifts me $1B for my 65 years birthday, I won't be having regrets on a death bed my remaining $700M are going to waste.

How about you?  

I’m with you!

This was one of those News articles than came on my iPad. I read a bit and blew it away.

The only value that it may have had, if it did have, was to show how much tax you would have paid.....but like you say....who cares if you get to live comfortably!!!

The only one article I have read lately is about having a high RRIF or RRSP balance and taxation if you die without a spouse that is the successor to your RRSP or RRIF. And the income tax paid by the estate can be around 49%......now that is too greedy! And it only appears to be recent that Advisors are now “on to” winding down RRIF funds by taking more than the compulsory amount while keeping in your lowest income tax bracket. THAT MAKES SENSE!

I am retired and even though I don’t need my RRSP funds yet I have been winding them down for years to fuel my TFSA.

So if and when I need my TFSA funds......I would want the interest only first.....and if I did not need it I would put the interest back into a 1 Year GIC. Can anyone tell me why I can’t do that at Oaken! Benjy...are you reading this?

Financial advisors, etc don't want you to spend your dough, the more they're "managing" for you then the more fees they're making. So the whole industry is about saving/investing, then later it morphs into "succession planning" or some other similar term. No doubt they got their eye on the next generation of clients.

Doug, it wouldn't be the government being generous with that super-donation credit but the other taxpayers of Canada. When you propose more gov't spending where should the extra money come from? Increased taxes elsewhere? Increased national debt? Cutting spending in which other programs?

Top It Up, I agree, but my dilemma is now that I'm retired I find the grand trips, winter home in Arizona, etc I was saving for all these years are not what I want at all, I treasure all the little daily pleasures around home that happen to be pretty much free. I don't want to do stuff that really doesn't interest me that much just because I have the money to do it or because of the marketing of those who are trying to sell me the cliché, template happy retirement lifestyles. So now (unexpectedly) my heirs (and some spouses, some of whom are not my favourite people but would be quite happy to get their share of MY dough) are going to get the benefit of this money I don't need......though I've told my wife if she dies first then at some point I'll need 24/7 care at home from a revolving group of (young & attractive) caregivers/nurses, so maybe it will all be spent after all!

Bill said
Doug, it wouldn't be the government being generous with that super-donation credit but the other taxpayers of Canada. When you propose more gov't spending where should the extra money come from? Increased taxes elsewhere? Increased national debt? Cutting spending in which other programs?

Good point, Bill. Where to begin...first, I would drastically cut the size of the federal public service. I would "go to war" with the militant public service unions. If they don't like what we've put on the table for a contract, then they can stay on the picket lines - for a year, if that's what it takes. A lot of what government does can be automated. AI could be leveraged much more extensively.

I would eliminate the CRTC, shifting responsibility for regulating telecoms and cell phone towers to Industry Canada - where it should be. CanCon rules are outdated. Look at the money Netflix voluntarily committed to spending on Canadian programming - it exceeds the collective annual contributions Corus and Bell Media make.

I'd eliminate the Canadian International Development Agency and that needless bureaucracy and instead just direct our foreign aid funds directly to the good work of foreign aid agencies through the private Humanitarian Coalition and other UN organizations.

I'd eliminate the Canadian Polar Commission, dramatically cut what I view as dubious funding to the Canadian Space Agency, end Canada's system of supply management, sell of CBC's television broadcasting assets to the private sector and put those funds in a perpetual endowment fund to help fund a dramatically reduced publicly funded CBC that would just consist of its Radio and Podcasting divisions, and dissolve the useless Canada Infrastructure Bank that has done nothing and instead expand the mandate of the Bank of Canada (if needed).

I would move the federal public service to a defined contribution pension plan.

On taxes, I'd cut the second lowest marginal tax rate a further 0.5% to 20% from 20.5% and raise the GST, over a five year period, by 2% to it to the 7% level where it should be. To offset that, I'd raise the federal basic personal exemption to $20,000 over 5-10 years. I'd eliminate the tax deduction on RRSPs and instead make them tax-free retirement vehicles (i.e., withdrawals would be tax free) - with a catch. They would be locked in until age 55, at a minimum, though I would still keep the Home Buyers Plan and Lifelong Learning Plan.

I would also continue cutting needless boutique non-refundable tax credits.

