Boomers Retire with David Field and Alexandra Macqueen | E065

What the retirement landscape looks like for the boomer generation.

In this episode host, Jason Pereira talks with authors of the book 5th edition of Boomers Retire - David Field and Alexandra Macqueen.

Episode Highlights: 

  • 1.16: Alexandra says she is a Certified Financial Planner since 2006. Earlier she worked as a financial advisor with an insurance license. 

  • 1.20: In 2008, Alexandra took a step back and realized what she like about finance is writing about finance. This feeling motivated her to start a job at a small fintech startup, where she co-authored her first book. 

  • 2.40: David says he is a Certified Financial Planner as well, and this is his second carrier earlier. Prior to this, he was a book and magazine editor. He is an advisor for financial planners and owns his firm papyrus planner.

  • 3.58: Jason talks about the challenges that people of this generation face; the challenges are different from previous ones. Jason inquires, “How time has changed?”

  • 4.30: Alexandra says Society is getting older. Present challenges throughout as a society require long-term care and providing care for people as we age. But as an individual, there are specific challenges that are unrelated to societal challenges. 

  • 5.57: Funding retirement is increasingly complex. Business owners never really had defined ownership pension. Retirement is a DIY proposition, explains Alexandra. Nobody has a partner in that, you have to do it yourself. 

  • 8.09: David throws some light on the changing pension schemes, and now with the increasing number of women in the workforce that is upped the number of people participating in pension plans.

  • 9.28: Jason is curious to know about the degree to which the Canadian government is going to support a citizen’s retirement?

  • 11.13: Jason shares the rough figures, if someone decides to retire at the age of 65 i.e., ~$20,000/year, and for couple it is roughly $40,000/year.

  • 13.56: Jason and Alexandra talk about the importance of making the right decision when it comes to withdrawing the lump-sum pension amount. 

  • 14.00: The total amount might appear to be lucrative, but withdrawing it completely has its downside like massive tax implications. 

  • 16.41: Jason asks, “What are the big pitfalls and common problems that occur in defined constitutional pension plans?”

  • 18.42: Jason inquires, “What happens when someone has retired, what are the biggest concerns that they have?” “What is the biggest risk that they face?”

  • 20.32: Alexandra explains how people can intelligently invest their retirement money and play safe. 

  • 23.32: Jason says a lot of conversation around retirement is based around income maximization. 

  • 25.11: David says people spend their lifetime accumulating money, they take risk and very often they take financial advice. 

  • 30.08: Alexandra and David talk about reverse mortgages. 

  • 30.23: Jason says the pressing issue for the present generation is that taxes are going to creep-up on properties. 

  • 32.31: Jason asks in terms of the advice that “If we give boomers, what are the most important thing they should be contemplating at?”

  • 32.58: Alexandra advises to think thoroughly about retirement. Figure out how much you will need to live on and where you would want to live. Don’t rely on other people’s assumptions. David hates shortcuts in this industry.

3 Key Points: 

  1. Alexandra explains how as per the OECD Data, Canada always ranks higher as compared to US and other European country’s data?

  2. Jason, David, and Alexandra share interesting insights on “How Financial Advisors can play a vital role in helping their clients navigate into and through retirement?”

  3. Listeners learn about the importance of financial planning and the risk involved around investing money.

  

Tweetable Quotes: 

  • “Retirement is more diffused” - Alexandra Macqueen

  • “Federal politicians’ lose election if they suggest changing the age when people can access their old age pension from 65 to 67”- Alexandra Macqueen

  • “The government is not going to pay for your cruises, it is going to pay for your food and shelter.” - Jason Pereira

  • “Averages means nothing to people.” - David Field

  • “Plan and live your retirement based on what you want to do and not on tax efficiency of your decisions.” - David Field

Resources Mentioned

Transcript:

Producer: Welcome to the Financial Planning for Canadian Business Owners podcast. You will hear about industry  insights with award-winning financial planner and entrepreneur, Jason Pereira. Through the interviews  with different experts with their stories and advice, you will learn how you can navigate the challenges  of being an entrepreneur, plan for success, and make the most of your business and life. And now your  host, Jason Pereira. 

