By Dylan Callahan, Stocktrades.ca
Special to the Financial Independence Hub
We’re constantly reaching out to financial authorities we feel would benefit our audience the most. From Mark Seed, to Xiaolei Liu, to Rob Carrick, we are always looking to compile information and pick the brains of experts in the industry. This is why we were ecstatic to hear that Jon Chevreau was willing to do a little interview with us about his most recent book. (Highlighted link is to original post at Stocktrades.ca)
A little bit about Jon before we start
Jon has long had our attention here at Stocktrades from his writing at Moneysense and the Financial Post. He is the owner of FinancialIndependenceHub, the author of Findependence Day and the co-author of Victory Lap Retirement, which is what this interview will be about. He was a columnist for the National Post from 1993 to 2012 and was Editor-in-Chief for Moneysense Magazine from 2012 to 2014. If we had to choose some financial authorities on the internet today that we’d follow, Jon would be near the top of the list.
WHAT INSPIRED YOU TO WRITE THIS BOOK?
Jon: Co-author Mike Drak approached me with the idea of a book about Retirement/Victory Laps after he encountered my website, the Financial Independence Hub, and my financial novel, Findependence Day. We thought we could marry the two concepts since Findependence gets you to the point you can launch a proper Victory Lap.
COULD YOU BRIEFLY DESCRIBE THESE FOLLOWING TERMS IN YOUR OWN OPINION, OR AS THEY RELATE TO THE BOOK?
What is Findependence?
Jon: Findependence is simply a contraction of the phrase Financial Independence. And so Findependence Day is the day you achieve financial independence, which we define as the moment when all sources of passive income (pensions, investments, royalties etc.) exceed your monthly expenses nut (rent/mortgage, food, clothing, utilities etc.)
Explain a Victory Lap Retirement?
Jon: Victory Lap Retirement can be described variously as semi-retirement, self-employment, an encore career or launching a creative career (writer, artist, musician) that lets you monetize what was previously a hobby. Normally, the Victory Lap is made possible by first achieving Financial Independence. It differs from traditional full-stop retirement in that you may still be working, albeit not for a single employer.
Rather you have multiple streams of income, some of which may be passive (pensions, investments) and some of which may be active (part-time work, contracts, an online business). This allows you to pursue the inner creative dreams you may have harbored when you were young, and which you may have put aside during the decades you worked in a traditional “Job” and raised a family. In your Victory Lap, you work because you want to, not because you have to (financially speaking).
Lastly what is an Encore Career?
Jon: An Encore Career or Legacy Career is a late-life reinvention of your career, as described by the website encore.org and the book Encore by Marc Freedman. Its subtitle says it all: Finding Work that Matters in the Second Half of Life.
Jon: We think it’s crazy to go from the 100% work mode of traditional salaried employment to 100% non-stop leisure, which is the traditional “full-stop” retirement that often occurs at age 65. By the way, I turn 65 next April and don’t expect to slow down much if at all. I’m in the fourth year of my own Victory Lap and am as productive as ever, and probably in much better physical and mental health.
With a Victory Lap, you work as much or as little as you wish: It may make sense to go down to 80% productivity, and gradually taper it down to 60%, 40% etc. as you reach your late 60s and 70s. This keeps the little grey cells active, it keeps you in the game and interacting socially with much more people (clients, suppliers, the public, etc.) than if you simply “retired.” Spending all your time at home watching TV and reading library books is, we think, potentially boring if practiced 7 days a week.
WHAT TYPES OF STRATEGIES CAN WE EXPECT TO SEE IN YOUR BOOK FOR PLANNING A VICTORY LAP RETIREMENT?
Jon: Planning is the key phrase. Ideally, you start planning your Victory Lap while you’re still gainfully employed: two to four years ahead if possible although life doesn’t always make that possible. First, you need to make sure you have saved enough that you are indeed findependent (financially independent at least of a single employer), and second you need to figure out what you’re going to do with all that free time you’ll have once you leave full-time employment, commuting and the rest of it. A Royal Bank study a year or two ago found that most of us spend 2,000 hours a year on the job, and that’s time you’ll have to fill with new activities once you leave the full-time workforce.
HAVE YOU HAD EXPERIENCE YOURSELF WITH A VICTORY LAP STYLE RETIREMENT, OR PLANS TO?
