If you’re like many Canadians thinking about and planning for an eventual retirement, you already know there are a lot of books to choose from at your local bookshop or library shelf.
But you probably also know that with more and more Canadians hitting the “traditional” retirement age of 65 every year – never mind those of us who strive to retire before 65 – and all of us planning to live longer than ever, the topic of retirement is hot and getting hotter.
That’s why I wasn’t surprised to see another retirement planning book pop up earlier this year. Titled “The Boomers Retire: A Guide for Financial Advisors and their Clients,” it’s co-written by two Certified Financial Planner certificants (CFP®), David Field (of Papyrus Planning) and Alexandra Macqueen (of “Pensionize Your Nest Egg” fame).
Last March, Alexandra helped me out with a decision about whether to stay in or leave my employer pension plan.
I’m interested in retirement, and I know my readers are, too – so I decided to check in with David and Alexandra to chat about why they wrote this book together, what they hope readers will get out of it, and why you should consider adding The Boomers Retire to your reading pile.
Why another retirement planning book?
“As strange as it seems,” says Alexandra, “there’s just always something new to say about retirement.” That’s because retirement keeps changing, she adds:
“What retirement means, when it takes place, how we fund it, how long it might last, how we plan for it and the strategies we can put in place to help ensure a successful retirement … they all change over time, and by a surprising amount! So even if it feels like you know a lot about retirement, there’s always more to learn and know to make sure you’re prepared.”
Just take the Canada Pension Plan, for example. Even though it’s been around since 1965, it’s undergone several major overhauls since then and we’re in the middle of implementing the last round of changes, which started in 2019.
For people approaching age 60, the decision about when to take the Canada Pension Plan is key – but that decision is complex and there’s a lot of nuance in figuring out what the best choice is. (Alexandra wrote about CPP claiming decisions for high-income earners in an article that I linked in a recent blog post.)
What’s different about this book?
Many retirement books are targeted to a particular audience or focus on a single strategy, whether that’s retiring early or following a specific asset mix or withdrawal strategy. Unlike those books, this book is much more “agnostic,” the co-authors say.
“We tried to provide information that’s relevant and practical to a very wide audience,” Alexandra notes. “And because we wrote this as a guide for both advisors and retirees, there’s lots of supporting information, like checklists and references to where additional information can be found.”
The additional info ranges from contact information for provincial pension regulators to checklists for will preparation and the administration of an estate, how to make a home accessible as you age, where to find emergency medical coverage outside of Canada, and more.
“Many retirement books are written as a story,” explained David. “The Boomers Retire is a tool to help answer questions and ensure nothing is missed. The book has clearly defined subject areas so if you do not have a defined benefit pension, there is no need to read about defined benefit pensions. It is not a novel, it is a retirement resource.”
Why do Boomers need their own retirement planning book?
Boomers are the largest group heading into retirement today, but the retirement they’re heading into is different from how we retired 10, 15 or 20 years ago.
“Retirement is defined simply as ‘withdrawing from active working life,’” says Alexandra, “but that simple definition hides the complexity and the realities of the many, many different decisions that future retirees face today in planning for their own retirements.”
Boomers are also the first generation to enter retirement with a Tax-free Savings Account. “The TFSA is one of the most powerful, underutilized, and underappreciated tools in a retiree’s arsenal,” says David.
Chapter 1 covers three trends that “make retirement different today:” it’s increasingly longer, it’s increasingly diffuse – it might take place before, at, or after the “traditional” age of 65 and might happen in stages, instead of all at once – and funding retirement is increasingly complex.
All of these factors together mean that more than ever before, Canadians are designing their own retirements: when it happens, what it looks like, and how it’s funded. And these “new realities” mean more planning is required, say the authors.
What are the top challenges facing Boomers planning for retirement today?
Boomers are living longer and not necessarily healthier with less guaranteed income for life. “Often retirees go from managing one income from their employer to many different sources,” says David. “Everyone of those income sources can have tax and retirement benefits consequences.”
