Canadians aren’t ready for retirement. A new survey from Royal Bank of Canada found that regardless of their personal wealth, most Canadians simply haven’t saved enough money. The figures get even worse the older a person is. Here’s how the numbers break down.
For Canadians above 50 years old, those that report assets of more than $100,000 say they wish to have a nest egg of around $1 million by the time they retire. So far, the average person in this group is running $275,000 short of their goal. Of Canadians above 50 years old that have less than $100,000 in savings, the average person is a whopping $574,000 short of their target.
And there you have it—the number one retirement mistake that Canadians are making is simply not saving enough. And as the data reveals, older Canadians are equally at fault.
If you want to avoid this mistake, you’ve come to the right place. Here’s one essential hack to ensure that you always meet your savings goals.
Make it automatic
If the toughest part of saving is doing the actual saving, your best investing hack is to automate everything. This practice takes advantage of classic psychological biases that treat opt-in and opt-out decisions differently. Here’s how it works.
If your goal is to save $300 per month, don’t trust yourself to login and manually deposit the funds. Instead, set up a recurring withdrawal to automatically move $300 from your savings or checking account to your brokerage account.
Nearly every brokerage firm offers this capability. Why is this so important? Decades of studies show that humans are much less likely to opt-out than opt-in.
Essentially this means that you’re more likely to stick with the status quo. So if the money is set to withdraw from your account anyway, you likely won’t take the time to prevent this investment from being made.
If you need to manually make the investment each month, however, you’re much less likely to follow through.
Setting up automatic, recurring investments is your single best tool to saving enough for retirement. But where should you invest the money?
Stick with Watsa
Prem Watsa is one of the best investors of the past 40 years. Since 1985, his shareholders have earned more than 17% annually. I’ve written about how I would never sell the three stocks that he manages: Fairfax Financial Holdings (TSX:FFH), Fairfax Africa Holdings (TSX:FAH.U), and Fairfax India Holdings (TSX:FIH.U).
By owning each stock above, you’ll create an instantly diversified portfolio with proven resiliency against downturns. Fairfax India and Fairfax Africa also give you exposure to some of the biggest growth opportunities this century, both of which should persist for decades to come.
Based on their respective track records, entrusting your money with Prem Watsa is similar to investing alongside Warren Buffett by purchasing Berkshire Hathaway Inc.
The advantage, however, is that Fairfax is 90% smaller than Berkshire Hathaway, meaning there’s significantly more runway for long-term gains.
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The Motley Fool owns shares of Berkshire Hathaway (B shares) and has the following options: short January 2021 $200 puts on Berkshire Hathaway (B shares) and long January 2021 $200 calls on Berkshire Hathaway (B shares). Fool contributor Ryan Vanzo has no position in any stocks mentioned. Fairfax Financial is a recommendation of Stock Advisor Canada.