For many decades in Canada, the prevailing belief on retirement went this way. If you worked hard and put aside a modest sum of money each year – that savings, combined with the government’s pension plan, would provide a comfortable retirement. For many people, the plan worked perfectly – until it no longer did. The emergence of a global economy combined with other forces has overhauled almost everything we thought we knew about retirement planning. Still, many people – millennials included – continue to follow the same old, tired savings plan embraced by their parents. The problem is that what worked for your parents and grandparents is not likely to work for you.
Low Risk Tolerance, High Retirement Desire
Data obtained in 2018 from ongoing surveys conducted by the Canadian Millennial Report indicates that 75% of Canadian millennials have some savings, but burdened by feelings of uncertainty in a volatile world, very few are investing their savings. As a result, the hard, cold truth is that there is a very good chance that their risk aversion will lead to significant shortfalls when it comes time to retire. At the same time and perhaps ironically, this same generation regularly expresses a strong interest in retiring early. The FIRE (Financial Independence Retire Early) movement is fueled by practitioners with a strong online presence who advocate a series of steps designed to achieve financial independence before the age of 50. Absent a sound investment strategy that includes real estate, this is probably an unrealistic goal for most people.
Given the exorbitantly high cost-of-living in cities such as Vancouver, it seems that it is going to take a new, more aggressive approach toward wealth accumulation for millennials to enjoy the type of retirement that so many envision. Micro-investing in real estate through crowd sharing platforms is just one way for people with limited means to put their money to work earning more money. Until very recently, the financial barriers to real estate investing were simply too high for everyday people to hurdle. IMBY, in removing these and other barriers, has made real estate investment accessible to all.
Since people are living longer and continuing to enjoy active lifestyles well into their golden years, many will probably have to seriously consider delaying retirement rather than accelerating it. Many countries have already initiated the process of nudging the standard retirement age north of 65. In a 2019 article in “The Globe and Mail”, personal finance columnist Bob Carrick notes that “A lot of your feelings about retirement will be driven by whether you love, hate or tolerate the work you do.” Those of us who love our jobs are likely to keep working as long as our health permits, while those with negative feelings toward their profession and/or employer will find themselves in a race to the finish line. In his article “Don’t Rely on Retirement to Make You Happy” Carrick cautions his readers that early retirement may not be all it’s cracked up to be given “the importance of work in the lives of many people and how hard it is to establish a new identity in retirement.”
Whether you retire at 35 or 85, you are going to need income to supplement your Canadian Pension Plan (CPP). If you are not a trust fund baby and you envision a lifestyle with minimal stress, complete with travel and adventure (or even just some eating out), you are going to have to begin putting your money to work to create a reliable stream of passive income in your retirement years. The great thing about IMBY is that you can invest as little or as much as you want in projects that interest you and align with your own goals and aspirations. You probably can’t bank on building your retirement nest egg the same way your parents did, but you can look for new and innovative pathways to wealth – and craft a retirement plan more in tune with the world we live in now.