Jason Pereira: Hello and welcome. Today on Financial Planning for Canadian Business Owners, I have the authors of the  new book, The Boomers Retire, or should I say the fifth edition of The Boomers Retire: A Guide for  Financial Advisors and Their Clients. And those authors are colleagues and friends of mine, Alexandra  MacQueen, and David. And I brought them on the podcast to talk about their book, but specifically  about the challenges facing this generation as they retire. And of course, we're going to twist this into  how does this impact business owners? And with that, here's my interview with David and Alexandra.  Alexandra, David, thanks for joining me today. 

Alexandra Macqueen: Thank you. 

David Field: Thank you for having us. 

Jason Pereira: My pleasure. I mean, like I need another excuse to talk to you guys, whatever, but with that said, before  we get started, let you introduce yourselves to the audience and tell people who you are. Ladies first,  Alexandra. 

Alexandra Macqueen: Well, I'm a certified financial planner and have been since, I think, 2006. Finance is actually a second  career for me and I thought... I was married and I had little kid and I did something that required me to  travel all the time and I thought, "I want to do something that allows me to stay closer to home." And I  thought that getting a CFP was the first step to getting into finance so I had a toddler and I was pregnant  and I did the CFP coursework, getting up at 4:00 in the morning before the toddler to do the courses  anyway. And then I, making this into a long story, worked in finance as an advisor, was insurance  licensed, and then 2008 hit, stepped back and realized that what I liked about finance is writing about  finance. Took a job at a small FinTech startup, coauthored a book with one of the owners of that startup  and that book writing journey for me had begun. 

Jason Pereira: That coauthor just happened to be Moshe Milevsky so that was a nice little benefit for the first book to  be written. 

Alexandra Macqueen: People often ask-

Jason Pereira: How'd that happen? 

Alexandra Macqueen: ... me, "How do you write a book?" And I'm like, "Step one, find famous co-author." 

Jason Pereira: Yes. If you're listening Daniel Crosby, I'm going to bug you. 

David Field: That's what I did on this book by the way. 

Jason Pereira: There you go. That's it. It's just a string. Okay, fair enough. Luckily, I'm fortunate to know a number of  famous authors. I just pick on Daniel because we go back and forth on Twitter all the time, but yes,  Moshe, and whoever else wants to write a book with me, just let me know. I'm happy to throw my name  behind it. David, your turn. Please tell us about your background. 

David Field: Yeah. I'm a CFP as well. This is also my second career. My previous career was, I was a book and  magazine editor. I worked at University of Toronto Press and [inaudible 00:02:54] like Owl Magazine so I  did children's publishing, academic publishing. I've been around in that world. And so, now as a CFE, it's  nice to be able to work back in books as well. I'm an advice-only financial planner at Papyrus Planning,  my own firm, and a co-creator of the CPP calculator. 

Jason Pereira: Handy little tool, I will say that much. 

David Field: Thank you. 

Jason Pereira: Just going to jump into the book here and go over the table of contents and talk about just the depth of  what you went and then we're going to go back and talk about the actual issues and problems. We start  off by discussing what retirement means today then you dive into sources of retirement income,  tackling government pensions first, then employer plans, personal savings plans, talk about the  investment choices, because again, that has an impact, tax planning, tips and strategies, where to live,  reducing your risks in retirement, estate planning, working effectively and retiring clients. 

Jason Pereira: One thing I want to thank you about for this book is what I do love about this book is the fact that 300  pages of explaining to the lay person how it is not easy. It never ceases to amaze me how people try to  simplify this challenge but the reality is, is that there are challenges that are facing this group or this generation of people that were different than previous. Can either one of you care to speak to how  retirement has changed? 

Alexandra Macqueen: Well, we have three themes in that first chapter. There's how retirement has changed for society as a  whole. Canadians are older than we have ever been, right? There's a neat little chart in chapter one that  shows the proportion of people under the age of 15 and the proportion of people over the age of 65 and  how, I mean, this isn't news, but that our society is getting older. And so, that presents challenges for us  as a society around things like long-term care and providing care for people as we age, healthcare costs.  But as an individual, there are specific challenges that are unrelated to those societal challenges and we  define them as retirement is increasingly longer. We've doubled life expectancy in a hundred years and  we've said that all of those extra years go at the end of life. They're not part of our working life. We still  think of retirement as happening at 65. Federal politicians lose election if they suggest changing the age  at which people can access an old age pension from 65 to 67. 

Jason Pereira: As we saw recently in Canada. 

