Trahair - Enough bull: how to retire well without the stock market, mutual funds, or even an investment advisor

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Copyright 2015 by David Trahair. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

ISBN 9781118994177 (Hardcover)

ISBN 9781118994191 (ePDF)

ISBN 9781118994184 (ePub)

DAVID TRAHAIR, CPA, CA, is a speaker, national bestselling author and financial columnist for CPA Magazine. His other books include Smoke and Mirrors: Financial Myths That Will Ruin Your Retirement Dreams, Crushing Debt: Why Canadians Should Drop Everything and Pay Off Debt and Cash Cows, Pigs and Jackpots: The Simplest Personal Finance Strategy Ever. He is known for his ability to explain the often-confusing world of personal finance in plain English. Canadians appreciate his no-nonsense style and the fact that his views are totally independent because he does not sell any financial products. He currently operates his own financial consulting firm and gives seminars on his books to accountants in B.C., Alberta, Saskatchewan, Manitoba, Ontario and Nova Scotia.

Id like to start off by thanking the two people that are responsible for the creation of this book. Those people are my literary agent, Hilary McMahon of Westwood Creative Artists, and Karen Milner of John Wiley & Sons Canada, Ltd., my publisher. If not for Hilarys belief in the idea and Karens enthusiasm for seeing it get into print, you wouldnt be holding it right now.

Id like to dedicate it to two other significant people in my life. First, to my mom, Florence Trahair, who passed away in 2008 at age eighty-two. She was always my biggest supporter. I felt her presence as I wrote this book. And second, to my father-in-law, Jack Baxter, who passed away in 2006 at age sixty-eight. Jack was one of my best buddies. He taught me how to enjoy life. I know he enjoyed each and every day of his.

And much thanks to Tula Batanchiev and Lia Ottaviano at Wiley for all the hard work in making this second edition a reality.

Welcome to the second edition! A lot has happened since the first edition of this book came out in early 2009. As I read through the first edition to see what needed updated, it occurred to me that my opinions havent changed. I still stand by everything I said the first time the stock market is no place to trust your hard-earned retirement savings in.

But some sections needed updated. For example the whole chapter on CPP is revised for the new rules that came into effect after edition one was published. And heres a bonus: this edition now includes step-by-step instructions for you to compute exactly how much CPP pension you can expect.

Ok, lets start at the beginning.

The period of time we lived through in 2008 and 2009 shifted the financial world on its axis. The old rules regarding personal finance are now history, as in obsolete.

This happened in the last quarter, the autumn of 2008. Lets call it The Fall of 2008.

During this period financial institutions that had existed for more than a century simply disappeared. World stock markets tanked. Entire investment portfolios were devastated. Retirement dreams wiped out.

What this series of events has done is show quite clearly the naked truth: traditional financial planning techniques dont work. In fact, if we had done the opposite of what the experts have told us to do to get ahead financially, we would be far better off today. Here are some of the past theories and the new reality:

• Trust the stock market to make us wealthy? Never again.
• Pay our investment advisor a fee of over 2% a year to try to beat the market? I dont think so.
• Risk our home trying to make our mortgage tax deductible by investing in mutual funds? Please, give me a break.
• Maximize our RRSP contributions religiously each and every yearand also save 10% of our income above that. You must be kidding, right?
• Borrow to invest leverage our way to riches? Forget it. Many have tried; you can now find most of them in the poorhouse.
• Skip a cup of coffee to get rich automatically? Yeah, right.

I am not opposed to capitalism. We need efficient stock markets so that entrepreneurial people can grow businesses that flourish businesses that create great products, deliver excellent services, hire good people, make profits and pay taxes.

The problem is that, obviously, markets have not been regulated satisfactorily. Businesses, especially financial ones in the United States, have been allowed to run rampant in the quest for riches. Thousands of intelligent, well-educated people making six-figure salaries and multi-million dollar bonuses spent years creating complex financial products that were sold to unsuspecting members of the public.

Ever heard of collateralized debt obligations? Mortgage-backed securities? Non-bank asset-backed commercial paper? What about income trusts? Or even mutual funds?

These complex instruments made many people rich. The people that invented them. The people that re-packaged them. And the people that sold them.

Unfortunately, the vast majority of people that bought into them got screwed. Theres the homeowner with no job and no money who was convinced to take out a mortgage on his home and ended up losing it. Theres the government, and the taxpayers, forced to shell out billions of dollars to buy into financial houses-of-cards just to keep them afloat. And of course, theres anyone who holds investments in these worthless companies.