There’s been a lot of speculation recently about why baby boomers are so unprepared for retirement.  It’s said that more than half do not have enough savings and will have to rely entirely on social programs that will be quite meager at best.  Do we have to develop a taste for canned cat food?

Why are boomers so ill prepared?  I have some thoughts from my own experiences.  I am in no way giving excuses and others may have different opinions from having lived through different circumstances.

Growing Up

Just as I can’t imagine how my parents lived through the Great Depression and the Second World War, later generations should not speculate about the boomer years.  Living in times of lack made my parents very frugal, which made life rather lean growing up.  There were no unnecessary purchases and things were bought to last.

As an example, my clothes were always purchased one size bigger and I wore them until they were one size smaller, giving me just a small window of opportunity to have them fit properly.

It’s no wonder that once I started working I bought clothes and more clothes.

Inflation rears its ugly head

No one in later generations experienced the same rampant inflation that occurred during the eighties.  While our parents saved up for major purchases, we were advised to buy on credit because prices would increase astronomically before we could save the money required.

I’ll give you an example of how quickly interest rates increased.  When we purchased our first house (when I was 22) we took a 5-year term at 10.5%.  The mortgage renewed at 17%.  Our neighbours who moved-in to their home about three months after we did faced a renewal rate of 22%!

Around this time credit cards were making a strong appearance.  Most banks were heavily involved in promoting their CHARGEX cards (now VISA).

These were the boomers’ buying years – house, furniture, cars and we paid big time if they were bought on credit.  It was the culture at the time.

It is the same mindset that had us taking out home equity loans when our houses increased so much in value.  Unfortunately, debt will be the biggest problem for many people entering their retirement years.

Meanwhile our parents were now in their savings years and benefitted from these high interest rates in GIC’s and Canada Savings Bonds.  They are known as the big savings generation.


Once we got into savings mode, interest rates on typical bank vehicles were 5% or less.  We took to mutual funds with huge enthusiasm expecting great returns.  Then came the market crash of 1987, the “Asian Flu” in 1998, the tech stock collapse in 2000 and, more recently, the mortgage fiasco in 2008.

Many unfortunates had their investments severely decimated and had difficulty rebounding from their losses.

RRSP Contributions

Although RRSPs were first introduced in 1957, they didn’t become a mainstream investment vehicle until the 1980’s.  However, low and middle-income earners had difficulty contributing a meaningful amount.  Apparently the tax savings were not sufficient incentive.

Even today, only 25% of tax filers make a contribution and the median amount is $2,790.  I’d like to see the results of a survey of current 30-year olds to see how much they are saving for retirement.

People are advised to maximize their RRSP contributions in their higher income years.  This was not possible for the many workers who were “made redundant” when businesses downsized and restructured during the economic recession in the 1990’s.

Workers in their 50’s and early 60’s had difficulty finding comparable paying employment at a time when they still had other financial obligations.  It’s no wonder RRSP contributions fell considerably during this time.

Social benefits

When CPP and seniors retirement benefits were introduced life expectancy was in the 60’s.  Somehow, to the government at the time, it seemed a no brainer to have the working generation fund the benefits of the retired for a few years.

Was it unexpected that the largest single generation would eventually retire at the same time that life expectancy increased substantially?

We saw our parents taken care of with workplace defined benefit pensions and CPP and we expected much the same thing.

What’s in store?

Given the experiences of the baby boomers, I think the question should be – how did the other 50% manage to accumulate enough savings for retirement?

Personally, I haven’t saved nearly the amount recommended by the “financial experts”.  I don’t need $65,000 a year to live on.  Most of my investments are in blue chip dividend paying stocks from which I will have extra income while preserving the capital for as long as possible.

I am not adverse to working part-time if need be.  I am confident that I will be able to deal with any unexpected hardships (I’ve done it all my life).

I’m not worried.

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