Alexandra Macqueen: We have a longer life, but we've said, "We're not going to work during those years. We have to fund  them out of our working years," and that's a huge challenge. Retirement is more diffused. Even though  we think about 65 as the so-called normal retirement age because that's when you might access old age  pension or if you're in a defined pension, which isn't the people that listen to this podcast, but if you're  in a defined benefit pension, you might have 65 as normal retirement age. The reality is, it's all over the  place. You can read stories about people retiring in their 30's and then there's people who are still  working up until they're 80. Retirement isn't this on-off switch that you might think of it as. 

Alexandra Macqueen: And then the third thing to your original point is that funding retirement is increasingly complex.  Business owners have never really had defined benefit pensions as a group, but with the loss of defined  benefit pension, it means that more and more, this... Retirement is a DIY proposition. You don't have a  partner in this. You've got to do it yourself and we keep adding strategies, products to the marketplace.  And if you're going to plan for your retirement, the amount of stuff you have to know has just gotten  bigger and bigger, hence 300 pages. 

Jason Pereira: We're recording this the week that Canada launched it's first tontine, which was a subject all onto itself.  But quickly on a little diatribe, going back to an article I wrote in 2014, I think the retirement age of 65 is  one of the best examples of anchoring bias in Western society ever because that number, as I'm sure  you know, came from the German pension, which was the first government-sponsored pension in  modern day society, which was started by Otto von Bismarck. And the funny thing is, is it was defined as  something that was there in case you were unable to work anymore, because back then people didn't  live that long. In fact, life expectancy was 35.6 when Otto von Bismarck pegged this back in 1881. It was  for a male, 35.6 years. A female was 38.4. If we had adjusted the start date of government pensions  based on mortality gains over that time, as of 2012, the start date would have been 95 years old, which  means today it'd probably would be 97.

Jason Pereira: Pensions for governments basically, and the concept of retirement is very, very new and really, pensions  were for, "Oh my God. You are so old and broken. You can't work anymore." Not for, "Oh, by the way,  you can start going on cruises and not have to work anymore and relax and enjoy your later years."  That's really a less than a hundred year concept, isn't it? 

David Field: Yeah. 

Alexandra Macqueen: Absolutely. 

Jason Pereira: But it's one we all want and it's also one that unfortunately, the industry has pushed people to start  thinking about at 55. And I always say, "That's a long time to do nothing." Anyway, David, in your mind,  does that about cover how things have changed or is there other things we need to address? 

David Field: No. Well, I mean, one thing that was interesting in researching for the book too, was just that there's a  conception, or perceptions, sorry, people less pensions than there used to be and the reality is actually there's more people on pensions than there used to be 

Jason Pereira: There's different types, right? 

David Field: Right, and also, a lot of women have entered the workforce over the last 40 years and many will work in  industry, such as teachers or such as government workers or something like that. Not to brand everyone  having the same career, but that's up the number of people participating in pension plans. And so,  there's this perception that nobody has pension plans anymore, but actually more people than ever  have pension plans [crosstalk 00:08:30]. 

Jason Pereira: It is safe to say that the number of people who are members of defined benefit pensions has increased,  but the overall percentage of the population has decreased? Is that the takeaway? 

David Field: I don't know if that's the takeaway. I think that there's more... Men have had less access to pension  plans 

Jason Pereira: That's fair. 

David Field: ... and I think that's the change. 

Alexandra Macqueen: OECB data on the proportion of pensions by country, and Canada always scores really high compared to  the US and many European countries, but it's because of the much greater fraction of our population  that's employed in healthcare and all those people have pensions. Sorry, not including doctors. I'm  talking about 

Jason Pereira: Nurses. 

Alexandra Macqueen: ... nurses primarily. 

Jason Pereira: Yeah, exactly. Yeah. I mean, the degree in size of the government plus pseudo-government  organizations and industries, basically those are the primary sources of defined benefit pension. Let's  talk about retirement income. And first of all, let's talk about the first myth or first belief. Let's talk about  the degree to which the government is going to support you in retirement. The major tenfold  government programs, what are they, how much money can people expect to see from them, best case  scenario? 

David Field: Well, the main government programs is you're going to have your Canada Pension Plan or the Quebec  Pension Plan and that one makes up the bulk of people's income in retirement, or government income  in retirement. And the rough intention of the Canada Pension Plan has been to make up 25% of your  working life income in retirement. That's the guideline basis. Obviously it depends on how much you  contributed and how much you worked, plus what your income was over that time, but that's the main  idea. The bulk will come from there and there's a lot you can do to increase that or decrease that based  on when you choose to take your pension. You do have some choice there and some ability to increase  what that does. 

