Retirement takes up a lot of space in society’s consciousness. It dominates the financial stories we tend to hear about. That is what we are all mostly saving for right? Retirement. Talk about retirement is particularly prevalent right now as the deadline for RRSP contributions for the 2015 tax year is fast approaching and so talk of whether to contribute to an RRSP or not is a daily question for some people right now.
What encourages people to save for retirement? I think the main motivation for people to save is fear based. The stories that seem to stand out are that people are not saving enough for retirement, as a collective society we are headed for financial difficulties and there are going to be a bunch of seniors living on the streets eating cat food.
Now, don’t get me wrong, there are a lot of very poor and vulnerable seniors out there. It is a scary thought to think that you could end up a senior with no savings and no ability to earn more money. I see seniors in this situation. I volunteer with the Community Volunteer Income Tax Program. Last year I completed 44 personal tax returns for low income seniors and the highest earner in the bunch made $28,000 for the year. She was rich compared to all the other people I helped.
Last week I went to the orientation for the senior’s centre where I volunteer. I work as an outreach worker so do not see what goes on in the actual clinic, but apparently, there is a line up out the door and around the corner for most of tax season. The criteria for having your taxes done for free is that you must earn less than $30,000 for the year, but again, this is high for most of the people in that line. The majority earn basic Old Age Security benefits (approx $6800 per year) and some have CPP (maxes out around $13,000 per year). So – if you worked all your life and contributed to CPP and you have no other savings, then you will be earning about $20,000 per year. Not a lot of money to live on. Do you rent in Vancouver? Well, that will eat up your CPP. Unless you are like the senior I helped who was still living in her apartment that she had in the 60s. She was only paying $750 per month for a big bright one bedroom. But I think that is a rare situation.
There is something else I notice about the seniors that I am helping. They are all in a similar financial situation but they couldn’t be more different from each other.
There is one lady I help who has lived in subsidized housing for the past 20 years. She moved in when her husband died suddenly of a heart attack and she discovered he had gambled away all their savings. She was 65 at that point, had not worked her entire life and had nothing other than about $20,000 she had inherited from her mother. She has since lent that to one of her children who now no longer talks to her. Oy, as my friend would say. This is a terrible situation and everytime I see her (I have seen her three times now), she reminds me of it. It is the daily story that goes on in her head.
The other thing I notice about her though is that she is very put together. She looks amazing for an 85 year old. She gets around easily, seems in great shape, has a fantastic place – it is very cute and in a great location. She has grandchildren and great grandchildren that visit her but she is not focusing on those things. She is focusing on her story and I can see the worry and stress emanating from her face.
I helped another gentleman at the same housing complex. I actually do not know what his story is. How did he end up as a senior living in subsidized housing? I don’t know. He offered me tea while I prepared his return and we talked about the music we like and the hobbies we have. He had a dog that he tries to walk every day, though walking is getting hard for him. He seemed positive and upbeat.
What is the financial difference between these two seniors? Nothing. They both have very similar financial situations and they are both coping and living within very fixed budgets.
Yet, they are living very different stories.
This is what I notice of all the people I do taxes for. They all make about $15,000 per year on average, they all have some form of subsidized housing and they are all managing to get by. They are all in financially precarious situations and yet they are all somehow managing to survive in those situations.
We all find a way of coping with what we are given. The way we choose to cope and the stories we tell ourselves are what makes a difference to how we perceive our lives and our present moments.
Most of us will eventually retire. There will come a point where we just are unable to earn money or work.
I do recommend financial planning for this day. It is easier to remain positive when you feel like you have some financial control over your life. That said, a person can financially plan without doing it out of fear. Stop telling yourself the story that you are going to be destitute or poor. It is the stories that we tell ourselves that impact our lives the most, not our actual living situations.
Next week’s topic? How to start planning for your old age when you don’t think you have enough money to retire on. It’s never too late to change and take control of your life.