David adds that strategies must change depending on health, marital status, differences in age between spouses, and goals that retirees have for their retirement. A strategy that may work for one retiree could be disastrous for another.
The Boomers Retire works to explore the different paths and the benefits and consequences of specific retirement choices.
Where can I buy The Boomers Retire?
The book is available directly from the publisher, Thomson Reuters.
Of course, you can always check it out from your local library, too.
And David and Alexandra have generously offered readers a chance to win a copy. Let me know in the comments why you think this book deserves a place of pride on your reading shelf, and you’ll be entered into a draw to receive a free copy.
The Globe & Mail’s Rob Carrick posed a question to his LinkedIn followers a few months ago asking about the cost of a financial plan. He quoted a reader who said:
“We recently received a quote of $4,000 for retirement and investment planning. This is a one time fee for service engagement. Seems high – is this the average cost now? And any guidance on what the report should include?”
There were some interesting responses from financial planners across Canada. Many claimed the $4,000 fee was well below what they would charge for a similar service. A few others said they charged less than $1,000 for this type of plan.
The trouble is that from the client’s perspective most feel their situation is fairly straightforward and they think they just need some expert guidance to make sure they’re on track. From the financial planner’s perspective there may be any number of complications that would require much more careful analysis and planning, like whether the client is a business owner, are they a US citizen, has their relationship status changed, do they have stock options, a rental property, own property in the US or abroad, etc.
Some of the planners commenting on Rob’s question work exclusively with ultra-high net worth individuals. These folks tend to have much more complicated and robust planning needs. A $10,000+ fee might be reasonable given the amount of wealth and complexities they’re dealing with, not to mention the benefit of getting the planner’s own expertise and the expertise of the team around them.
For those with truly basic planning needs a fee of $4,000 might be too high, but a cookie-cutter plan for less than $1,000 without much detail or ongoing advice might not cut it.
Rob took that feedback and more to write a follow up piece on how much you should expect to pay for a financial plan that shows you’re on track for retirement (and more). The answer was a range between $1,500 and $4,000, or higher.
Fee-only advice is still a fairly new and unknown business model in Canada, so we shouldn’t be surprised that planners and clients have vastly different expectations on how much to charge or pay for a plan.
Michael Kitces has done extensive research on planning fees and found that the median flat-fee price for a financial plan was $2,400 (US based research).
One of the challenges I’ve faced in my own fee-only financial planning practice is aligning the service I provide with the right type of clients who I feel will get value from that service. This includes charging a reasonable fee for the written plan and 12 month long engagement (currently $1,800).
My ideal clients are regular Canadians with regular planning needs. In most cases they are nearing retirement and want to know the answers to burning questions like are they on track to retire, how much can they spend, and how best to generate retirement income from their investments. Other clients may have recently gone through a major life event such as getting married, having their first child, moving into a new house, or changing careers, and want to know how to get their finances to match their new reality so they can achieve their goals.
After an initial inquiry or discovery call we may find that the prospective client’s needs are much more complicated and don’t quite fit with the service I provide. In this case I would refer them to a larger fee-only financial planning firm like Objective Financial Partners or Spring Plans, where they have entire teams with expertise in certain areas of planning. Again, don’t be surprised to see that advanced financial planning may cost in the neighbourhood of $7,500+.
There are only 100 or so financial planners who are truly offering unbiased and objective advice for a flat fee. Each of them likely have a particular expertise and a ‘type’ of client they like to work with. That’s why there’s such a wide range of fees being charged across the industry.
One thing for prospective clients to watch out for is that several fee-based advisors (who charge a flat fee or percentage of assets to manage your investments) have co-opted the term “fee-only” or “advice-only”. They may offer a financial plan but what they’re really after is for you to invest your assets with them.
