Most people have a retirement savings problem. They just don’t put enough away for their golden years, choosing instead to spend on today. With real estate prices, tuition, and other expenses getting more and more expensive, it’s easy to see how families can fall into this trap.
But some people have a different problem. They’re saving too much for retirement, stuffing away every spare nickel for spending in their golden years.
These people fall into two different categories. They’re either high-earning folks who can easily put money away. Or they’re regular folks who live a hyper-frugal lifestyle, relentlessly worrying about running out of money come old age.
So these folks will max out their RRSPs and TFSAs for decades, ending up with millions in their accounts. This creates a tricky tax situation when it becomes time to take that cash out. Remember, the government will force RRSP withdrawals once someone hits 69.
RRSPs are effective tax-deferral schemes. Eventually, the tax needs to be paid.
Besides, personal finance is all about balance. There’s no reason to defer spending indefinitely, especially if someone has demonstrated they’re very good at saving. It’s okay to have a little fun once in awhile.
We’ve all heard the stories of people who get sick and pass away shortly after they hit retirement age. I guarantee these folks didn’t look back and regret the time and money they spent on today.
We only have a fixed amount of money to spend in our lives. Putting a portion of it towards the future is a good idea. Just make sure there’s enough left over for fun today, too.
