Personal Finance

Gen Y Saving Earlier and Planning Now for Retirement

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  • May 22nd, 2013 8:41 am
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Deal Addict
Feb 15, 2013
2445 posts
573 upvotes

Gen Y Saving Earlier and Planning Now for Retirement

The Spring 2013 Merrill Edge Report, a semi-annual study of the financial concerns and priorities of the mass affluent (consumers with $50,000-$250,000 in investable assets) released today by Bank of America shows the mass affluent, despite the recession, are making saving for retirement a top financial priority. From cutting back on luxuries to funding less of their children’s education, mass affluent are making significant trade-offs for a more secure financial future.

“Many mass affluent, particularly young investors, are focusing on their retirement goals by saving earlier and planning now for the lifestyle they want to live during their retirement years,” says Alok Prasad, head of Merrill Edge. “As markets continue to improve and the mass affluent invest optimistically for the future, they will seek tools and guidance that help them best pursue their long-term retirement goals.”


Optimistic About Their Financial Futures, Gen Y Saving Earlier and Planning Now for Retirement | PYMTS

In addition to saving more aggressively and earlier, Gen Y is also optimistic about their retirement savings potential. Today, Gen Y mass affluent believe they will save on average nearly $2.5 million for their retirement, compared to those working mass affluent ages 51-64 who anticipate saving just $260,000.
20 replies
Member
Jan 20, 2004
436 posts
143 upvotes
Toronto
I think you should clarify your title to read "Gen Y mass affluent Saving Earlier and Planning Now for Retirement" which I think they mean "rich young people Saving Earlier and Planning Now for Retirement'.

The normal young people are more likely to relate to this article:
The No-Limits Job:22-year-old willing to work 22-hour days for $22,000 a year
But I forgot everyone on RFD makes >100K/yr
;)
Banned
Sep 29, 2012
1269 posts
95 upvotes
Toronto
Gen Y here.
I don't see myself moving out of my parent's home for a solid 6-8 years so...
Deal Guru
Dec 11, 2008
13064 posts
3756 upvotes
I'm center of Gen X and Y (1982) and probably don't plan to save $2.5M. Maybe $1.4M on my own, plus spouse, sure $2.5M is possible. But having a DBP allows me some flexibility.
Jr. Member
Nov 22, 2012
136 posts
34 upvotes
Generally speaking, people with money save, people without money spend to try and appear like people with money. Nothing new here, might even be a little more exaggerated this generation.
Member
User avatar
Jul 25, 2008
369 posts
5 upvotes
I know I am. I don't think our generation can depends on the same comforts that others enjoyed (DBP, early retirements, govt handouts).

Besides, if you have the ability to save for your own retirement, you absolutely should. Who wants to wait until they are 67 to live on the bare minimum the govt gives you?
Sr. Member
Feb 28, 2013
945 posts
82 upvotes
Toronto
By the time us generation y-ers are in our 60s the government won't have much left to hand out. I save for retirement even though I can't really afford it, okay I can but, I can't afford retirement plus a house, family and random junk and vacations. Luckily, I don't want kids so, that saves me plenty.

I feel bad for my peers who have the irrational need to have children but, if there is any government money for me in my 60s, it's because my peers are changing diapers now so, while they become boring as hell to hang out with and waste their money on raising kids, I may yet benefit. :p
Deal Addict
Jun 6, 2007
1025 posts
139 upvotes
KINGSTON, Ontario
I'm 28, not sure what that makes me, but I have to ask, are Gen Y'ers saving for retirement or are they saving for ever-more-expensive housing? As house price increases put home ownership out of reach for Gen Y'ers, you bet they'll spend more time saving.

Purchasing power of the Canadian dollar is higher than its ever been (i.e., a combination of strength compared to a basket of other currencies and the important accessibility of inexpensive SEA material goods). Consequently, a frugal Gen Y'er will have more disposable income than a frugal Gen X'er based simply on the difference in the cost of fulfilling basic material needs.

All to say, Gen Y'ers may not be planning more for retirement because they are more conscientious, but instead because of other circumstantial factors, such as the above.
Newbie
May 20, 2013
17 posts
Toronto
I am young financial advisor and have been trying to motivate and encourage a lot of Gen Y'ers to start saving money. Whats sad is that they dont realize that they have time to actually save and earn a good return on their investments. If a 25 year old were to save $150/month until they retire and have that invested, its possible for them to have $1 Million saved up for their retirement. This doesnt even take into consideration any increase in savings. Saving $150/month is definitely possible!

