A new problem – Saving too much for retirement

It’s the end of the 2022/23 RRSP season. If you’re over the age of 25, this likely isn’t a new experience. The ads and reminders to top up your retirement accounts are endless, and it seems like a mad dash to the March 1st deadline. Being the diligent investor that you are, you’ve maxed out your Tax-Free Savings Account and either set up monthly savings or contributed a lump sum to max out your RRSP contribution for the year. So, you are doing everything you should be, right? Probably.

But, what if I told you that there is a new problem arising in personal finance. What if you’re saving TOO MUCH for retirement?

That’s right! You’ve worked hard your entire life, stocked away your savings diligently so that one day you can live on easy street and travel the world – or at least that’s what you’ve planned.

It’s the concept of delayed gratification at its core; putting away money today during my working years so that years down the road I can finally enjoy retirement. But it really makes me wonder, are retirees really enjoying their fruits of their labour to its fullest?

I look at my own parents as an example. (Hi Mom, I know you’re reading this and I love you!) My parents worked incredibly hard to put us through school and save for their retirement. Now at age 65 and 68 I am noticing they really hesitate to spend and enjoy their savings. They are not alone. Layer on the effects of a 2 year pandemic where spending for enjoyment was limited. This only increased Canadians’ savings to historically high levels.

When you go from the mentality of ‘save, save, save’ from the age of 25 to 65, it’s not like a switch flips to make it simple to turn off that mindset to that of ‘spend and enjoy’ your wealth. I see this now more than ever in my work with clients and I know I am not alone. Countless studies are showing that retirees’ net worths are actually growing during retirement and consumption, and possibly enjoyment, is at historically low levels.

So, how could you take a more balanced approach? Maybe the traditional mindset of working tirelessly, not taking that extended vacation or sabbatical in an effort to bolster up your retirement savings every year of your working life needs a revamping? I personally believe it does. We are now living longer than ever and more and more Canadians are pushing back retirement to either work longer or part time. Why? It could be because they haven’t saved enough. Or they just really love what they do and have no plans of slowing down – and that is okay.

There is no one size fits all approach to saving for retirement, trust me. I think it’s the psychology of saving for tomorrow vs. spending today that needs work.

We are taught from a very young age that saving, cutting expenses, and limiting ourselves as the only way to build wealth. How many headlines shout strategies to reduce spending by cutting out your favourite Starbucks drink or cancelling Netflix and limiting our lifestyle at the expense of a life with pleasure.

While saving is incredibly important and something that I both practice and preach – we need to learn how to spend too. Having worked with clients in my day job as a CERTIFIED FINANCIAL PLANNER™ for 10 years, I can confidently say that most affluent Canadians are great at saving, and not so good at experiencing without worrying.

What if I told you that I have personally witnessed clients pass away with 7 figures left in their retirement accounts? Sure they will pass on an incredible legacy for their family, church or charity and we have built that into their plan. But did they enjoy life to its fullest?

What if they spent a bit more to experience the joys in life, instead of putting it into their bank accounts? Would they have been able to buy back more time? Would they have created more memories with their family? Could they be happier?

I’ll be thinking, and writing, in the months to come about what it truly means to live a rich life.

And (hint, hint) what if you don’t need to be a millionaire to live a rich life? Would you be curious to know more about why I think it’s about mindset, not net worth? Stay tuned.

​Yours in wealth and health,
Brandon Yanchus​