We use the term "retirement" frequently but don't often consider what it means to each of us. What does retirement actually look like? What are we saving for?
Advertising tells us it's a sandy beach, a golf membership, or a full-time move to the cottage. It certainly can be that, but for many of us it'll look different. Perhaps we'll pick up some freelance work, volunteer, or turn a hobby into a business. That unfulfilled dream you have of starting a band? Maybe this is the time to make it happen!
It's important to remember that we each get to decide what life after full time work, or retirement, means to us. We get to choose what we're saving for.
Financial journalist Bruce Sellery is all about this message and we knew he'd be the perfect person to interview for this post. He's written two bestselling books on personal finance, and you may have read his column in Money Sense or know him from TV (he hosted Million Dollar Neighbourhood on the Oprah Winfrey Network!).
He encourages us to take a step back and decide what our money is for, saying if we don't, we'll find ourselves conforming to standards set by society or our parents. That leads to some unhappy surprises in retirement.
Having a purpose for your money – let's call it a vision for your savings – motivates you to stay on track. It ensures you're creating a life that truly makes you happy. A future you'll look forward to!
Kate Smalley, Nest Wealth: You like to start by asking people, 'What is your money for?' Why is it so important that we each decide this for ourselves?
Bruce Sellery: Context is everything. It is the 'setting in which an event occurs'. The way to come up with one for yourself is to answer the question, 'What is my money for?' I don't mean the function use of it, like the mortgage or Merlot, I mean the purpose of it. My answer is adventure. My money is for adventure. So I do all the boring stuff that needs to get done so I can have more adventure in my life.
There is always a context. It is either one you created to be inspiring and empowering, or it can be the boring, generic disempowering one society doles out to everyone. Your choice.
Kate: There's a disconnect, as you've talked about, between what retirement looks like and what advertising tells us it looks like. What can we do to figure out what it means for us personally, so that we don't end up planning our lives around a retirement lifestyle that sounds good on paper, but in practice doesn't make us happy?
Bruce: First, ask yourself what you want to do in retirement. Do you want to travel, take up hobbies, contribute to your community, spend more time with family? Brainstorm answers in all these areas, knowing that what you actually do will be different from what you say today and that that's okay.
Second, when you get closer to the day when you're no longer drawing a paycheque, test-drive your ideas for a few weeks. Do you like living at the cottage? Do you have enough to occupy your time? Do you have enough people around you?
Kate: Since it's RRSP season (and you literally wrote the Guide to Rockin' Your RRSP), we wanted to ask what's a common way you see people misusing their RRSPs?
Bruce: Canadians are not making good use of the RRSP. Only 25% contribute to their RRSP, and the value of those contributions is low. This is a big missed opportunity to defer income tax into the future, and take advantage of the magic of compounding.
It is very difficult to take money away today to save for your future self tomorrow. But it is worth it.
If you want to hear more from Bruce, and we know you do, check out his new podcast Moolala: Money Made Simple.