Gordon Pape - Retirements harsh new realities: protecting your money in a changing world

Also by Gordon Pape

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CONSUMER ADVICE

Gordon Papes International Shopping Guide (with Deborah Kerbel)

HUMOUR

The $50,000 Stove Handle

CHRISTMAS (with Deborah Kerbel)

Quizmas Carols

Family Quizmas

Quizmas: Christmas Trivia Family Fun

FICTION (with Tony Aspler)

Chain Reaction

The Scorpion Sanction

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NON-FICTION

Montreal at the Crossroads (with Donna Gabeline and Dane Lanken)

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First published 2012

1 2 3 4 5 6 7 8 9 10 (WEB)

Copyright Gordon Pape Enterprises Ltd., 2012

All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book.

This publication contains the opinions and ideas of its author and is designed to provide useful advice in regard to the subject matter covered. The author and publisher are not engaged in rendering legal, accounting, or professional services in this publication. This publication is not intended to provide a basis for action in particular circumstances without consideration by a competent professional. The author and publisher expressly desclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book.

Manufactured in Canada.

LIBRARY AND ARCHIVES CANADA CATALOGUING IN PUBLICATION

Pape, Gordon, 1936

Retirements harsh new realities : protecting your money in a changing world / Gordon Pape.

Includes index.

ISBN 978-0-14-317922-1

1. Retirement incomeCanadaPlanning. 2. Retirement incomeCanada.

3. Finance, PersonalCanada. I. Title.

HG179.P372 2012 332.024014 C2011-907154-1

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To my grandchildren.

May your lives be healthy, fulfilling, and prosperous.

With love to you all, Granddad

CONTENTS

PREFACE

It has been twenty years since I wrote my first book on retirement planning. Retiring Wealthy was first published in 1991, but as I leafed through it again in preparation for this book, I found that it focused on many of the same themes that will be dealt with here. I also found a prescient quote in that book from a Fortune magazine article: If they dont start actively planning for it, the future of retirement for the baby boomers is work.

Guess what? The first baby boomers have now reached the normal retirement age of sixty-five, and many of them are still working. A Harris/Decima poll conducted for Scotiabank and released in early 2011 found that 38 percent of Canadians expect to continue working after sixty-five because they wont have enough money to live on. Thats an alarming statistic.

The poll found that, all told, more than two-thirds of respondents said they plan to keep working after reaching retirement age. I wasnt surprised. Were living longer and healthier lives, and many people arent ready to abandon their careers just because they have a sixty-fifth birthday. Im seventy-five as I am writing this. There is no magic number at which we suddenly lose our desire and capacity to work.

But working after sixty-five should be a matter of choice, not necessity. Thats why it troubles me that many Canadians believe they wont be able to get by financially unless they stay on the job. In some cases, those jobs will involve menial labour, like bagging groceries at a local supermarket. Weve already seen signs of that. No one should be forced into doing work they dont want and dont enjoy. And as the baby boomers continue to age, the trend will likely accelerate.

There were several other worrisome findings in surveys that were published during the 2011 RRSP season. For example, the Scotiabank poll also found that 55 percent of those planning to retire completely have saved less than $20,000 over the past five years. At that rate of saving, theyll need government handouts to survive. A TD Waterhouse survey discovered that 67 percent of baby boomers are worried they wont have enough money to retire; only 15 percent feel comfortable about their situation. And a Royal Bank study concluded that only 39 percent of Canadians between the ages of eighteen and thirty-four have opened an RRSP, the lowest level in almost a decade and a sharp contrast to the 62 percent who responded positively to the same question in 2006.

And heres the most frightening statistic of all: 5 percent of the people who answered the Scotiabank poll said they were counting on a lottery win to fund their retirement. You have to wonder how much of their potential savings theyre blowing on tickets!

If the poll numbers are anywhere near accurate, they tell a disturbing story that portends badly for the future. Despite years of warnings, exhortations, and incentives, far too many Canadians are still unwilling or unable to take the action necessary to protect themselves from years of financial distress in later life. And this is despite the fact that this country offers some of the best governmentsponsored savings programs in the world.