WHY "CONTRIBUTE WHAT YOU CAN" IS DANGEROUS FINANCIAL ADVICE

Your retirement is the single biggest investment you will make in your entire life.

Yes, it is even a bigger investment than your house.

Yet when you buy a home, you go through a seemingly endless set of steps to ensure you are making a sound investment. You go to multiple showings. You compare feature sheets. If you are contemplating renovations, you speak to potential contractors to price out the work. You involve home inspectors, lawyers, realtors, mortgage brokers, even friends and family in the final decision.

You wouldn’t dream of simply viewing a listing online and submitting an offer yourself, sight unseen.

That would be far too risky.

Yet I see too many people treat their retirement plan with exactly this kind of casual approach.

They take a quick look at their budget, ballpark a number they think they can afford to contribute, and start contributing to some sort of RRSP (likely through their bank).

They may even have been told – by a well-meaning advisor at their bank, or by an article online - to simply “contribute what you can”.

But when it comes to the biggest financial investment of your life, that is dangerous advice.

I had a client come to me for general financial planning. As part of the regular intake process, we went through her budget, cash flow, and overall goals. I noticed that she had $500 a month allocated to retirement contributions.

I asked her how she came up with that specific number.

“I am not sure, actually. My bank advisor asked me how much I felt comfortable contributing. At the time, I guess I felt comfortable with $500 a month. I’ve been doing that ever since.”

She felt that she was checking off the “save for retirement” box. It feltlike a good number.

We did a comprehensive analysis (following the 5 step Pulse Process, of course!). We dove into her goals for her retirement lifestyle: where did she want to live, what kind of activities did she want to do. We explored her current investments, projections, factored in inflation…

Through all that analysis, we determined that to actually reach her retirement goals, to live the lifestyle she wanted to life in retirement, she would need to contribute $1500 a month to retirement.

That is triple what she was currently contributing.

She was shocked.

Luckily, we were able to work together to find the budgetary room and cash flow to make that happen.

But what if she didn’t have that flexibility? She would have spent all those years diligently contributing to her retirement, only to find out that she stillwouldn’t have enough.

“Contribute what you can” would have cost her an ideal retirement. She could have spent potentially 25+ years not living the life she wanted, because of one piece of advice.

On the flip side, I had a client who came to me in defeat. He had used an online retirement calculator to determine a monthly contribution amount. That amount was almost $3,000 a month.

He was completely dejected.

To meet that goal, he’d have to forgo all of his other financial goals: buying a rental property, taking a yearly vacation, helping his kids with their school. And even then, he wasn’t sure he could make it work.

But after we went through the Pulse Process, we determined he actually only needed to invest $1700 a month in his retirement.

The online calculator would have cost him his ideal life pre-retirement. He could have spent potentially 25+ years not living the life he wanted, because of one online tool.

Your retirement is the single biggest investment you’ll make in your life. Any retirement solution that is reached with less than a few minutes of work cannot possibly give you the best result.

Retirement planning, like buying a house, is complex. If you are serious about your retirement, a “contribute what you can” mindset or a quick budget analysis will not help you reach your goals any more so than scrolling the Realtor app will score you your dream home.

Work with an expert who will conduct a truly comprehensive reviewwith the level of detail that such a big investment merits.

Book a consult, and we can determine how much you need to contribute to reach your actual retirement goals. (I promise I won’t tell you to “contribute what you can”!)