David Field: And then the other major source is the Old Age Security. As the Old Age Security, and the old age  security is based on residency. Depending on how many years you've lived, between one and 40 years in  Canada, then you have that as your set income as well and that also has some choices to when you can  start it and what the benefit will be as well. That makes up nowhere near as what the Canada Pension  Plan, but roughly half of that. Then if you combine the both, you might get up to 40% of your working  general income from that. Obviously people who are high net worth and high income earners, that's  going to be different because they cap out at a certain amount but 

Jason Pereira: Yeah, but all said and done, you add up those two numbers. Assume someone retires at 65, doesn't look  to defer an increase or anything like that, best case scenario, we're looking at roughly $20,000 a year for  someone. And if you're a couple, that's 40,000 for a household. The reality is, and I've had this happen more so in the past, not less lately, where people get to retirement, finally see what the pensions are  and are like, "I'm supposed to survive off that?" And my response is, "The government was never going  to pay for your cruises. They were going to help you pay for your food and shelter." 

Jason Pereira: I mean, the great thing about those pensions is they're there and they prevent abject poverty, right?  And there's also other programs to do that but the message is, if you want to have any reasonable  retirement lifestyle that you're used to it, you've got to plan beyond that. The next phase was to talk  about retirement income from employer plans. You already covered how more people than ever are  covered by DP plans. Is there anything people should be aware of or concerned about when it comes to  then defined benefit pension plans? 

Alexandra Macqueen: Well, the big thing I always think about, or the big issue that is always front of mind for me, because  people talk to me about all the time, because it's something I specialize in, is that you hit 65 or you hit  the age at which you can turn this pension into income. And one of the options that's often offered is  the chance to opt out of the pension and receive a lump sum and it's very tempting for people. You look  at that number, it might be well over a million dollars. Psychologically, it's like winning the lottery. What  if I got a million dollars? I could manage it better than the pension plan. And I think the thing to be  cautious about... I would never advise that there's a blanket. Everyone should stay in their pensions or  everyone should exit. It's a highly personal decision, but we get almost no thinking or education about  that. 

Alexandra Macqueen: You're presented with this one-page form from your employer that says, "These are your options at  retirement. Do you want to take the pension now? Do you want to defer it or do you want to opt out  entirely?" And where do you go for that advice about, "What should I do?" And when you look at that  number and it's $2.1 million, and it doesn't tell you how much tax you're going to pay on it, you don't  necessarily understand that. That's, to me, the big looming, I don't know what to call it, but it's a big  issue that people grapple with and really have nowhere to go for good advice about it. 

Jason Pereira: Well, the problem is too is the incentives are pretty one-sided, right? If you go to the average advisor  you're dealing with, they're given a choice between telling you to take the commuted value and getting  to manage those assets and seek money on it versus getting nothing. Not to say that good advisors  wouldn't tell you what the right answer is for your situation, but it does create an inherent conflict so  much so that in my practice we actually get third-party actuaries to weigh in on, just out of principle.  The other thing is too, you may have been at the [inaudible 00:13:27] conference, where it was  mentioned, but I wish I had this study, was like psychologically people discount the value of an annuity  by about 30% of the actual present value of it. That means that when presented with a lump sum versus  an income stream, the human mind is not really good at understanding the inflation adjusted value of an  income stream for the rest of your life and factoring in insurance against you dying too soon. 

Jason Pereira: And more often than not, people will opt for the lump sum because they don't understand the value of  the actual pension itself. Yeah, that's a big concern because you make the wrong decision there, there's massive tax implications and other massive complications in term of longevity. But here's another  question to hit the both of you with, and one I've encountered in the past, and we'll call it the moral  hazard of defined benefit pension plans. I met countless people during my career who basically simply  say, "I've got a pension plan at work. My retirement's taken care of. I don't have to think twice about." Is  that wrong and why is that wrong? 

Alexandra Macqueen: Well, unless it's a government of Canada or a municipal backed pension, it's risky. 

Jason Pereira: That's true. But also throw in the twist that the pension plan hasn't asked you what your spending is or  what your lifestyle is, right? They're just going to pay you a sum. They don't care what the heck is going  on in your life and what's going on in your life may not be sufficiently covered by the pension. You can  have that problem as well. 

