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Retirement savings

March 06, 2012

The end of saving for retirement

This year, for the first time in 22 years, I won’t be making an RRSP contribution.

Gee, this feels weird! I’m like a squirrel without nuts to store for the winter. This year, for the first time in 22 years, I won’t be making an RRSP contribution.

For 22 years, our single-income household squirrelled away money in registered retirement savings plans RRSPs. We scrimped, scrounged and made saving for retirement a priority. Sometimes, we even moped about not being able to gratify ourselves instantly by buying stuff.

But we stayed true to our values, we stuck with the plan and, every year, we managed to contribute to our RRSPs. Some years, I had a bonus from work that went straight into the RRSP. Other years, an income tax refund formed the base of our RRSP contribution for the following year. Sometimes, we were disciplined and made regular contributions — and other times, we just made small contributions whenever we found a few unused dollars. Almost every year, we managed to make the maximum contribution.

No RRSP contribution room

As a retiree, I no longer have what the Canada Revenue Agency calls “earned income,” which the CRA uses to calculate RRSP contribution room. No earned income means no RRSP contribution room — it’s that simple.

Less money to contribute to a TFSA

Since tax-free savings accounts were introduced in 2009, my wife and I have also stashed money in them. The first week of every January, we met our advisor with cheque in hand to make our maximum contribution to each TFSA.

But not this year. In 2012, I’m focussed on living, not saving for my future life. Like most retirees, I don’t currently have an income big enough to let me continue to add to my savings. (Having said that, I may still contribute to our TFSAs in future years.)

Shift from retirement saving to spending

I retired early – and not a multi-millionaire — so I guess it’s no surprise that I’m now focussed on living well today, rather than saving even more to live even better at age 65, 70 or whatever.

For me, today is the first day of the rest of my life, while I’m young enough, healthy enough and vital enough to fully enjoy myself. I’m doubly lucky, because I have a partner who is also young enough, healthy enough and vital enough. So, I’m not waiting for tomorrow to start living.

But that doesn’t mean I’m living only for today. I’m a healthy 55 years old, so I’ll need the retirement savings I’ve already accumulated to last 30 years, 40 years, maybe longer!

End of saving requires better budgeting

My wife, Anne Marie, who does the day-to-day household budgeting in our family – and does it really well – had an “aha!” moment the other day.

“I finally understand what retirees mean when they say they live on a ‘fixed income’,” she said.

When we were still in our over-extended working years of struggling to save while spending, she could always count on future savings. Unless the RRSP deadline was today, or the car broke down today, or the roof needed fixing today, it wasn’t just blind optimism that let us think that before the RRSP deadline came, or the car finally died, or the roof caved in, we’d save enough to somehow squeak through yet another Dineen family financial crisis.

But now, in retirement, we are no longer saving for the future. So how will we survive future Dineen crises? With an effective, disciplined family budget.

I’m sure Anne Marie — our family’s effective, disciplined budget manager — is up to the task.

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