Forget delayed gratification. Today’s consumer culture calls for a chill retirement

If you want to do fun stuff in retirement, you have to sacrifice today. So goes the classic advice to working people about saving for the years they will spend after they leave the work force.

It’s the right guidance and conceptually unassailable. But in today’s consumer culture, it’s a practical fail.

An alternative thought for Gen Z and millennials: the chill retirement. Make your working years prime time for travel, concerts, dinners out and other experiences, on the understanding your retirement years will be quieter. You are no longer delaying gratification.

Young people are familiar with financial takeaways such as fewer jobs with pensions and less affordability in housing and raising children. The idea of the chill retirement suggests yet another example of generational inequity, and there’s some truth to that.

But it’s also a reimagining of retirement that reflects how people in their 20s, 30s and 40s actually live their lives, rather than outdated ideas of delayed gratification.

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Delayed gratification was the template retirement for the silent generation, a.k.a. parents of baby boomers. Boomers themselves are the gratification-all-the-time generation, thanks to a quirk of timing that gave them an opportunity to benefit from big gains in the housing and stock markets. Also, an accommodating work force with more pensions and job stability than we see today.

Gen Xers, millennials and Gen Zs will have to make harder choices about consumption today and in retirement, and not only because they’re less financially fortunate than boomers.

Younger generations are also under more pressure to spend money. They’ve spent all or most of their life exposed to the internet-social-media complex, with its influencers and FOMO-inducing posts from friends and family.

Preaching delayed gratification to younger people as a retirement saving rule is like counselling abstinence for birth control. We need better guidance that accepts people as they are, not as older generations think they should be.

Q&A: Ask Rob Carrick your personal finance questions on Tuesday, Oct. 6

The chill retirement acknowledges that spending today means less money going into your tax-free savings account and registered retirement plan to compound over the decades. It must be noted here that if you can swing it, investing in your 20s or 30s and letting the money grow for 40 years is a huge win.

But what if you don’t do that, in part because you’re unwilling to slash your spending? Ending up with smaller TFSAs and RRSPs in retirement means a lower level of investment income and reduced capital to withdraw for splurges and eventual big expenses such as elder care. The delayed gratification school of retirement planning strives to avoid exactly this outcome.

You do end up with less in chill retirement, but then you’ll need less because you consciously pulled retirement spending into your working years. More trips in your 30s, fewer in your 70s.

There’s some upside to this plan that honest retirees will recognize. An ideal time to travel is when you’re young, not old.

In your younger years, your health is at peak levels and you can tackle any destination without worrying about stairs or how spicy the food is. You’re more amenable to saving money on basic airfares and modest accommodations, and you’re less weighed down with family responsibilities such as elderly parents.

People of all ages need travel medical insurance, but it’s far more affordable when you’re young. Retirees pay more, especially if they’re thorough in reporting any pre-existing ailments. Failing to do that can result in claims being denied.

Gen Z’s retirement savings problem could become an employer’s problem

For as long as I’ve been in the personal finance business, there has been talk of a “retirement crisis” of Canadians not saving enough. The term is overblown, but today there are good reasons to worry about how young people will manage retirement in 30 or 40 years.

The cost of food and housing has soared way ahead of incomes, and the same applies to fun stuff such as travel. Meantime, social pressure to spend has never been more intense.

Telling young people to ignore the noise and spend less is worth a shot, but don’t expect much. We are what we are – a society that can’t stop spending and is always open to new things to buy.

The chill retirement acknowledges this. It accepts that you spent on fun stuff in your working years and chose not to delay gratification. In retirement, you have nothing to prove.

Rob Carrick is a personal finance expert and former Globe and Mail staff columnist.