Retirement Income for Life – Review and Giveaway
“Drawing down one’s savings in retirement is something very few retirees do well, even with the help of professional advisors.” – Fred Vettese, Retirement Income for Life.
If you want to learn about a few ways you can earn retirement income for life – this book will help.
In golf, the finishing holes are just as important as the front nine to score well. The same could be said for asset accumulation years and asset drawdown or decumulation years when it comes to money management.
Smart decumulation strategies are difficult to employ because retirees have, for the most part, conflicting goals. Retirees ideally want to have enough money to last a lifetime but at the same time, they want to enjoy the wealth they’ve worked so hard for.
This means asset decumulation, in comparison to asset accumulation, is the easier of the two.
How can you make your money last? What strategies should you consider to make your retirement income last for a lifetime?
Fred Vettese, retirement expert, author, chief actuary at Morneau Shepell, and more – shares those strategies in his latest book you can win a copy of, right here. (You can find a review of Fred’s previous book here – The Essential Retirement Guide.)
Before we get to the giveaway, like other giveaways on this site, here are my favourite takeaways from Retirement Income for Life (Getting More Without Saving More).
Vettese on retirement categories and strategies in general:
“Spending in retirement falls into three categories or “buckets”: regular spending, rainy day spending and bequests.” Vettese suggests you have income and cash set aside for all three, although the latter (leaving a legacy or inheritance) is far more discretionary.
“A good decumulation strategy maximizes the portion of your income that is stable and predictable. This is a sure-fire way of allaying your financial anxiety after retirement.”
On rainy day spending:
“Supply shocks” will occur in retirement. Whether that comes in the form of major home repairs, dental or health expenses, a family emergency or other circumstances – don’t pretend it won’t happen to you. Plan for these shocks before and during retirement with a rainy day fund. How much is enough? “Hold back about 3 to 5 percent of your retirement income each year…”. “Keep it in a separate account to be used exclusively for rainy day spending.” That equates to $30,000 to $50,000 for a $1 million portfolio.
On investment risk:
“The inescapable conclusion is that you have to invest in stocks if you want a decent return over the long run. There is no guarantee you will get it, but your odds are better than with any other asset class.”
On what not to do, including how not to drawdown your portfolio:
Vettese does not recommend any flat percentage withdrawal – such as 4% or 5% per year. Why? “The real problem with a flat percentage withdrawal is that the income it produces does not reflect your actual needs.”
Vettese does not recommend withdrawing only the interest. Why? Unless you intend to leave a modest to large bequest, in some years investors will have much more income or capital than they need but in some lean years, potentially less. “…there are better decumulation strategies out there.”
Vettese tends to favour withdrawing income equal to the target you need – marrying income needs but also reducing your assets over time in a meaningful and predictable way.
On ways to optimize decumulation:
Vettese recommends investors consider one, two or more of the following:
- Invest in passively managed funds to lower your investment costs and fees over time – keeping more of money working for you (versus in the hands of advisors of financial companies).
- Start your Canada Pension Plan (CPP) later in life – something I wrote about here.
- Use some (not all), maybe between 25-50% or so of your RRIF assets to purchase a non-indexed annuity.
- Make adjustments to your spending habits. In “good times” when the market is hot (like 2017 was), consider spending more. In bad times, when the market declines for a couple of years or remains flat, consider spending less.
- Consider the “nuclear” option of using a reverse mortgage, later in life.
Building a massive surplus of money for retirement is absolutely better than running out of money in your old age, but neither situation is ideal. By keeping your investment costs as low as possible for as long as possible, starting government benefits later in life, using some of your assets to purchase an annuity in your 60s or 70s, along with other options – Fred Vettese in Retirement Income for Life shows Canadians they need not worry about having millions of dollars saved for a comfortable retirement.
Canadians can have a very comfortable retirement if they plan well. That planning includes building a modest portfolio before retirement, getting out of debt (including no mortgage) at the time of retirement, and ensuring to the extent possible – they maximize contributions to tax-sheltered accounts such as TFSAs and RRSPs to generate future retirement income.
Want to win a copy of this book? Of course you do!
Enter the giveaway below by using a few methods or all of them. Let me know why you want Fred Vettese’s Retirement Income for Life in a comment or tweet. Tell a friend to subscribe to my site. Send me some Twitter machine love. I’ll raffle off the book to one lucky reader in a few weeks.
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