Fred Vettese is one of Canada’s leading retirement planning experts. The former chief actuary for Morneau Shepell spent his entire career working within Canada’s retirement income system. He’s written three books on retirement, including The Real Retirement, co-authored with former Finance Minister Bill Morneau, and The Essential Retirement Guide: A Contrarian’s Perspective.
Mr. Vettese’s latest is a completely revised and updated version of Canada’s #1 bestselling retirement income book – Retirement Income For Life. Most retirement books focus on the accumulation phase. Retirement Income For Life is aimed at people who are close to retirement, or who are already retired, and who are going to rely mostly on their own savings to meet their retirement income needs. It assumes your main objective is to maximize your retirement income rather than maximizing the assets you leave behind if you die early.
He decided to revise the book just two years after its initial release to help readers who were still a few years away from retirement improve their financial situation. He also reorganized the chapters into a more logical sequence, and added chapters to address special situations such as high-net-worth couples, early retirees, single retirees, and early death.
Mr Vettese also addresses significant developments since the release of the first book, which include expanded CPP and the possible introduction of deferred annuities that start at 85. He also touches on the potential fallout from the COVID-19 pandemic.
The five enhancements that made up the core of the first edition remain intact. These include reducing investment fees, transferring risk to the government by deferring CPP, transfer even more risk by purchasing an annuity, know how much income you can withdraw (and actively adjust it as needed), and have a backstop (likely a reverse mortgage or HELOC).
If you’re going to read one retirement book, this is it. Retirement Income For Life is an incredibly comprehensive and sensible look at how to think about retirement planning. Mr. Vettese offers plenty of wisdom throughout the book. Here’s one of my favourite takeaways from the section on investment risk:
“I used to research the market on my own and trade in individual stocks. It was hubris to think I was smarter than the crowd and could profit on a consistent basis by taking a contrarian stance. Over time, I did pick a few winners, but I also picked way too many losers. I didn’t beat the market anywhere near often enough to call the experience a success.”
He strongly suggests you not to become a stock picker or day trader. The odds are very much against you. Instead, participate in a pooled fund, such as an index you can buy in the form of an exchange-traded fund (ETF). The author’s takeaways in this chapter are worth the price of the book alone:
- Future investment returns will almost certainly be lower than historical returns for many years to come
- Stay away from investing in second mortgages
- Real estate investing can be lucrative for long-term investors, but it is not for amateurs and it is not without risks
- Long-term bonds will be especially poor performers, since bond yields have nowhere to go but up, and this would create capital losses. This includes real return bonds
- Your best bet for a 5% annual return is to invest in equity funds, risky as they are
- a 60-40 asset mix is probably better than 50-50 in the case of retirees with average risk tolerance
Retirement Income For Life Giveaway
I was fortunate enough to receive an extra copy of the newly revised Retirement Income For Life and I’d like to give it away to a lucky reader.
If you want to enter for a chance to win a copy of Retirement Income For Life, leave a comment telling me when you took (or plan to take) your CPP benefits and why.
Deferring CPP to age 70 is one of the author’s five enhancements for retirement income planning, but in reality this option is almost never taken. I’ve written before about when it makes sense to take CPP at 60, and when it makes sense to defer CPP to age 70. I’ve also explained why taking CPP at 65 is rarely the optimal choice.
The contest will close on Wednesday November 4th at 5pm EST. I’ll randomly select a winner from the entries and announce the winner in my next edition of Weekend Reading.
This Week’s Recap:
On Thursday I explained exactly how I invest my own money. Thanks for the great feedback on this article!
From the archives, here’s which accounts to tap first in retirement.
Remember travel? Here’s how I redeemed more than 1 million points for travel last year.
I’ve pivoted to cash back rewards in “these times” and hope to share exactly how I did that in the coming week.
Looking to level up your rewards credit card game? Credit Card Genius has you covered with the best credit cards in Canada.
Here’s a heartbreaking look at five people who lost their jobs during the pandemic.
NPR looks at stuck at home moms and the pandemic’s devastating toll on women:
“The uncomfortable truth is that in their homes, women are still fitting into stereotypical roles of doing the bulk of cooking, cleaning and parenting. It’s another form of systemic inequality within a 21st century home that the pandemic is laying bare.”
The Evidence Based Investing blog explains the dangers of trading from home.
Rob Carrick shares several reasons to stop worrying the pandemic will be followed by a plague of tax increases. I agree.
Michael James on Money says that owning today’s long term bonds is crazy.
PWL Capital’s Justin Bender looks at tax-loss selling with ETFs in his latest investing video:
Does that sound too complicated to implement on your own? Check out this post on tax loss harvesting at work with Wealthsimple.
Pension plans will use a new method for calculating commuted values as of Dec. 1 that may reduce defined benefit plan payouts.
Here’s a smart take by Millionaire Teacher Andrew Hallam on what to do when financial experts say a giant crash is coming.
A Wealth of Common Sense blogger Ben Carlson says the question you should always ask when searching for higher yields is, what’s the catch?
Finally, Morgan Housel has a few questions that are relevant to everyone and apply to a lot of things.
Have a great weekend, everyone! (and don’t forget to comment below to enter to win a copy of Retirement Income For Life)