It's Your Money  

High earners, short careers

The Okanagan is one of the most beautiful areas to live in Canada, if not the world.

It is no wonder than many people who live and work in separate places choose this as their satellite or summer home. 

Most of these long-distance commuters are people who are high-income earners with relatively short careers
— think pro-hockey player or a high-risk, labour-intensive job in the oil patch. 

For those who fall into this high-income and early-retiree situation, retirement planning should be viewed with a very different approach than most others.

Average Canadians have their income slowly increase over a 30-45-year career and they gradually build up their savings over this time. 

For those who work in these high-paying, likely short-career-span jobs, their income can start at a very high level, but it may not last too long. They do, however, have to make sure that the money they have made will last a lifetime if they can no longer work. 

For an example, let’s use a 22-year-old who starts working up north on an oil rig and is earning $200,000 a year.

This young worker has no mortgage or other debt and really no obligations in the world at this stage.

Just like their new friends who also earn high incomes, they decide to buy a new truck, go on several vacations, buy a new snowmobile and an ATV and during weeks off, eat $200 dinners every night at restaurants. 

Without proper guidance and a bit of self-restraint, these young oil workers could still be flat broke 15 years from now, even though they were earning such a great income at a young age.

At this point in life, they and their spouses now have two small children and they decide that it is too difficult on the family to have one parent away from home for three weeks at a time. 

Without any transferrable skills, they are forced to accept a job paying $35,000 a year close to home and struggle to pay their mortgage and bills.

With a big debt load and no savings, this almost 40-year-old is far behind in the retirement savings game and has nothing to show for all the hard work they did up north for the last 15 years. Unfortunately, we see this type of situation far too often…   

An even more extreme example is a pro-hockey player.

At 21 years old, he is signed to a four-year contract earning $3.5 million a year. Suddenly a millionaire, this young star decides to buy a $4-million home on the lake and a new sports car or two.

Like many players, injury or age catches up with him after only a few years of playing and his contract is not renewed.

While he may find some part time work coaching a junior team, making ends meet might be tough for the rest of his life.

To compound matters further, these young high-income earners are often the prey of un-licensed and un-ethical investment “advisers” who talk them into high risk investments that often cause them to lose everything they do put away.

While it doesn’t sound fancy or “elite”, their ideal investment plan should be relatively safe and highly diversified.

While they may be feeling invincible and enjoying the high life now, these young people need to realize that it likely won’t last forever. The smart ones will make creating a financial plan a number one priority, as soon as they receive their very first paycheque. 

While a traditional plan may call for you to save 10% of your annual income for retirement, a high-salary short career worker should consider saving anywhere from 40-70% of what they’re bringing in depending on their situation.

While this may seem too hard to accept at the time, consider that 78% of NFL players are bankrupt within two years of retiring.             

A structured financial plan and regular savings may seem unappealing to many young high-income earners, but you should also remember that this doesn’t mean you don’t get to spend any of your hard-earned money.

A good plan will also contain a certain level of “play money” on top of what is required for your basic expenses. Like everything in life, retirement planning is all about balance and the choices you make today will have profound impact on the rest of your life.      


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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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