I currently put away $300/month earning 12% year. Like I said, I am an advisor and I practise what I preach. It's possible my friends, just got to start when you are young!
Financial Advisor
Member
Feb 4, 2009
378 posts
78 upvotes
rsholanki wrote: I am young financial advisor and have been trying to motivate and encourage a lot of Gen Y'ers to start saving money. Whats sad is that they dont realize that they have time to actually save and earn a good return on their investments. If a 25 year old were to save $150/month until they retire and have that invested, its possible for them to have $1 Million saved up for their retirement. This doesnt even take into consideration any increase in savings. Saving $150/month is definitely possible!

I currently put away $300/month earning 12% year. Like I said, I am an advisor and I practise what I preach. It's possible my friends, just got to start when you are young!
Do you think you can really sustain 12% a year for a 30-40 year period? If you go with something more realistic like 6% then 300/month will net you around $600k in 40 years.
Newbie
May 20, 2013
17 posts
Toronto
DarkMemoria wrote: Do you think you can really sustain 12% a year for a 30-40 year period? If you go with something more realistic like 6% then 300/month will net you around $600k in 40 years.


Since I am an advisor and this is what I do everyday, I believe its possible to avg. out to a 12% return per year for a 30-40 years. There are some mutual funds that do this already, and we have clients that easily double their money in 6-10 years. Mind you there will need to be some changes a long the way ( a lot) but its definitely possible.

Worst case scenario i earn 6% like you mentioned and end up with $600K, which is still a great return for having only invested $72,000. Time is money, I only wish more people, let alone young people, did this. Problem is people dont seek proper advice, they think if they can google it they can do it! If that were true, I'd also be a doctor, lol

My advice: Start early, stay consistent!

Cheers!
Financial Advisor
Deal Addict
Aug 28, 2010
3521 posts
1223 upvotes
Halifax
In case anyone is interested in this sales pitch, you really should run away from any advisor that tells you they can get you a 12% annual return for 30 to 40 years.
Member
Feb 4, 2009
378 posts
78 upvotes
rsholanki wrote: Time is money, I only wish more people, let alone young people, did this. Problem is people dont seek proper advice, they think if they can google it they can do it!
What do you think a financial advisor can bring to the table for a young person that Google cannot? 3-4 hours of reading up on couch potato portfolios, e-series and ETFs will benefit most young people much more than visiting an advisor and being sold 'top performing' mutual funds with 2-2.5% MER.

I see the value of an advisor for people with complicated and large portfolios, but expense tracking, budgeting and long-term investing are easily accessible concepts for young people with low networth if they are willing to read and learn.

Here is a really good article that shows that 7-8% would be a more realistic figure. Also, it will introduce the concept of a constant 7-8% growth per year versus 'averaging' 7-8% growth per year - a big difference that people may not realize.

http://petetheplanner.com/site/2013/01/ ... vestments/
Deal Addict
Dec 23, 2002
1514 posts
16 upvotes
North York
FunSave22 wrote: In case anyone is interested in this sales pitch, you really should run away from any advisor that tells you they can get you a 12% annual return for 30 to 40 years.
LOL, your $1,000 investment will have turned into $100,000 in 40 years at ~ 12% a year.. a nice 100 bagger
Newbie
May 20, 2013
17 posts
Toronto
DarkMemoria wrote: What do you think a financial advisor can bring to the table for a young person that Google cannot? 3-4 hours of reading up on couch potato portfolios, e-series and ETFs will benefit most young people much more than visiting an advisor and being sold 'top performing' mutual funds with 2-2.5% MER.

I see the value of an advisor for people with complicated and large portfolios, but expense tracking, budgeting and long-term investing are easily accessible concepts for young people with low networth if they are willing to read and learn.

Here is a really good article that shows that 7-8% would be a more realistic figure. Also, it will introduce the concept of a constant 7-8% growth per year versus 'averaging' 7-8% growth per year - a big difference that people may not realize.

http://petetheplanner.com/site/2013/01/ ... vestments/
I am not looking to start a debate so Ill wrap things up clearly as possible.