Alexandra Macqueen: Well, it goes back to, I'm going to let David speak in a moment, but it goes back to the idea you were  talking about with how much is the government going to pay you in retirement? We've already talked  about retirement. It begins at 65, in many people's minds, and then retiring before 65 is retiring early.  And then you get some money from the government to [inaudible 00:14:55] in retirement. It's built on a  lifecycle model of finance, which I personally think is really breaking down. Why would you need less in  retirement? Well, presumably you've got a principal residence that's paid off. That is a reality 

Jason Pereira: Big assumption. 

Alexandra Macqueen: ... that is not going to be the case for... Because fewer and fewer... If I just look at our own city of  Toronto, who was buying houses in that age 40 cohort? There's an entire generation of people that are  shut out from the, "I'm going to have a mortgage and I'm going to pay it off." If I look at my own parents'  life cycle, that they bought a house in their twenties, they already had children. They needed a house.  They had no way to prevent children effectively so they had four of us. They needed a house to stick us  somewhere. They paid it off by the time they were 50 and then my dad was a university professor and  retired with a pension. None of those factors are true for me, not a single one. 

Jason Pereira: Very true. 

David Field: And I saw too, when leading up to retirement, that's my preferred time to work with people, is that little  bit of time before retirement, because although inexperienced, a lot of people may have paid off their  mortgage, but it's basically, they've been paying it off with a line of credit. That's in many circumstances,  but for those people who have paid off their mortgage, what you find is that lifestyle ramps up. And so,  yes, they don't have this payment anymore, but it's now going to new spending that they were  sacrificing while they were paying off their mortgage, that sort of thing. When you go into retirement, it's not that you're going in without the mortgage. You've now increased your spending since paying off  the mortgage. You have to deal with, like you said, the real numbers of your lifestyle, right? 

Jason Pereira: I agree with you. It's nice for people to have defined benefit pensions. We've covered that. Let's talk  about defined contribution plans through work. Now, where are the big pitfalls? And I mean, they can  work. Let's be clear that. You basically get the money. You invest it to a risk that is at least equal to the  pension plan. You get the long-term returns and in theory, you could get the same income as a DB plan,  but without the floor, but where are the pitfalls and common problems that occur within defined  contribution plans that you're concerned about? 

David Field: Well, the defined contribution plan, I mean, it's very much, in a lot of ways, just like the RSP, right?  You're managing that risk. And so, I would say some of the greatest risks is really knowing your time  horizon as to when you're going to start spending that money, and really knowing how you're going to  withdraw that money. And with a defined contribution plan, if that goes into a LIRA, then you have a  little bit less flexibility. Of course, in some provinces, there's some unlocking rules and such things, but  really understanding when and how you're going to use that income over your lifetime is important to  knowing how to invest it and what risk level to take on. And then of course, there's the risk less so in a  LIRA, because you can only take so much out from RSPs and that sort of thing. I mean, if you deplete  that too fast or too much of it is eaten up by taxes because you're withdrawing too much at the  beginning and increasing your tax, I think that's a big problem as well. 

David Field: And then [crosstalk 00:18:02] I would say the third is figuring out how to take that income out and if  you're married, how to split that. People are different ages. You can only split that income... A pension  income, you can split from the time you get that pension income, but a LIRA, you can only start splitting  from 65. If your retirement's before that, you really have to think that strategy through. 

Jason Pereira: And that brings me to an interesting question. Let's take a step back from the technical side. I'm not  going to get into the RSP, TFSA's and what not. We covered that previously in the podcast. Any even  with the business owners, there's a number of savings options we covered like RCAs and IPPs, previous  episodes on that so we can reference those. But let's talk more about someone gets to retirement. They  managed to save or they're right about there. Let's just say they reasonably certain or the BB plan, or  they've actually gone to a planner hopefully, and gotten confirmation they have enough money. What  are the biggest concerns that they should be having at that time? What are the biggest risks they're  facing, whether it's the 65 year old, the 70 year old, whatever it is? That person who's about to hit the  stage where they are no longer going to continue working, their human capital has hit zero or will be  zero going forward, what are the biggest issues that they face? 

