Gordon Pape - Retirement Time Bomb

PENGUIN CANADA

THE RETIREMENT TIME BOMB

GORDON PAPE is Canadas best-known financial author and the publisher of four investment newsletters, including The Income Investor, Mutual Funds Update, and the Internet Wealth Builder. He has authored or co-authored over 40 books and has spoken at hundreds of seminars in Canada and the United States. He is frequently quoted in the media and is a popular guest on radio and television shows. His website is located at www.buildingwealth.ca.

Also by Gordon Pape

INVESTMENT ADVICE

Get Control of Your Money

6 Steps to $1 Million

Retiring Wealthy in the 21st Century

The Complete Guide to RRIFs and LIFs (with David Tafler)

Gordon Papes 2004 Buyers

Guide to Mutual Funds

(with Eric Kirzner)

Gordon Papes 2004

Buyers Guide to RRSPs

Secrets of Successful Investing

(with Eric Kirzner)

Making Money in Mutual Funds

The Canadian Mortgage Book

(with Bruce McDougall)

The Best of Papes Notes

Head Start

(with Frank Jones)

Building Wealth in the 90s

Low-Risk Investing in the 90s

CONSUMER ADVICE

Gordon Papes International

Shopping Guide

(with Deborah Kerbel)

HUMOUR

The $50,000 Stove Handle

FICTION

(with Tony Aspler)

Chain Reaction

The Scorpion Sanction

The Music Wars

NON-FICTION

Quizmas: Christmas Trivia Family Fun

(with Deborah Kerbel)

Montreal at the Crossroads

(with Donna Gabeline and Dane Lanken)

VISIT GORDON PAPES WEBSITES

Building Wealth on the Net

www.buildingwealth.ca

Investing commentaries

Financial news and views

Gordon Papes email newsletters

Answers to your financial questions

On-line Buyers Guide to Mutual Funds

Net Worth Calculator

Family Budget Planner

Book excerpts

and much more!

Quizmas

www.quizmas.net

Christmas trivia for the whole family

Readers Christmas memories

Quizmas contests

THE RETIREMENT TIME BOMB

HOW TO ACHIEVE FINANCIAL INDEPENDENCE IN A CHANGING WORLD

GORDON PAPE

PENGUIN CANADA

Published by the Penguin Group

Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada M4P 2Y3 (a division of Pearson Penguin Canada Inc.)

Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, U.S.A.

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(a division of Pearson New Zealand Ltd)

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Penguin Books Ltd, Registered Offices: 80 Strand, London WC2R 0RL, England

First published 2006

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

Copyright Gordon Pape Enterprises Ltd., 2006

Excerpts from Richard Shillingtons report New Poverty Traps: Means-Testing and Modest-Income Seniors, located on pp. 11213, are reproduced courtesy of the C.D. Howe Institute.

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 other 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 disclaim 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 The retirement time bomb : achieving financial independence in a changing world / Gordon Pape.

Includes index.

ISBN 0-14-305073-7

1. Retirement incomeCanadaPlanning. I. Title.

HD7129.P37 2006 332.02401 C2005-904956-1

Visit the Penguin Group (Canada) website at www.penguin.ca

To the memories of David Tafler, Bob Nelles, Bruce Smith, Shirley Smith, Herb Sanders, Carl Kaye, and Stu Strebel. You are greatly missed by us all.

ACKNOWLEDGMENTS

Being an author is a lonely job in many ways. No one else can write the words for you; its a task that must be done alone and which sometimes requires shutting out the rest of the world for hours or even days on end.

But that does not mean that a book is a one-person accomplishment. There are many people who play important roles in making everything come together and their hard work deserves recognition.

To begin with, I want to thank my daughter Deborah Kerbel for her assistance in the research of this book, which she amazingly found time to do while writing a series of childrens novels of her own.

I would like to thank my editor-in-chief, Andrea Crozier of Penguin Canada, who has been a constant source of support, encouragement, and skilful guidance for many years. I would also like to thank Lisa Berland, my copy editor on this book, and Eliza Marciniak, the production editor, who looked after the myriad details that transformed my words from computer files to the book you are holding in your hand. As well, my thanks to all of the other folks at Penguin Canada who played important roles in the design, promotion, and marketing of The Retirement Time Bomb.

And finally, thank you to all of my faithful readers over the years. I have received letters and emails from many of you saying that my books have helped you reach your financial goals and attain a better lifestyle for yourselves and your families. Your words have meant a great deal to me and I very much appreciate the fact that you took the time to tell me that, in some small way, I made a difference.

Gordon Pape

INTRODUCTION

The Speed of Change

The only constant in life is change, and that is particularly true when it comes to retirement planning. Assumptions that seemed valid 10 years ago have been turned upside down in the intervening years and an entire new set of dynamics has come into play. Consider:

A decade ago, people were worried that the Canada Pension Plan would run out of money and would not be there to support them when the time came to draw benefits. Today, only the most pessimistic fret about the solvency of the CPP. If the actuaries are right, Canada has one of the most stable public pension systems in the world.

A decade ago, every Canadian with an employer pension plan believed that it would be the mainstay of their financial well-being in retirement. Today, the stability of the whole private pension system is in question. Financially stressed companies seek to reduce pension benefits that were once taken for granted. In a few cases, plans have actually collapsed into insolvency, leaving people who contributed to them for years with virtually nothing.