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Is it possible that helping people understand how much they need to save for retirement is preventing them from actually saving?

I just read an article that makes this case and I’m mostly persuaded. The argument is this: By telling people they need to save a million dollars for retirement or save enough to replace 70 per cent of their working income in retirement, we set high standards that often can’t be met. And so, some people give up.

The article I linked to just above reflects the U.S. experience, so some of the numbers and terms differ from what you’d see here in Canada. But the main insight is valid – people need encouragement just to save and invest intelligently. Bludgeoning them with thresholds and milestones they can be counter-productive.

A good example is the recent trend of setting guidelines for how much money you should have saved by a certain age. There are many routes to a comfortable retirement – starting in your 20s is great, but it’s feasible and sometimes unavoidable to begin later. In an expensive housing market, telling 30-somethings they should have two times their annual salary saved for retirement is almost pointless.

But that doesn’t mean we should do away entirely with guidelines about much to save. Around ages 45 to 50, it’s important to think about what kind of a retirement you want and then see if you’re on track to have the income you’ll need. Savings guidelines can help you see if you’re in good shape or need to save more.

Ultimately, though, we need people to save consistently for retirement. Making them feel bad because they haven’t saved four times their salary by age 45 isn’t the way.

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Looking Ahead: The Retirementality

That’s the name of my new podcast on retirement, which you can listen to here or download on iTunes or Spotify. There are three episodes, one aimed at millennials, one at Gen X and one at baby boomers.

Rob’s personal finance reading list…

How to be an executor

I once asked a lawyer specializing in wills what someone’s response should be if asked to be an executor for an estate. Her response, only sort of tongue-in-cheek, was to say ‘no thanks.’ Being an executor is a tough job. If you want to know what’s involved, check out this blog post.

The bargain guide to relationship breakups

The Sassy Investor blog on how to get over a breakup without resorting to excessive spending.

A smarter way to be generous

An investment writer on his plan to give modestly to charity today so he can invest his money and make more generous donations later when he and his wife die. Here’s my take on how generous Canadians are with charitable donations (not very, on average).

Cheap eats for budget travelers

For frugal travelers willing to make sacrifices to keep meal costs low. The author typically buys one meal out per day while travelling.

Today’s financial tool/app

The Investor Protection Clinic provides free legal advice to people who believe their investments were mishandled and cannot afford a lawyer. The clinic’s 2018 annual report is presented here because it includes a few stories about unscrupulous people and practices in the investing world. Be careful who you trust with your money.

Ask Rob

Q: Is there an estimate of how much the cost of long-term care would be for an individual aged 78 today with a life expectancy of 20 years?

A: Here’s a worksheet that will give you an estimate of costs based on your province and expected length of stay in a long-term facility. The Ontario government published these cost guidelines, which are current to July 1, 2018.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

What I’ve been writing about

  • Even the folks running pension plans think you’re not saving enough for your retirement
  • If households are this financially stressed now, how much misery is coming as rates rise?
  • What should Canadian investors do with their U.S. dollars? (for Globe Unlimited subscribers)

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