It’s hard to pinpoint exactly how much value you could get from using a fee-only financial advisor. One answer is to measure the investment fees saved if you end up moving from a managed portfolio of mutual funds to a robo-advisor or self-managed portfolio. The difference in fees could easily be $10,000 per year or more. But how do you quantify the confidence that you’re on track to retire, or the increased financial literacy, or the help in defining and prioritizing your financial goals?
When I first started offering this service I wasn’t sure how receptive people would be to paying upfront for financial advice. After all, the financial services industry typically bundles advice with product sales and so the fees come off of your investments not directly out of your pocket. But it’s clear the fee-only business model has been growing by leaps and bounds in the past few years. More and more people are realizing that there’s real value in financial planning and not so much in their advisor’s stock picking prowess.
We need to continue to bring more awareness to the fee-only financial planning model. For the advisors offering this type of service we need to be open and transparent about our fees and level of service provided so that prospective clients know where to turn for their situation.
This Week’s Recap:
No new posts from me over the past two weeks as we are in vacation mode and getting ready to head to Vancouver / Whistler for a short getaway. Our kids have been enjoying a variety of activities this summer including theatre camp, science camp, and volleyball camp. It has been nice to have a fairly normal summer so far.
I’ve enjoyed a new podcast from Ramit Sethi called I Will Teach You To Be Rich. Ramit looks at real money stories from behind closed doors. The first episode was about a husband not trusting his wife to run her business (while he traded cryptocurrency as a “business”). The second episode was about a cheap couple who was worth more than $1M. And the third episode is about a husband going broke trying to pay for everything and be the “man of the house”.
From the archives: Stop asking $3 questions. Start asking $30,000 questions.
Weekend Reading:
Our friends at Credit Card Genius have the best credit card offers and sign-up bonuses for the month of August.
Should you always defer CPP if you’re working past age 65? Not always, explains Alexandra Macqueen.
Here’s the most important retirement planning question you need to answer:
“Are you retiring to something, or from something?
On a similar note, here’s Joe Kesler on The Humbler Dollar blog with a look at life’s two halves.
Of Dollars and Data blogger Nick Magguilli looks at the Coast FIRE movement where you go big, then stop. Here’s my own path to Coast FIRE.
Here’s a nice interview with My Own Advisor Mark Seed on the Modern FImily blog.
Gen Y Money has an in-depth look at how dividends are taxed in Canada.
Preet Banerjee has partnered with BMO InvestorLine with two free courses to learn more about investing. Here’s the introductory video:
The latest investing fad: direct indexing. Morningstar explains what exactly it is, including the pros and cons of this investing strategy.
Everyone wants to talk about inflation these days. Here’s why investors should consider long-term trends, not pandemic ones.
Steadyhand’s Tom Bradley looks at the rise of free trading apps as an eco-system of failure.
What’s a better investment – real estate or stocks? Millionaire Teacher Andrew Hallam gives a thoughtful answer to this question.
Have a great weekend, everyone!
For many Canadians, owning a home is a sign of personal and financial success – a rite of passage signalling that you’ve made it on your own (maybe with some help from mom & dad). Just over two-thirds of Canadian households own their home, which puts us ahead of countries like the United States, Australia, and France, but well below the likes of Italy, Spain, and Norway.
Soaring real estate prices across the country have kept housing top of mind. Ask any journalist or blogger what the most-read stories are and they’ll invariably say anything to do with housing.
I must admit I don’t quite get the obsession. Maybe it’s because I can be an emotionless robot when it comes to financial decision making. Or because I live far away from the major Canadian cities where real estate has exploded in value. Here in Lethbridge, our housing market barely keeps pace with inflation.
Or maybe it’s because, as Canada’s worst handyman, I’m keenly aware of the constant maintenance and upkeep that comes with owning a home. We moved into our current home – a brand new build – 10 years ago. In that time we’ve had to deal with an insurance claim for major roof and siding damage, plus landscaping projects, plumbing issues, appliances breaking down, a basement renovation, and an ant colony from hell, just to name a few. Yeah, home ownership sucks.