1. Financial Advisor (like myself) works with clients to help the save, plan for different events in their life, and keeps them on track with these goals. Its too call you to remind you that you need RRSP because last years you paid a lot in taxes. We also educate and provide advice on many concepts: Investments, Insurance, Mortgages and Tax Planning. Not just about investments. Its life planning/coaching. Also, not everyone understands "finance" even if they search it, plus unfortunately google doesnt have everything. Lastly, I can spend 4 hours self-diagnosing myself but that doesnt make me qualified like a doctor.

2. Peope shouldnt be afraid of MERs. Posted returns are net of MERs. I rather a fund that has an MER of 5% but still earns me 8% returns, then a fund that has a 1% MER that earns me 6% return. 8%>6%

3. Lastly, I am not going to argue "realistic" figures, as that is subjective and is irrelevant to what the focus of this thread is about - Gen Y saving early.

What I do know is that saving when you are young and doing it consistently is beneficial to anybody regardless of the return they earn. Some will earn 2%, some 10%, or somewhere in between. Starting early is the key to focus on here. I wouldnt have over 500 clients if there wasnt a benefit in what i do, that everyone regardless of age can benefit from

Cheers my friend!
Financial Advisor
Deal Addict
Sep 19, 2009
2280 posts
991 upvotes
Toronto
confused wrote: LOL, your $1,000 investment will have turned into $100,000 in 40 years at ~ 12% a year.. a nice 100 bagger
When you chase a 12% per year return you will probably transform your $1,000 investment in $100 quickly :) These days the risk-free rate of return on investment is somewhere around 1.5%. The higher the ratio between your target and the risk-free rate, the lower the chance to preserve your capital.
Deal Addict
Mar 27, 2003
1542 posts
986 upvotes
Vancouver
FunSave22 wrote: In case anyone is interested in this sales pitch, you really should run away from any advisor that tells you they can get you a 12% annual return for 30 to 40 years.
Guess I should send him a PM. Fired several financial advisors over the past decade. Need a new b*tch.
Moderator
May 28, 2012
12484 posts
5278 upvotes
Saskatoon
rsholanki wrote: I am not looking to start a debate so Ill wrap things up clearly as possible.

1. Financial Advisor (like myself) works with clients to help the save, plan for different events in their life, and keeps them on track with these goals. Its too call you to remind you that you need RRSP because last years you paid a lot in taxes. We also educate and provide advice on many concepts: Investments, Insurance, Mortgages and Tax Planning. Not just about investments. Its life planning/coaching. Also, not everyone understands "finance" even if they search it, plus unfortunately google doesnt have everything. Lastly, I can spend 4 hours self-diagnosing myself but that doesnt make me qualified like a doctor.

2. Peope shouldnt be afraid of MERs. Posted returns are net of MERs. I rather a fund that has an MER of 5% but still earns me 8% returns, then a fund that has a 1% MER that earns me 6% return. 8%>6%

3. Lastly, I am not going to argue "realistic" figures, as that is subjective and is irrelevant to what the focus of this thread is about - Gen Y saving early.

What I do know is that saving when you are young and doing it consistently is beneficial to anybody regardless of the return they earn. Some will earn 2%, some 10%, or somewhere in between. Starting early is the key to focus on here. I wouldnt have over 500 clients if there wasnt a benefit in what i do, that everyone regardless of age can benefit from

Cheers my friend!
The problem is that MER's are taken off from the very start...it doesn't matter if the fund makes money or loses money, the fund manager gets paid. I don't have a problem with compensation, but there are some funds that have very high fees that don't add much value to the consumer. No equity product comes with any guarantees, and stocks have been all over the place lately. I imagine if the really expensive funds always out-performed the cheaper ones, index funds wouldn't be nearly as popular as they are.
Deal Addict
May 3, 2006
2505 posts
41 upvotes
Milton
I highly recommend self directed investing with td Waterhouse e-series funds...

My USA e-series index and international e-series index are both over 20% this year

And you save a ton on MERs, I'm sitting around 0.67%
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Sr. Member
Aug 29, 2004
952 posts
271 upvotes
beerbaron105 wrote: I highly recommend self directed investing with td Waterhouse e-series funds...

My USA e-series index and international e-series index are both over 20% this year

And you save a ton on MERs, I'm sitting around 0.67%
Yup.

I have two portfolios for retirement - the conservative one and the "risky" one. I'm a pretty good little trader, buying on primarily on value + dividend.

Buy broad based canadian dividend ETFs and sock that away. The $500/mnth you can find in your early 20's will be huge down the road.

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