Alexandra Macqueen: How much can I take out of those accounts so that I don't run out of money before I run out of life? That  is the number one concern over decades. And DB plans solves that. CPP and OAS is there until you die  but for every other arrangement, you need to figure it out and it's complex.Jason Pereira: It's interesting because I'm sure you guys have seen it too. The person who tells you, "Well, look, I've got  no one to leave it to. I want to bounce my last check," to which my old joke is, "It better be for the thing  that kills you because frankly, I can't predict it otherwise," right? That's the reality of it. We're trying to  hit a target where we don't know what the end date is. That's highly problematic and I think it's even  more problematic in the fact that longevity... Everybody loves the idea of being part of a defined benefit  pension. Lots of people love the idea of having that and having that more by retirement, but we can give  them the same thing in the open market by selling an annuity. But how many people will actually pull  the trigger on an annuity, right? They hate annuities, but they love DB pension plans. No one can square  that circle for me. It's bizarre. 

Alexandra Macqueen: No, you're completely right. If the biggest question is, "How do I make sure that I have enough money or  that my money lasts until I die," the answer is extremely simple, is buy an annuity. 

Jason Pereira: That's it. 

Alexandra Macqueen: And the cheapest, most effective annuity is the plain old, FIA or single premium income annuity. You  give a chunk of money to an insurance company and in return, they give you a little bit every month for  as long as you're alive. And the moment that you start adding riders, like it continues to another person,  or it can do this for a guaranteed period, or it has inflation indexed in, then the amount goes down. You  want the most bang for your buck and that's FIA, but the choice is irreversible. People don't want to do  it and to be frank, the commission is low for advisors. If I buy a bunch of mutual funds, my advisor's  going to get a little bit every month. I'm providing the annuity for the advisor. 

Jason Pereira: Well, it's like Charlie Mungers said, "Show me the incentive and I'll show you the outcome," right?  Annuity's going to pay you at most 3% up front to the person who sells it versus the investment  management is probably going to pay them somewhere in the neighborhood of 1% indefinitely, right?  The incentive is not there, but I will also say... Again, good advisors will still basically make the  recommendation. The bigger issue is coming down to is, go back to the pension decisions, some worth a  million, $2 million. They never cut a check that big in their lives. How many people in this world have cut  a check for over a million dollars? And in many cases, that's what we're talking about doing potentially.  Maybe not a million, but last time I tried to do this was with someone who would have benefited from  putting $400,000 into an annuity. And that person's thought cutting a $400,000 check that they were  never going to be able to just get their money back other than by outliving it, was non-starter in  conversation for them. 

David Field: Yeah. I think one of the things that are missed out by tools like an annuity, tools like long-term care  insurance, and even tools on the estate side, like a participating whole life or universal life policy, those  things add backstops that allow you to spend your money more freely and I don't think that's  communicated enough. If your desire is to max spend and spend it all, everything you've earned, and enjoy life, well, if people don't use these tools that are at their disposal, then you always have to have a  large chunk in reserve and that's just the nature of it. You can transfer that risk elsewhere and then it  frees up you to be able to spend, right? It's really what your aims are. 

Alexandra Macqueen: Don't forget, you can mix and match. I think that people often portray this as an all or one decision, like  either I, and that's the DB thinking because with the DB plan, typically all or everything but your CPP and  OAS, all your retirement income is coming from that DB plan because it's used up all your RSP room.  People don't tend to save a lot. Most people in general, don't tend to save a lot of additional funds,  whether it's in a TFSA or a NonReg fund. There you go. All your retirement income's coming from that  one pot but if you don't have a DB plan, you can mix and match income sources to give you some  backstop and some flexibility. 

Jason Pereira: I want to go back to something David said earlier about that you spend it all that, and that assumption. I  know people say that and it'll come out of their mouth they don't want to leave anything behind. And  unfortunately, a lot of the conversation of retirement is based around income maximization over the  lifetime, right? But in reality, this seems to be based off the premise of people are just going to spend  whatever the heck gets the bank account and I fully believe that's normal to a certain level of lifestyle,  right? If I need to pay for food, shelter and just basic transportation and all that, and I'm barely at the  line, I'm willing to believe that I'm probably going to spend every last penny that's in my bank account. 

Jason Pereira: But as net worth increases, how realistic... I mean, I got to tell you from my practice, I can count on one  hand the number of clients who couldn't control their spending beyond a certain threshold. It'd get to a  certain level where sometimes a lot of these people are receiving more money from their rifts or  whatever else it is than they actually spend it. We ended up reinvesting it because, hey, they're doing  what they want and anything beyond that, maybe they just they've run out of interests. Is that your  experience? Do you think we focus too much on just that message of income maximization, spend it all,  or am I missing something here? 

