This financial squeeze has been dubbed the “sandwich generation”. As you can imagine, it’s a heavy burden that affects us both emotionally and financially. As a result, we’ve greatly reduced the amount we put aside for our retirement.
Don’t worry though; there are ways to break free from what seems to be an endless cycle.
How much do we need?
ONE MILLION DOLLARS!!!!! Okay we don’t actually need a million bucks, but it’s important to establish a number so you have something to work towards.
According to the BMO study, $818,000 is the average amount Canadians feel they need to retire comfortably on.
In the recent MoneySense article: The Stress-Free Guide to Retiring Rich, it was suggested that couples only need to have $625,000 saved to have a comfortable retirement. This would give us a middle class lifestyle by providing us with $55,000 a year income, of that $30,000 would come from the Canadian Pension Plan and Old Age Security.
A decent plan, but I personally think that MoneySense is being a bit generous with the estimates of CPP and OAS. I expect the payouts to be greatly reduced by the time I retire (30+ years from now).
What should we do?
Have a plan – It’s a bit disappointing that only 40% of the sandwich generation have a financial plan in place. Without a plan it’s impossible to figure out how we plan to reach our goals. Establishing a financial plan will not only help us manage our money now, it’ll also ensure we have enough saved to have the retirement lifestyle we dream of.
→Related: Saving for Retirement, Talk About it
Don’t worry about the kids – Of course we have the best intentions in mind, but delaying saving for retirement, so we can fund out child’s RESP instead is a huge mistake. Our kids have a lifetime to save and earn money, but we’re now on a fixed timeline, so saving for our retirement is the bigger priority. The last thing we want is to extend our children an invitation to the sandwich generation.
Pay yourself first – Using auto-payments is the easiest way to pay yourself first. Set it up so 10% of your salary automatically gets transferred to your RRSP the day after you get paid. Sure the hit on the paycheque will hurt at the start, but after a while you won’t even notice the difference. Just remember to check on your RRSP at least once a year to make sure what you’re invested in still fits your plan.
With our current debt loads in Canada, I fear that the sandwich generation will become a permanent generation.
If we’re not prepared financially when we retire, it’s going to create a heavy burden for our children, so make sure you’re taking the right steps so they don’t feel the squeeze.
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