Cheers,
Doug

I agree, Top It Up, aside from a few bucket list things most people tend to just keep doing the same stuff except not have to go to work, the minority make drastic, permanent lifestyle changes. I've always had a bunch of stuff I like to do, now I just do them all the time. Plus I consciously chose to live somewhere where nature is out my back door so I've no desire to travel to do the same, get out in nature by foot or bike, which is pretty much all I want.

Doug, good luck with that public sector thingy, a certain party finds out regularly what happens next election when they dare take on public unions - again, that's probably too much politics.

AltaRed, that's an option, but for a whole bunch of reasons I won't get into here I give zero to charity any more. I have given money directly to some individuals in need and you're right, I could ramp that up. In my life my observation is 99% of the time with given money it's easy come, easy go, and I don't want that for mine. I've come to the conclusion I'm keeping it, there will likely be at least one upstanding child or grandchild in my life when I'm old and any dough I haven't spent on my own care and companionship I won't mind if they get a bunch. Or I'll take up gambling in my last days, though with my bad luck I might win!

hotmony, very true about others having ideas for your money and trust no-one re your money, we're on the exact same wavelength there!

One of my sons loves his work (a lot more than he lets on), enjoys piling up his money, but being a millennial (i.e. no way he's going to live like a boomer) claims adamantly he's quitting when he's got enough to live on modestly for the rest of his life. It seems that'll be when he's about 35, I'll be interested to see if he actually does.

My "problem" was I enjoyed working into my 50s, had a rewarding career, so I didn't quit even though my bank account was saying I could.

Bill said
AltaRed, that's an option, but for a whole bunch of reasons I won't get into here I give zero to charity any more. I have given money directly to some individuals in need and you're right, I could ramp that up. In my life my observation is 99% of the time with given money it's easy come, easy go, and I don't want that for mine.  

Agreed we all have our reasons for doing one thing or another. FWIW, I don't agree with blanket cheques to charity either. BUT as one digs into specific things that is of particular interest to oneself, there are many 'one off' direct funding opportunities. These would be some examples if one is so inclined:
1. Becoming aware of a particularly talented music student in one's home town who has exceptional skill to become an important musician in the classics, but has no money to further his/her study in TO, or New York, or... Start sponsoring that person (I've seen some great talent in our non-profit community music school)
2. If one is animal inclined, fund that dog run at the local SPCA that the local SPCA needs so badly, or that operating room, or that structure to protect rescued horses from the elements.
3. Fund that bicycle repair station in an isolated area of one's favourite bike path (locally that would be the Okanagan Rail Trail or the KVR trail system). Or fund developement or upgrades of a section of the bike trail (as many of us have done with the Okanagan Rail Trail).

In other words, there are specific projects in areas where one has specific passion. Often groups have the volunteer labour to do something but not the funds for the goods necessary to undertake it.

In any event, these are the kinds of things I see myself funding as my travel interests wind down and I am no longer spending large sums every year on travel experiences. My two 40something sons don't need all (actually any) of the money I will have left, but of course will get meaningful amounts.

Doug, no jibe at millennials at all, just that I've heard some of them criticize boomer materialism and indicate that life's not about that for them - that's what the 60s hippies said too, not unusual for the young to not want to copy their elders, go for it, good luck with it. Once they get older some will notice every generation's the same, i.e. some go more for their society's "suggestions on how to spend your life" than others do no matter what generation you're part of, nothing new there. I'm on no other internet forums, etc.

A cornerstone of my son's philosophy is zero dependants, that includes plants. It also means zero committed relationships, and certainly no sharing of one address, from what I can see, i.e. that's the price of autonomy that he seems quite happy to pay it.

Re what to do, I agree, if you can't live your life in its various expressions without a commitment to be somewhere at some time then do it. Personally the lack of commitment is precisely what I treasure. Plus I've always enjoyed my own company over being with others - that might be a key, I seem to notice a big difference between social and non-social people in terms of non-working life happiness.

AltaRed, thanks for the ideas, if I ever get to the point where I feel strongly enough about not passing all my money to family I'll consider them. Except for the dog thing - I'm mystified by my society's obsession with dogs, especially when everybody talks about green this and green that yet they're apparently cool with the (99% unnecessary, non-essential, frivolous) pet industry's massive carbon footprint. It's a puzzle.