Just between us, your generation has had it tough, hasn't it?
Many people think so. I was reminded of this after I scoffed in print at the need for increased contribution limits to tax-free savings accounts. A senior citizen slammed me for ingratitude. "Those lucky enough to be working with all the RRSP advantages that we never had are just mean to begrudge us old folks that little bit of comfort," the reader told me.
Maybe so, but every generation has its own tale of woe.
For instance, a Gen X mom at my daughter's school lambasted me a few months ago for retirement savings advice that she says is madly unrealistic for her age group. She told me it might be nice in theory to save 10 per cent of her income, but given Toronto's exorbitant home prices, as well as daycare expenses, she and her husband find themselves with little left over despite a six-figure household income. "You're living in the past," she told me.
From now on, my working theory is this: No matter which generation you belong to, you will feel that you have had a rough ride. And you're right.
If you're in your 80s or above, you witnessed a depression and a world war. If you're a bit younger, you struggled to raise a family during the stagflationary 1970s.
Even baby boomers, the most fussed-about generation of all, may be able to join the pity party. Late boomers endured nasty recessions in the early 1980s and 1990s, then were blindsided by the financial crisis in their prime earning years.
Of course, Gen X and millennials have had their own battles to fight. Both groups have confronted soaring home prices and university tuition, as well as a cutthroat job market.
So henceforth let it be resolved: We are all financial victims.
The question is whether our sense of victimization reflects something truly unjust. That is exceedingly difficult to prove.
For all the gnashing of teeth about slowing income growth, the median net worth of Canadian households was almost 80 per cent higher in 2012 than it was in 1999. Every age group, from under-35s to over-65s, made gains during that period, according to Statistics Canada – with seniors making the biggest gains of all.
So why so much generational outrage? Much of it arises from failing to take into account the different phases of a financial lifetime. This is something that Malcolm Hamilton, the retirement expert, has long highlighted.
Start with a hypothetical but typical Gen X couple in a large city. They both work and make a combined $140,000, on which they pay taxes of roughly $30,000. Then come daycare expenses of, say, $10,000, other kid-related expenses that probably total about $10,000, and a hefty mortgage that eats up about $25,000 a year. After all that, they're left with about $65,000 a year.
But that's not the end of it. Since they both work, they need a second car, which means about $10,000 a year in added expense. They also strive to contribute to their RRSPs, to the tune of about $5,000 a year. That leaves the adults with around $50,000 a year to spend on themselves.
If things go as planned, this couple will hit a patch in their 50s when their kids are raised and their mortgage is paid. Their disposable income may leap above $100,000 a year. But they are likely to pour much of their sudden "wealth" into a last-ditch, frantic attempt to build up their retirement savings, so they won't feel rich at all – just the opposite.
In retirement, their income will plunge. However, the fall may not be that painful. Canada Pension Plan and Old Age Security are likely to provide them with about $30,000 a year. Meanwhile, many of their expenses – kids, the mortgage, the second car – will be gone.
Even better, their savings will have grown, especially if they use most of that extra cash flow in their 50s to augment their nest egg.
Let's assume they can generate at least $24,000 in investment income every year, bringing their total income to $54,000 a year. If they split that income more or less evenly, their combined after-tax income will be around $47,000 a year – remarkably close to what they were spending on themselves during their working life and no cause for alarm at all.
Despite that, they may feel like victims: When they're young, they don't have enough money to save. When they're a bit older, they have to save too much. And when they're retired, their nominal income appears scanty.
But what they're experiencing isn't injustice: It's simply the normal ebb and flow of a financial life. That's something for all of us would-be victims to keep in mind.