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Ted Rechtshaffen

Financially, the next generation is on its own Add to ...

If you are 30 years old today, whom can you count on for your retirement?

You can’t count on the government because they won’t have any pension money after the baby boomers draw out their full amount. You can’t count on your company, because they are cold mercenaries – and you won’t be with them in 10 years, anyway. It turns out that you can only count on yourself.

It wasn’t always this way. Let’s look at your grandparents and parents. Your grandparents may just have had the following background:

1) They grew up poor. 2) They believed that "a penny saved was a penny earned." 3) They were fearful enough of how quickly things can change that they never overcame their fear of running out of money – no matter how much they had. 4) Debt was their enemy. 5) They never spent much on themselves.

I call this group Classic Canadian Retirees. Most of us know someone that fits into this group.

The good thing about this group is that they are responsible and independent. No need to worry about how to help them out financially. They don’t need our help.

The bad thing is that this group missed out on many things. They could easily have spent more on themselves and possibly have enjoyed their life more. They could have helped others in need a bit more but they usually didn’t because they were too afraid of not having enough themselves. They could have paid less in taxes, if they were more realistic about their financial future.

Somehow this group gave birth to the Baby Boomers.

Like all large groups, no one label can properly define them, but as a group, the Baby Boomer is very different than the Classic Canadian Retiree. From a financial perspective they have these characteristics:

1) They grew up middle class (or wealthier), with few or no financial crises in their childhood. 2) They believed that a "penny saved won’t make much of a difference." 3) They believe the future will end up OK – so no need to save for a disaster. 4) Debt is OK. 5) They spend a lot on themselves.

The good thing about this group is that they help to keep the economy going. Many have had good careers and incomes, and should have enough to carry them through. Besides, if they don’t, they will likely inherit from their Classic Canadian Retiree parents.

The bad thing is that this group may not be okay – time will tell.

As a 30-year-old, we know that you will likely have to work longer and put more into pension benefits, in order to keep the Baby Boomers in a decent retirement. It is possible that many outstanding tabs from your parents will be discovered over time, and the only ones left to pay them will be you.

If I had to guess, your generational characteristics may look like this:

1) You were wealthier in childhood than adulthood. 2) You believed that "a dollar saved is the right thing to do." 3) You were fearful enough of how quickly things can change that you never overcame your fear of running out of money – no matter how much you had. 4) Debt was a necessary evil. 5) You never spent too much on yourselves – because you couldn’t.

You may share a number of characteristics with your grandparents – but I fear that your financial future will actually be much tougher than theirs.

My recommendation to you today would be the exact opposite of what I recommend to your grandparents. You should save a little more, spend a little less, and invest with a long-term outlook.

When it comes to your retirement, you are on your own.



Ted Rechtshaffen is president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He has an MBA from the Schulich School of Business and is a certified financial planner. He was vice-president of business strategy at a major Canadian brokerage firm.

Follow Ted on his blog at The Canadian Financial Planner.

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