All posts by Jonathan Chevreau

Boomer & Echo guest blog: What I’ve learned so far in Semi-Retirement

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Regular Hub guest blogger Robb Engen returned the favour earlier this week by inviting me to write a blog for his site Boomer & Echo. You can find that version by clicking on the highlighted headline: What I’ve learned so far in Retirement.

For convenience, it also appears below, including original links, with a Hub headline and a few subheadings that better reflect the central point that I personally don’t consider myself fully retired yet. This version has a few extra points added, plus two links to FIRE pieces that didn’t appear in the original B&E version. And as a bonus, it includes near the end an update on some of our recent travels, which hopefully reinforce some of the broader themes described in this blog.

Which begins as follows:

Through most of the five years the Financial Independence Hub has existed, Boomer & Echo’s Robb Engen has been kind enough to allow the “Hub” to republish some of his blogs that first appeared on his own site.

He recently suggested we turn the tables and invited me to write a guest blog for Boomer & Echo recounting some of the lessons I’ve learned in my decades as a financial writer and what I’ve learned so far in Retirement. Here it is.

For starters, my age alone qualifies me as a Boomer: I recently turned 66, but do not consider myself retired: at most, I consider myself semi-retired. As Robb would know, running a website is no trivial undertaking and I aim for new content 5 days a week, 52 weeks a year. That and writing for a handful of media outlets keeps me fairly occupied, although the privilege of doing this from home means I gain a couple of hours that would formerly have been expended on commuting.

Indeed my last full-time salaried staff job that involved commuting and bosses ended five years ago, when I stepped down from the editorship of MoneySensemagazine. That two-year stint followed 19 years at the National Post/Financial Post, most of which time I was the paper’s personal finance columnist.

Those familiar with my books or blogs would not expect me to describe myself as Retired, since my shtick has long been Financial Independence, or my contraction for it: Findependence. That’s as in Findependence Day, a financial novel I wrote in 2008 (Canadian edition) and 2013 (US edition.)

As I have often written, I do not regard the terms Retirement and Findependence as synonyms. You can be Findependent but not Retired, as I am; but it’s hard to be Retired if you’re not Findependent.

In the old days, the traditional “full-stop” retirement was considered to happen at age 65, which even today is when you can first start receiving Old Age Security benefits. (And yes, I do now collect OAS, for reasons I’ve explained elsewhere). But “Findependence Day” can be years or even decades earlier: you may still choose to work for money but on your terms: the magic day is when you’re completely free of debt and have enough saved (and properly invested) that even if you never earned another dime you could meet all your major living expenses, assuming some variant of the 4% Rule.

Even if I considered myself as having “retired” at age 61, that’s relatively old by the standards of the so-called FIRE movement, which of course stands for Financial Independence Retire Early. True FIRE people aspire to “retire” in their 30s or 40s, sometimes even in their 20s, typically by saving like demons for a decade or so: in the most extreme cases they may save      something like 50% of their income.

I’m more like Robb, where he described in his blog why he wasn’t yet paying down his mortgage because he first wanted to maximize RRSP and TFSA savings. Mind you, my books do argue that “the foundation of financial independence is a paid-for home” but I’m old school and we bought our first home (of only two) back in the 1980s, when Toronto real estate was pricey but hardly at the lofty levels of today. Of course, interest rates were much higher then: close to 12% in our case, so we were motivated to pay off the mortgage as quickly as possible.

I don’t see myself as an early retiree or a “FIRE” blogger

There have been some interesting critiques of FIRE, nicely summarized by Fritz Gilbert in a guest blog for the Hub: Is the Fire community full of hypocrites? Fritz is an American Pluto award winning blogger for RetirementManifesto.com, who I’ve come to know through our joint membership in the Younger Next Year 2019 Facebook group, which I helped found and have helped moderate (along with the site’s prime mover Vicki Peuckert Cook) since late 2017. Fritz “retired” himself at age 55 about this time last year. But as we would both argue, he’s hardly retired in the classical sense of the term. Continue Reading…

Retired Money: Time for retail investors to STANDUP to the financial services industry?

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My latest MoneySense Retired Money column is a review of advisor John De Goey’s new book: STANDUP to the Financial Services Industry. Click on the highlighted headline for the full column: Fight for your right to low fees.

Obviously a retrofitted acronym, STANDUP stands for Scientific Testing and Necessary Disintermediation Underpin Professionalism. STANDUP was an undercurrent in the four editions of De Goey’s previous book, The Professional Financial Advisor. There he argued that while most advisors hold themselves out to be professionals like doctors, lawyers or accountants, the primary function of most advisors is “to sell products.” STANDUP Advisors are the good guys and gals: the “self-aware and knowledgeable advisors” his new book aims to help readers find. His personal website is www.STANDUP.today.

Bad advice they believe is good

Right from the get-go, De Goey is pretty harsh on many members of his profession. Much of what advisors believe is “demonstrably wrong” he declares right on page 2 of his introduction: “People who give advice for a living routinely give bad advice while honestly believing that the advice they are giving is, in fact, good. That’s a huge problem.”

He puts much of the blame on the managers of retail advisors, chiefly the senior members of Canadian mutual fund companies. He hauls out the old Upton Sinclair quote to illustrate the gap between doing what’s good for investors and what’s profitable for the financial industry itself: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” Continue Reading…

Motley Fool: Getting out of Debt as the first step to achieving Findependence

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Those who are regulars to this site will know that Getting out of Debt is the first step towards achieving Findependence, or Financial Independence.

My latest Motley Fool Canada blog has just been published on this topic, which you can read in full by clicking on the highlighted headline: Getting out of Debt to achieve Financial Independence.

