The predictions of 70% of pre-retirement income are unrealistic considering savings rates and return on investment

Everybody has different circumstances. You might want to work past 65 and you might want to retire early. The secret is to stop consuming beyond your means and save 20% of gross earnings.

When I was in my 30s, I read those financial planning formulas about saving to create an income of 70% of your pre-retirement income. I worried about that and saved in RRSPs only to have them wiped our periodically by market crashes.

Then 11 years ago at age 50 I retired. It was unscientific. No adviser would have given me the go ahead but I had learned a great secret: you are never too young to retire. The trick is to adjust spending to a much lower rate of consumption.

The second thing to learn is pick your jobs. There is busy work that pays no money. There are also projects that use your skills profitably. Try to avoid the busy work.

You can live on about $30,000 after taxes if you are careful. Many people in Canada live on much less than that. The trick, again, is to stop spending on every gadget they put out for consumers.

A good book to read is The Millionaire Next Door. The authors contend that most millionaires are not people who struck it rich but people who lived below their means and saved.

The authors ask you to consider that every new thing we purchase will be sold for ten cents on the dollar at an auction. 90% of what we spend evaporates. That might help to control purchases. Invest in things that appreciate like real estate as in your home. However, even real estate is not guaranteed as the US found out.

Most of what you read in the media is baloney from financial planners who want you to hand over your money so they can earn a fee. One day a young fellow who joined Rotary to get clients was telling me about his skill as a financial planner. Really, I said. Tell you what, I’ll give you some money to invest if you can guarantee me 7% income annually and you won’t lose the principal. He looked a little sad when he heard that. All he wanted was his 2.5% annually.

Of course, if you were really smart, you would now be ending 30 years of working in the public sector with a guaranteed pension.

If you want to read dire predictions of retirement calamity unless you give your money to a financial planner, try this story Baby boomer retirement may be a bust. The dumb part of this financial planner’s advice is that it’s too late for baby boomers. The horse is out of the barn on making a retirement income from investments.