When I started saving using an RRSP, I was in my very early 20s. At the time, inflation was running at around 12 per cent (yes, really), and one of the first investments I made was a stripped bond paying 14 per cent for 30 years. (A dumb advisor subsequently convinced me to sell for the capital gain back when I was still young and naive and thought those people had my best interests at heart. But I digress.)
All the retirement savings calculators ask you to guess at stuff like your rate of return and inflation. Well, how could we possibly know this since markets change and economic conditions change? We can take a guess, but that's all we're doing.
And we should be prepared for the fact that when things do change, so will the projections.
If I had based my retirement planning on the rates of return and inflation of my early investment years, things would look very different from someone starting out now in our current low-interest-rate environment, particularly if we're both very conservative investors.
All this is to say forget about the experts, the projections, the calculators. There is no magic number that will ensure a safe and financially secure retirement. Each of us has a different life, different expectations, and different needs. We must figure out what will work for us as individuals and ignore the tempests in teacups regularly brewed to grab our attention.
Save because you know that you must save if you want to have some money in the future. And save as much as you can.
If you start small, so be it. Over time, grow your savings until you are putting away a solid amount every single month. Hey, this isn't rocket science. You'll only have in the future what you don't spend today.
Know that once you jump on the savings bandwagon, it's easy to get carried away. You may even find you want to stop spending money on the things that make life a joy. So when your partner suggests you head off on a lovely vacation together, all you can think about is how much money you'll be "wasting" because it won't be going into your retirement pot.
Give your head a shake. If you put all of your focus on your future, you'll be one miserable puppy to live with.You have to find the balance between having a great life now, and having enough to keep having a great life when you retire. And knowing how fast your money can grow, given enough time, will give you the confidence to have a life now and plan for the future. So that's what we'll talk about next.
Abridged excerpt from: Never Too Late published in Canada by HarperCollins Publishers Ltd. Copyright 2011by Gail Vaz-Oxlade. All rights reserved.