Jon: My Victory Lap began in May 2014, which was also my Findependence Day. It was helped by the fact my last full-time employer was willing to keep me on as a supplier under contract, which freed me to take on other clients and to focus on new activities like the book, public speaking and of course the website, the Financial Independence Hub.
HAVE YOU HAD PEOPLE REACH OUT TO YOU AND EXPLAIN THAT THE BOOK HAS CAUSED THEM TO CHANGE THEIR IDEAS AND PLANS REGARDING THEIR OWN RETIREMENT?
Jon: Certainly, there have been several who have done that, including a few financial advisers who bought cases of the book to give to clients they thought could benefit from the approach. It is a bit of a paradigm shift but once the light bulb goes on, I’m sure many may think either “It’s so obvious” or “Why didn’t I think of that?”
DO YOU THINK IT IS MORE COMMON THAN NOT THAT PEOPLE RUN OUT OF SAVINGS DURING THEIR TRADITIONAL WORK-FREE RETIREMENT AND ULTIMATELY END UP RETURNING TO WORK ANYWAY?
Jon: That’s more common than you think. The book Falling Short by Charles Ellis makes the case for working longer, for all the familiar reasons: the decline of Defined Benefit pensions, minuscule interest rates, rising longevity and soaring inflation. On the Hub, Adrian Mastracci reviewed both Falling Short and Victory Lap Retirement together, seeing them as a good matched pair on this concept: click on Two Notable Books to Guide Your ‘Retirement ‘Journey.
Ellis recommends working till 70 if you’re healthy, deferring Social Security to that age. I’d argue the same for Canadians: wait till age 70 to take the Canada Pension Plan (CPP) and Old Age Security (OAS). CPP will be 42% higher than if you took it at 65 and is a very valuable form of a guaranteed-for-life inflation-indexed pension: especially if you don’t have a gold-plated employer pension.
TO A YOUNG MILLENNIAL INVESTOR WHO IS STRUGGLING TO GET STARTED WITH INVESTING, WHAT ARE TWO PIECES OF INFORMATION YOU WOULD GIVE THEM?
Jon: Actually, Victory Lap Retirement is dedicated in part to Millennials, as well as their parents: we Baby Boomers. Millennials will have a very long time horizon: See the Hub’s review of The 100-Year Life, which suggests many Millennials will be centenarians. So while the Boomers may have extended Longevity, the Millennials may have SuperLongevity. So for them, they may as well be 100% in equities and if they’re not good at investing they might want to try a robo-adviser, which are really just packages of low-cost exchange-traded funds providing instant diversification.
THE AVERAGE CANADIAN IS ABOUT $22,000 IN DEBT. DROWNING IN DEBT SEEMS TO BE THE NEW NORM. WHAT MONEY SPENDING TIPS WOULD YOU GIVE A YOUNG CANADIAN TO STAY OUT OF DEBT BEFORE THEY HAVE DUG THEMSELVES IN A HOLE?
Jon: My book Findependence Day starts out describing a young Millennial couple who are in big credit-card debt and their attempts to get out of it. As one character in the novel quips, “You can’t climb the tower of Wealth while you’re still mired in the basement of Debt.” The book also describes how to do this: you have to live within your means and consistently spend less than you earn: for years if not decades. You have to save the surplus and invest it wisely. But the key is save, ideally 10 or 15% of your gross pay: what David Chilton calls “Pay Yourself First.” And the only way you can save is by being super-frugal, or what Findependence Day calls “Guerrilla Frugality.”
WHAT IS YOUR GREATEST INVESTMENT ACHIEVEMENT/MISTAKE?
Jon: I’m on the record that my biggest investment mistake was selling Apple stock way too early. I’d bought maybe $5,000 worth around the time the iPod came out and before the iPhone hit but sold it a year later. That’s probably a million-dollar mistake: is that big enough for you? On the other hand, I did buy it back once I realized the mistake, as well as most of the other so-called FANG stocks (Facebook, Apple, Netflix, Google). Probably because I was a technology journalist in the 1980s, long before I switched to investing and personal finance columnizing. So maybe I could have had my Findependence Day a few years earlier but I’m content with the way things have worked out.
Summing it all up
We’d like to thank Jon for taking the time out of his day to conduct this interview and we hope to have him back for more in the future. In the meantime, we highly suggest you check out his book and see if a Victory Lap strategy could work for you.