The Thirties - The Sandwich Years, Part I

This is a continuation of my decade-by-decade plan toward financial freedom and the pursuit of prosperity.

I anticipate the thirties will present exciting moments in my lifetime, but they will also present some of the most difficult financial decisions I will ever have to make. I know that during these years my parents will both retire full-time, and live off one pension, and their RRSP investments. I also anticipate that my wife and I will start a family during this time as well. I well then officially become the "Sandwich Generation" - potentially having to take care of my parents above me and my children below me. This means conflicting financial decisions, and potentially less room to contribute to savings and investments. My plan, and suggestion for anyone in this stage of life: don't sacrifice your retirement funds for any other costs, no matter how difficult that appears.

I know, I know. I won't "get it" until I become a parent, but I am a firm believer that you must, must, MUST fully contribute to your retirement plans prior to any education funds. The power of compounding is a very powerful thing, and many people miss its value. $10,000 invested in a tax-deferred retirement account compounding at a rate of 8% will become $46,610 in 20 years, about the same time as a child enters their junior year of college/university. While that sounds great for a child's education fund, it's more critical that this money is invested into a retirement fund first: by allowing this investment to compound in a tax deferred (or tax-free) retirement fund, it would grow to $100,626 10 years after initial contribution, and $217,245 10 years beyond that. By deferring your retirement funding by the 20 years, in favour of contributing to your child's education, you are actually burdening your child with your retirement: you will have missed over $170,000 of funds in this example. Imagine the loss of 20 years of contributions!

Remember: you can't mortgage your retirement - nobody is going to lend you money so you can not pay them back. You can always help your children fund their education in other ways, including loans while you have the chance to work to pay them off.

To conclude, my plan is to continue to put maximum contributions into my retirement funds (RRSPs and the new TFSA), and beyond that contribute whatever I possibly can into my children's RESP. After all, I don't want to burden my children with my retirement expenses.