Rob Carrick’s [Bad] Advice to Young People: RRSPs? Nah.

Rob Carrick’s receent article is a beauty. His headline is “Under 25? Live it up! Financial advisers can wait.” The article gives very confusing advice, and is by no means “financial and investing wisdom” as he claims. It’s the opposite of wisdom, whatever that is. He main goal point seems to be that young adults should wait before starting to invest (”RRSPs? Nah.” he says) and that they should stay away from the financial industry.

His logic goes like this. The “the financial industry is always trawling for new clients” so don’t invest until you are older. “There’s no need to let the financial industry get its hooks into you just yet.” If you do some investing, “get aggressive, sure, when you’re young, but hold off on the adviser.” “Be wary of the financial industry at any age.” Did the financial industry abuse Rob Carrick as a child? When you’re a bit older, sure go ahead, get an advisor, he says. “My advice to people in their early 20s is to live a little, and then visit an adviser when you really need to.” “Expert help can be indispensable if financial matters baffle you.” He uses an example of a TD poll that concluded that people aged 18-24 are least likely to have consulted a financial planner. Rob, TD is not in the same business as the fast food industry. Advertising targeted at children/young adults is OK.

Rob makes a feeble argument as to why you should until you are 28 to invest rather than, say, 22. Here goes:

There’s a good, strong argument for contributing to RRSPs as young as possible, of course. The earlier you put money in a plan, the longer it has to compound tax-free. If you put $1,000 in an RRSP at age 22, you’ll have $18,344 at age 65 if you assume an annual return of 7 per cent. If you wait until 28 (the TD poll found this is the average age for starting an RRSP), you’ll have $12,223, and if you wait until you’re 32, you’ll have $9,325.

By these numbers, the right age to start contributing to an RRSP is 28. You just lose too much in tax-free compounding if you wait until 32. And what about the $6,121 in gains you miss out on by delaying until age 28? Call it a fair price for enjoying your youth and not rushing into financial adulthood.

I’m not sure how he concludes that the magic age is 28 from those numbers. May I remind you Rob that one is only allowed to contribute up to 18% of one’s gross income into an RRSP every year. In the worst case that would lead to an 18% reduction in enjoyment, in the best case, it would lead to less spending on unnecessary things and minimal impact on enjoyment. You said it yourself Rob, “There’s a good, strong argument for contributing to RRSPs as young as possible, of course. The earlier you put money in a plan, the longer it has to compound tax-free.”

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6 Responses to “Rob Carrick’s [Bad] Advice to Young People: RRSPs? Nah.”


  • Has anyone not ever not been abused by the financial industry? Please…like any other industry they want to make as much money as they can. Whether it’s at your expense or not is irrelevant.

    I agree that his ideal investing age of 28 is a bit odd considering that different circumstances would dictate different ages for different people.

    I disagree about the ‘worst case scenario of a 18% reduction in enjoyment’ – first of all 18% is quite a bit!! Especially for someone who doesn’t make a lot of money and maybe doesn’t have much if any left over for investing. I think that sometimes people get brainwashed by the financial industry marketing and somehow think that a dollar contributed to an rrsp is worth far more than a dollar used to pay off debt. News flash: it’s the same dollar.

  • “18% is quite a bit”

    Maybe, maybe not. It depends how much you spend. It also depends a lot on how much your parents are helping out with school and your other expenses. But it makes sense to at least TRY and put away that much even at a young age. It wouldn’t hurt to TRY now would it? That you should try to max out your RRSP every year if possible even when you can’t use the deduction is good advice. Rob Carrick’s “RRSPs? Nah” is idiotic.

    “I think that sometimes people get brainwashed by the financial industry marketing and somehow think that a dollar contributed to an rrsp is worth far more than a dollar used to pay off debt.”

    I’m not saying young people should forgo payment of debt in favour of RRSP contributions. But any “brainwashing” by the financial industry into making people think that they should contribute to an RRSP is doing more good than bad. A better solution would be for the education system to actually educate high school students on investing, debt, and personal finance in general. Give them the whole picture. I had a course that did that when I was in high school but they took it out of the curriculum a few years later.

  • I couldn’t agree more on your suggestions of more (any?) personal finance courses available for high school students – these should be mandatory. The bottom line is that more knowledge would allow young people (and older people for that matter) to have the ability to hopefully be able to analyse their own situation and decide on a course of action that works for them. One of the problems with the financial industry and to some extent the community is the preponderance of “rules of thumb” which I can’t stand. For example the rule of needing 70% of your working income in retirement might apply to a few people but I’ll bet that for most people the range would be somewhere between 25% to 125%…depending on their situations and goals. Another common mindset is the idea that maximizing your rrsp contributions is the best plan for everyone. I know you’ve mentioned this and while I agree that it’s usually not a bad strategy – after all any saving is good saving, the reality is that the rrsp max contributions limits are set by the government based on how much tax money it is willing to defer to the future, it has nothing to do with anyone’s personal finance needs. Not unlike the 70% rule, the max contribution is probably perfect for some people but some people would be better off contributing less and some people shouldn’t contribute at all. This is not to say that someone who doesn’t max their rsp shouldn’t save the difference if they can, ie paying off debt, invest outside rrsp.

    Ok, I’ll stop commenting now – I don’t want to ramble on forever!

  • I also hate rules of thumb like that. In the case of the 18% RRSP rule, yes I know that some people who don’t make much money are better off not using an RRSP. I think for most average to high income earners 18% is actually not enough and something more like 30 is required. That’s what the Wealthy Barber recommends. 18% to the RRSP and a 10% fund in addition to that. If you can obviously.

  • Anyone ever read Rob’s Bio? He has no financial background, except for him being a “Graduate” of the Cdn Securities Course. A graduate??? Its just a course. Took my 3 months to do it. This is false glorification aka BS… Put it like that on your resume and I wish you luck landing a job in the financial industry. The point is, his emplmoyer is a powerful brand and he’s been at it for 12 years. That doesn’t make him an expert, and by no means qualified to give any kind of financial advise to the general public. He should stick to reporting the facts. If phd’s in the industry are constantly getting it wrong, I would advise this “Graduate” to keep his financial advice to himself.

  • Rick, thanks for that information, I had no idea he was no unqualified (although after reading some of articles I had SOME idea).

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