That’s why this piece from friend-of-the-blog Kyle Prevost resonated with me. Kyle moved to Doha, Qatar last summer to teach at an international school. Now he’s decided to sell his home in rural Manitoba. This quote nicely sums up my feelings around home ownership:
“Endless fear of hearing a strange noise. Is that the furnace taking its last breath? Perhaps it’s the water treatment system deciding to spring a leak? Is that rain I hear – is it possible our septic system is backing up?!”
I acknowledge that I’m saying this from the privilege of being a long-time home owner (~20 years). I live in a low cost of living area and so it’s hard to put myself in the shoes of someone looking to buy a house today in a city where prices have increased by 30% or more year-over-year. The average home price in Lethbridge ($319,503) is less than half the average home price in Canada ($679,051). That’s insane.
We have serious housing affordability issues in many areas of the country where the answers seem to be:
- Rent forever
- Get a significant cash gift from relatives
- Move to a lower cost of living area
The last two just aren’t options for many aspiring home owners.
That’s why we need to destigmatize renting in this country. Renting doesn’t mean you’re a financial failure. In many cases it’s the smart financial decision. Renting is often cheaper, comes with fewer headaches, and gives you flexibility to relocate or travel for extended periods.
Meanwhile, home ownership isn’t all that it’s cracked up to be. Condo owners pay monthly fees and also may be hit with special assessments from time-to-time. Detached home owners have to deal with all the crap I’ve mentioned above, with maintenance costs easily surpassing 1% of property value each year over the long term.
This Week’s Recap:
I recorded an interview with Kyle Prevost on investing FOMO for this year’s Canadian Financial Summit. The annual online financial conference should go live later this fall. I’ll keep you posted.
I’ll also be chatting with Kornel Szrejber this week about pensions on the Build Wealth Canada podcast. Stay tuned for that conversation.
On Monday I looked at the Vanguard effect on mutual funds, fees and performance.
On Thursday I dove further into the mutual space and revealed the dirty little secret of the industry – closet indexing.
From the archives: Here’s Ben Felix on renting in retirement.
Promo of the Week:
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Weekend Reading:
Our friends at Credit Card Genius have done the math to determine which Canadian rewards program is worth the most in categories like North American flights, long haul flights, free hotel stays, and groceries and gas.
Global News’ Erica Alini explains why some used cars are now selling for as much as new models.
The Humble Dollar’s Jonathan Clements debunks six playground taunts seen often on financial forums and blogs.
Downtown Josh Brown says your mission is to invest for the long-term. The world will offer you a million chances to fail that mission.
Morgan Housel explains why the highest forms of wealth are measured differently:
Keep two things in mind:
Desiring money beyond what you need to be happy is just an accounting hobby.
How much money people need to be happy is driven more by expectations than income.
Here’s Nick Magguilli on how investing has evolved from something only done by the rich and powerful to something done by everyday people.
PWL Capital’s Ben Felix explains the 5% rule when contemplating renting versus buying a home:
Jamie Golombek looks at a recent case involving a Vancouver taxpayer who purchased, demolished, constructed and then sold three homes in a six-year period.
Louise Cooper explains why women in particular have their work cut out when it comes to funding their retirement, but are generally better at investing than men are.
Preet Banerjee went off the record with Peter Mansbridge for his 100th (and possibly final) episode of the Mostly Money podcast. It was a good one!
A Wealth of Common Sense blogger Ben Carlson explains why hedging inflation is harder than it sounds:
“Markets always require context but the biggest lesson here is how hard it can be to hedge against short-term risks in the markets.”
Squawkfox blogger Kerry Taylor, who lives near Vernon, BC, describes her evacuation plan as wildfires rage nearby.
Finally, why waiting for baby boomers to die is not effective housing policy.
Enjoy the rest of the weekend, everyone!