You’re on your own in retirement, so plan for your financial needs accordingly


At 75, personal finance icon Gordon Pape seems to be taking his own advice — keep working.

Author of more than 40 books over the past quarter century, he has just released another tome on retirement, the third after declaring four years ago that his final financial book would be Sleep Easy Investing.

“Let’s just say I spoke too soon,” he admitted in an interview last Tuesday.

First, he couldn’t say no to the opportunity to pen two quick bestsellers about the new tax-free savings accounts that launched in 2009. Next, his publisher, Penguin Canada, asked for an updated version of Retirement Time Bomb (published in 2006).

However, Pape said too much had happened in the intervening years so a brand new book was needed: Retirement’s Harsh Realities.

Pape became a household name with a series of much-imitated annual mutual-fund guides published between 1989 and 2004. Coupled with annual RRSP guides and a current stable of five investment newsletters, Pape is a reasonably wealthy man.

Personally, he would be in the camp of continuing to work for the love of it rather than being unable to afford to stop. But the latter may apply to many of Canada’s Baby Boomers, Pape warns.

“The idea of retiring young [at 55] has become an elusive dream for most people,” Pape writes. “Of course, the longer you plan to work, the less you need to save for retirement.”

He himself had a rude awakening about how much health care is not covered out of the country, after spending 20 years wintering in Florida. His property there is now for sale and he’s staying put in Toronto this winter.

“One thing I’ve discovered as I grow older is you get hit with expenses never anticipated earlier.”

He and wife Shirley both needed hearing aids last year, with only a fraction of the costs covered by private plans or government.

Similarly, many other medical-related expenses, like dentistry and eye glasses, aren’t fully covered. The cost of care-giving alone can pass $20,000 a year, he says.

The new book identifies nine harsh realities of retirement. That number was set not by the publisher but by the number of topics Pape could come up with.

The first four should by now be familiar: Baby Boomers are getting old. (Born in 1936, Pape is himself a pre-Boomer.)

Traditional employer-provided defined-benefit pension plans are dying and defined contribution plans (including the new pooled registered pension plans) are not an adequate substitute. The third harsh reality is, “We’re on our own” but, unfortunately, No. 4 is most Canadians aren’t facing this fact and “our savings rates are pitiful.”

Little wonder most grit their teeth and resign themselves to working longer. He cites several recent bank sponsored surveys buttressing his argument that many Boomers will toil past age 65. The average Canadian now expects to retire at 68.

Scariest was a Bank of Nova Scotia survey that found 5% are counting on winning the lottery to fund their retirement.

The good news is that for each of these realities, Pape presents a solution. The first four are to make a plan, pay off debt, know your pension plans and build RRSPs.

Harsh reality No. 5 is, “We don’t know what we’re doing,” with the solution being to open a TFSA.

Reality No. 6 is there is no safe place for your money; the solution is to educate yourself.

No. 7 is the tax system is stacked against us. Pape rails against minimum RRIF withdrawal rules, the dividend “gross-up” and other pet peeves his readers complain about.

The solution is to find dependable financial advisors, although this runs into harsh reality No. 8: “We don’t know who to trust.” The solution to this (albeit a stretch) is to minimize taxes.

The last harsh reality is, “You have to make sacrifices,” the solution being to review your retirement options.

Pape dances around the perennial “How much do you need?” question with an “it depends” response but the book includes a Retirement Worry Index he devised. Those with employer DB pensions and no debts have no worries. If it’s the other way round, the Worry Index reads “Extreme.”

Even for those with large nest eggs, today’s artificially low interest rates punish savers and investors and tempt people to borrow, “one reason our debt levels are so high.” Pape still believes a balanced portfolio is the solution to the investor’s dilemma. This can be a mix of fixed income and low-risk, income-generating equity-like securities, though not necessarily stocks. They can be mutual funds, REITs or income trusts, he says. (In the book, he still appears to favour mutual funds over indexing.)

Several books ago, Pape divulged his personal net worth had passed $2-million, which prompted me to ask why one of Canada’s foremost retirement experts is still working at 75?

He laughs, explaining he would “find myself terribly bored” if he stopped altogether. “My golf game is lousy and I don’t play bridge. Also, I enjoy what I do. I just don’t want to do as much of it.”

He promises in the preface “this will almost certainly be my last book on this subject,” but that leaves plenty of wiggle room. He’s already working on a new book on money for young people, coauthored with daughter and young adult novelist Deborah Kerbel.

That brings things full circle: early in his career, Pape co-wrote (with wine writer Tony Aspler) three novels but confesses his daughter is “a better writer than me.”

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