Financial Advice from the Future

Hindsight is 20/20, so we asked some long-time investors what they wished they knew in their younger years.

Bruce Smith, 77, has been investing since his 40s, and he’s pretty much seen it all – from sky-high interest rates to rock-bottom markets. The former management consultant, who lives in Toronto, is now comfortably invested in a portfolio of 60 percent bonds, 30 percent equities and 10 percent cash, but admits that he would have had an even larger nest egg if he had done things a little differently in his 40s and 50s.

When it comes to finances, experience matters. If people in their 30s, 40s and 50s could look into the future and see what life would be like in their 60s, 70s and 80s, they might do things differently.

For one, he feels he should have sought financial advice sooner. “Trying to do it yourself is a crazy game,” he says. “Everyone is trying to find an underpriced stock and you’re not going to beat them. Get advice and start investing early.”

When it comes to finances, experience matters. If people in their 30s, 40s and 50s could look into the future and see what life would be like in their 60s, 70s and 80s, they might do things differently. With that in mind, here are some financial tips for those in their younger years from people who know what retirement really looks like.

Start early

You’ve heard this a million times, but the earlier you start saving the better – and this goes for people of all income levels, says Blair Evans, Director, Tax and Estate Planning at Investors Group in Winnipeg. “The earlier you start to save, the longer runway you have.” In other words, if you can invest more now, you probably should. Starting to invest, especially in plans such as RRSPs and TFSAs, as early as possible will have long-term benefits.

Go for free money

When you’re earning a high income, it’s easy to overlook the little things. Many people fail to take advantage of, say, employer-sponsored health benefits or a company retirement savings program, where a business will match what you put into the account, says Gary Ford, a retired financial professional and Burlington-based author of Life Is Sales. “It’s easy to procrastinate – but then three or four years go by,” he says. He didn’t take advantage of RESPs, which also offer free money by way of government grants, but should have. However, he has always maxed out his TFSA and is now enjoying some of the tax-free retirement income that has been built up.

Hold for the long-term

When Smith was younger, he made the mistake of trying to time the markets. “If you jump in and jump out, it doesn’t seem to work out,” he says “I was out of the market when the booms were happening and making marginal returns when I did invest.” He now hangs on to his investments and only sells when he needs money for retirement.

Watch your spending

Spending lavishly when you’re earning good money is a problem for many Canadians, says Ford. People in their working years splurge on new cars, travel or home upgrades. But think carefully about that $20,000-a-year club membership or high-end vacation.

Fortunately for Ford, he was a prudent spender. “I didn’t want to go through that first year of depreciation,” he says about why he never splashed out on cars.

Evans is more forgiving. Many retirees have told him that they could have spent more had they known they would have had a comfortable nest egg during retirement. They key to spending, he says, is to question if what you’re spending money on provides value, and whether it fits in with your larger financial plan.

Talk to an advisor

Everyone can benefit from investment guidance and that guidance should come from a trusted investment advisor, says Evans. “Some people do try to do it on their own,” he says. But having professional help can prevent unpleasant surprises at age 65. Let an advisor assist you in choosing an asset mix that works for you – be it conservative or aggressive – and then stay the course.

Overall, Smith is happy with his investments. Despite some missteps, he’s enjoying his post-working days, spending a couple winter months each year in Florida. “My nest egg would have been better had I always stayed invested,” he admits. “But I’m doing well.”