As one of the characters in my financial novel, Findependence Day, says to the protagonists: “You can’t climb the tower of Wealth while you’re still mired in the basement of debt.”

As the article reprises, most of us start our financial life cycle with zero or even negative net worth, depending on how much student debt, credit-card debt or later mortgage debt one has accumulated. So if a young person has graduated from college or university and is able to get out of the hole early in their working life, that should be regarded as a huge initial step towards achieving Financial Independence, or Findependence (my contraction).

Keep up the frugal behaviour that got you out of debt

So how do you get out of debt as quickly as possible? The book coins another phrase, guerrilla frugality, which simply means super frugality, whether brown bagging your lunches, taking public transit or any number of other money-saving activities that ensure that you are living within and well below your means. Continue Reading…

Retirement #2 priority but four in ten Americans don’t see it happening

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Retirement is a close second to home ownership, according to a LendEDU survey of American saving priorities

While having enough money saved for Retirement is narrowly behind buying a home, more than a third of Americans don’t expect they’ll ever be able to retire, according to a survey released Tuesday from LendEDU.com.

Retirement saving was cited by 19% of 1,000 respondents, versus 20% prioritizing “buying my own house or apartment.” Paying off credit-card debt was cited by 14% and building an emergency fund by 10%.

While there was only a minor lack of confidence about paying off credit cards and building an emergency fund, 17% don’t believe they’ll ever become homeowners and but almost four in ten Americas (39%) don’t believe they’ll ever be able retire.

Of those doubting their ability to retire, 52% were over age 54, 30% were between 45 and 54, and 15% were 35 to 44.

As for emergency savings, 33% said a major bill resulting from an injury would destroy their savings and therefore their long-term financial goals; another 14% cited some form of debt that could quickly get out of hand. However, 28% felt “relatively secure” and did not believe their financial goals could be derailed.

Secondary priorities

After home ownership and retirement, the most cited financial priorities were some form of getting out of debt: 14% cited paying off credit-card debt, 7% paying off student-loan debt, and 4% cited paying off other forms of debt apart from credit cards or student loans. 6% answered “Building my credit score,” 5% wanted enough saved to move out of their parents’ homes and rent a home or apartment, 4% said “Buying a car,” and 3% wanted to start a business.

1% wanted to invest in real estate, another 1% wanted to buy a second home and yet another 1% wanted to buy a second or third car. 3% want to “create a retirement account” and 2% want to “invest in the market outside my retirement account.”

Money a bigger priority than Love?

Of the 37% who were not currently in a long-term relationship, 72% were more focused on their financial targets, versus a minority 23% who prioritized finding a romantic partner. (The rest preferred not to say). The survey sees this as a “glass half full” finding: “It is good that Americans are quite serious when it comes to realizing their personal finance goals. But, on the glass empty side, sometimes one’s finances can’t buy happiness, or in this case love, and it is always important to understand what is truly important in life.” Continue Reading…

Retired Money: How the financial industry may use ALDAs and VLPAs as Longevity Insurance

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Finance professor Moshe Milevsky welcomes industry’s implementation of academic longevity insurance theories

My latest MoneySense Retired Money column looks at two longevity-related financial products that the industry may develop after the road to them was paved in the March 2019 federal budget. You can access the full column by clicking on the highlighted headline: A new kind of annuity designed to help Canadian retirees live well, for longer.

Once they are created by the industry, hopefully in the next year, these new products will introduce an element of what finance professor Moshe Milevsky has described as “tontine thinking.” In the most extreme example, a tontine — often depicted in fictional work like the film The Wrong Box — features a pool of money that ultimately goes to the person who outlives everyone else. In other words, everyone chips in some money and the person who outlives the rest gets most of the pot. As you can imagine at its most extreme, this can lead to some nefarious scenarios and skulduggery, which is why you occasionally see tontines dramatized in film, as in The Wrong Box, and also TV, as in at least one episode of the Agatha Christie TV adaption of Miss Marple.

Fortunately, the Budget doesn’t propose something quite as dramatic as classic tontines but get used to the following two acronyms if and when the insurance and pension industries start to develop them: ALDA is an acronym for Advanced Life Deferred Annuity.  As of 2020, ALDAs could become an investment option for those currently with money invested in registered plans like RRSPs or RRIFs,  Defined Contribution (DC) Registered Pension Plans and Pooled Registered Pension Plans (PRPPs).

The other type of annuity proposed are Variable Payment Life Annuities (VPLAs), for DC RPPs and PRPPs, which would pool investment risk in groups of at least 10 people. Not quite tontines in the classic academic sense but with the pooling of risk VPLAs certainly have an element of “tontine thinking.”

The budget says a VLPA “will provide payments that vary based on the investment performance of the underlying annuities fund and on the mortality experience of VLPA annuitants.” That means – unlike traditional Defined Benefit pensions – payments could fluctuate year over year.

There is precedent for pooled-risk DC pensions: The University of British Columbia’s faculty pension plan has run such an option for its DC plan members since 1967.

The budget said Ottawa will consult on potential changes to federal pension benefits legislation to accommodate VPLAs for federally regulated PRPPs and DC RPPs, and may need to amend provincial legislation. But it’s ALDAs that initially captured the attention of retirement experts, in part because of its ability to push off taxable minimum RRIF payments.

Up to $150,000 of registered funds can go into an ALDA

An ALDA lets you put up to 25% of qualified registered funds into the purchase of an annuity. The lifetime maximum is $150,000, indexed to inflation after 2020. Beyond that limit you are subject to a penalty tax of 1% per month on the excess portion. Continue Reading…