Three reasons people retire broke

According to a recent study, roughly 40 percent of Canadians would be unable to pay for an unexpected $200 expense without going into debt.

I’ve spent over 20 years working with people and their money and reading all kinds of financial material and I’m stunned by that finding. Anyone who can’t cover even a small bill is almost certainly going to be in the large group of Canadians who will fall short of their retirement goals. We have these dreams for life after work but we rarely achieve them.

If you want to retire well with more money than you can outlive, you’ve got to take control of the behaviors that are destructive to building the wealth required to retire comfortably and worry-free.

Related article: Building wealth is simple but not easy

In his book Retire Inspired, author Chris Hogan says that most of us have bleak finances, but they’re salvageable with good decisions.

“If you want to win at the retirement game,” Hogan writes, “you’ve got to take control of the behaviors that might keep you from investing. With that in mind, let’s take a look at three reasons why people hit retirement with no money.”

I don’t agree with Hogan that most people retire broke, I concur with his reasons why most of us are somewhat financially inept.

We don’t invest

The number 1 reason for our failure to achieve our financial goals is our refusal to invest. Fear is the biggest reason we don’t invest; we’re afraid of losing money. You have to understand what risk is – and what it’s not. It’s not market ups and downs.

Related article: Investing is a science

Assuming that you have the time to wait it out, market volatility can be your friend. If there is money that you won’t need for years, then market drops are opportunities to buy into a rising tide at reduced prices.

Investment markets and financial planning are complex. Most of us don’t understand them so we often own low-yield instruments such as GICs (guaranteed investment certificates), where we’re pretty much guaranteed to lose purchasing power year after year.

We bail

You’ve invested – but now what? Don’t expect a smooth ride; investment markets don’t work that way.

A friend of mine was persuaded to buy shares in a high-risk sector mutual fund and over a few months his $30,000 tumbled to just over $25,000 and he sold.

Many people would benefit from a good investment advisor to help them invest appropriately, ignore the noise and keep focused on the long term.

Related article: Five realities of the stock market

Markets go up far more often than they go down, and the ups are bigger than the downs. Corrections of 20 percent or more occur roughly every three years. If you can stick it out through the bad times the reward comes when the inevitable recoveries occur.

Bad decisions

In the late-‘90s one of my clients wanted to sell his conservative investments to buy technology mutual funds. Everyone was riding the tech boom, he thought. I managed to convince him that it was a bad idea.

A few months after we had that conversation the tech bubble burst and the sector dropped 70 percent. The tech sector took almost 15 years to recover to its pre-crash level.

“You and I are always one stupid decision away from wrecking a retirement dream,” Hogan writes. “One bad risk on a single stock, one afternoon of day trading, one impulsive hour in the showroom of a luxury car dealership — all it takes is one moment of letting your guard down to undo years of hard work. Always measure the long-term impact of these kinds of decisions, and keep your guard up against stupid!”

While I think that some of Hogan’s writing is hyperbole as it would take a monumentally bad decision to wreck a retirement dream, over the course of a few decades several terrible decisions can compound to scuttle a retirement dream.


  1. Don Smith

    I agree with your assessment, but read this recent post from It’s fiction.

    I moved to the Maritimes from Ontario. Regards, Don

  2. Claude Mayrand

    I was born with the “I want more money!” gene but I was missing the “How?” gene.

    I think many don’t have either of those genes and must modify their behaviours towards money. “Money is the root of all evil” is the most unfortunate thing we learn when we are younger and the message is prevalent for many for many decades.

    My curiosity led me to many mistakes, aka losses. But I learned to rely on myself and really, deeply listen to others.

    From these stumbling beginnings I formulated a strategy that addressed two issues.

    There was no way I would live long enough to accumulate the huge amounts of money suggested by many financial advisors and all banks. And I determined that what I needed was from my modest retirement fund potential was to generate monthly cash from my funds.

    Another mantra everyone has heard is “You need money to make money”. After a time I learned about Margin Loans, Distributions (return of capital, capital gains, dividends, interest) and their multiple advantages.

    There are companies out there that entice investors to buy their funds because of their primary attributes: diversity and monthly income.

    You buy these on the TSX – I’m not smart enough to deal directly with foreign exchange; most financial advisors don’t have a license to sell these funds. Foreign income is a problem for a TFSA.

    It didn’t take long to achieve monthly income targets, and a few mistakes along the way. Mistakes are part of the game; successful traders are ecstatic when they achieve 2 profitable transactions out of 3.

    Anybody can do this. As Wayne says, you need to change some behaviours.

    Let me add that the change must include some time to oversee your retirement capital and its performance. It’s like grocery shopping and preparing meals rather than restaurant shopping and paying a lot for your meals and not learning anything.

    How much time? Start with 15 minutes a week; it’s so easy today with the Internet and all the free resources for investors. 15 minutes a week!!! How can I cope with that? Bring a sandwich and a apple for lunch, check with the boss or bring your own laptop and click away.

    First of all, you must change your behaviour.

  3. Patrick

    I enjoy your posts & I share them with my 3 children in their 20’s, as it’s tough for a parent to deliver the vague concept of saving now for the inevitable in 30 years. I retired 19 years ago at 49 but only after accumulating a significant real estate portfolio (with a lot of the lifestyle frugality, sweat & pain mentioned above). The returns of Passive income vs Earned income was very alluring if you appreciate it’s power.
    The only time I actually took any cash from my monthly pension was last year to pay cash for a new tax deductible truck that I needed for my real estate endeavors.
    My Questrade account (separate from my Pension) accumulates dividends of at least $3-$4k/month regardless of market blips. I share this concept of high dividend returns with my kids hopefully to instill in them the returns of reinvested compounding interest.
    Learning to constantly manage debt is imperative & yet it escapes the majority of our younger generation.

    • Claude Mayrand


      It’s been difficult to get my kids to grasp the savings when working and need for income mandatory once retired.

      I was never wealthy and was a spendthrift – they say cheap. But for some reason, they’re very good at spending; I think it’s partly the nanny state which seems to provide “free” healthcare, A Pension Plan which is actually a supplement to a personal pension plan and FOMO (Fear Of Missing Out).

      No matter what I say – I try to be very candid about my investment successes and mistakes – the message doesn’t get through.

      I think it’s genetic somehow, part of the “I’ll live forever” syndrome. My father believed strongly in land. An expensive lesson for me. You were successful in real estate, another expensive and stressful experiment for me.

      Hopefully their earned income will be much larger than mine ever was so that they won’t be able to spend it all – that’s the “wishful thinking, rose coloured glasses” syndrome. In the meantime, I continue to act like a parent and try to teach them something useful.

      I haven’t shared this site with them; I fear they’ll just see this as another annoying dad link that doesn’t directly apply to them.

  4. Financial Canadian

    I totally agree with all of your points here but I would add one more: People spend more than they earn. This is the root of all debt and while some debt (like student loans and mortgages) can be very beneficial, you will never accumulate wealth until you train yourself to spend less than you earn.

Leave a reply

Your email address will not be published. Required fields are marked*