You can read the entire article here and I highly recommend it, however I’ve summarized their advice into these bullet points.
A lot of their advice overlaps from one person to another so I’ve consolidated it a bit.
- Start saving early and save, save, save, no matter what.
- Pay yourself first (at least 10%) and automate it; there’ll always be a convenient excuse to not save.
- Time is your biggest asset and young people have a lot of it (compounding interest).
- Put all salary increases 100% straight into your retirement funds until they are maxed out.
- Keep a heavy stock allocation of 90% stocks with 30% in international funds until your early 40s.
- Contribute to your Roth IRA / TFSA because the money is tax-free upon retirement.
- When you reach your retirement age decrease your retirement funds to just 50% in stocks.
- Stocks are not as risky earlier on (when you’re young), versus when you get closer to retirement.
- Understand what and how your investments act and how to divest if need be.
- Be prepared to live a long life (up to 100 years old), so save and plan accordingly.
- Take care of your body / health and your relationships to those around you.
- You will need more money in retirement than you think.
- Set aside money for your children’s college education early on. (1)
- Take a course on retirement planning with a neutral organization. Don’t sign up with a company.
- Learn how to invest, particularly focusing on index funds.
- Buy a home, don’t rent — you’ll probably come out ahead. (2)
- Avoid credit card debt.
I only disagree with these two points:
Set aside money for your children’s college education early on
Do this only if you have the money to spare.
Otherwise, focus on your retirement first.
You can’t assume that your kids will want to go to college, and you also can’t assume that they’ll make enough money to support themselves and you in retirement.
It’s best that you take care of yourself and you retirement so that your kids won’t feel the burden of doing so (or may not be able to).
Buy, don’t rent
Don’t assume that buying is cheaper than renting. Do the math first.
If you can’t afford a home in your area, then don’t buy one until you can and have 20% saved as a down payment.
Otherwise, consider leaving for a cheaper area.
Assessing my own situation
I am in my 30s now (on the nose), and I think I’ve hit on all of their points.
- I have fairly strong friendships and family relationships (not with my father but that’s another story).
- My retirement funds are maxed out into index funds with a small portion in individual stocks.
- I’ve amassed savings of $230,000 so far.
- I am prepared to live very long and am making sure I do by eating good, healthy food.
- I’ve avoided credit card debt.
- I have a very heavy stock allocation in my portfolio of 90% and will keep it that way until 45.
- I plan on working and saving even more, I have a good 30+ years ahead of me to do so.
- I’ve taught myself how to invest and I’ve been focusing on index fund investing and dividend investing.
My own personal advice
Not that I am in retirement, but I think as I am in what I call semi-retirement (work for a year, chill for a year, wash, rinse and repeat), I might be a tiny bit qualified to say this:
- Have a plan for what you will do in retirement — go back to school, volunteer, teach, etc. Have a life PROJECT.
- Enjoy your money when you’re young as well; don’t hoard it just because you’re scared of the future.
- Watch out for lifestyle inflation; I am currently struggling to bring myself down.
- Be aware that life plans change and be flexible enough to deal with them when they do.
- Don’t count on anyone to give you an inheritance or any money, particularly for retirement.