Alexandra Macqueen: Well, isn't that a feel good message? I mean, if you're an advisor and you're trying to win a client, aren't  you going to... I'm not trying to be overly cynical, but I would rather deliver the message, "Here's how I  can maximize how much you can spend," versus "We need to take a careful look." Now, obviously it'll  depend on the client, it'll depend on the advisor, but from a sales point of view, I want to deliver the  message that I can give you more than you were expecting. 

Jason Pereira: Yeah. I mean, there are lots of promise sales pitches advisors can make and returns or more income is  definitely one of them, or there's two of them, but I don't know. I feel like it's missing the wrong target. I  mean, too often, and I'm sure you get to this in your book, it's, "What is it you want your lifestyle to look  like?" Great. Let's see if it fits. If it does and there's stuff beyond that, then we can talk about options.  Just find a way to blow it all just doesn't seem to make a lot of sense to me. It just doesn't resonate with  me, quite honestly.

David Field: I think people spend their entire lifetime accumulating money. I want maximum returns. I want to take  risks. I don't know how much I'm going to need. I want that to grow. And then very often, you'll do a  financial plan for somebody and it's all based around their goals. What do they want? What do they  want to achieve? What do they want to do? You lay that all out and you vet what they need. And with  certain assumptions, you can show them they have more than enough to do everything they want. You  can either say, "Do you want to do more? Do you want to retire earlier? Or if you're happy with that,  maybe we can really dial down the risk." 

David Field: What's the point of taking so much risk when you're able to achieve everything you want for the next  [inaudible 00:25:47] years? And obviously you've got to be worried about inflation and there's other  risks there, but often, people in retirement will have their portfolios trying to get 8, 9%, and taking a lot  of risks. When really, you show a projection and you're like, "Really, you need to keep up with inflation.  Basically, you need 2% and you can achieve everything." 

Jason Pereira: It's interesting. It's the risk-need component that doesn't get discussed enough, quite honestly, where  we've had that happen all the time. People are very afraid of rationing down their risk or whatever it  might be, but then I'll show them in our plans, "By the way, you could make 0% for the rest of your life  and you never run out of money," and then suddenly they're like, "Why am I putting myself through  this?" I think you're right. It's almost like they're running the rat race to try to get to something but they  passed the finish line so long ago they haven't even thought about it. I think the conversation around  how much they can spend also is the same thing. It's like, "Well, I need to have as much as possible,"  and it's just like, "But if your lifestyle is at a certain level and you could spend 50% more than that, what  in your lifestyle did you want to increase that you didn't tell me about in the first place," right? 

Jason Pereira: I've had that conversation about, "What is it you're not spending money on, that you want to spend  money on that you haven't told me about?" And when I frame it like that, they just look at me  dumbfounded sometimes thinking like, "I haven't even thought about that." It's one of those things  where... Yeah, it's the old Yogi bear quote, "If you don't know where you're going, you'll end up  somewhere else." And unfortunately, some people pass retirement a long time ago and fail to realize it.  But I want to come back to the book for a sec and I want to come back to a section that I think a lot of  people would not necessarily think would be in a retirement book and that is a section on where to live.  Can you address the issues surrounding that? 

Alexandra Macqueen: Well, we wrote this book during COVID. I mean, it was an interesting time. I refer to this as a pandemic  project because all of a sudden I had some spare time and I'm, "Oh, let's write a book." Where to live,  well think about the word downsizing. People always talk about downsizing as something that people do  in retirement. I'll use my parents as an example. They downsized and that means they sold the four bedroom home that they lived in and raised a family in and moved to a condo. They sold their four bedroom home for $600,000 and bought a condo for a million dollars and the condo has ongoing condo  fee. Did they downsize? The condo's smaller, but it's more expensive. The question about where to live  is we have these underlying assumptions that I think are not really explored. People say, "Downsize," to release equity from a home, but my parents are in Calgary. That's not a conversation that's happening in  Calgary. 

Jason Pereira: No. Well, it's definitely a conversation happening in Toronto. I mean, that's the reality of it. But that said,  I mean, everything that's happened in COVID, the reluctance for that, I think generationally, has got to  be hitting out high between what's happened in the long-term care facilities and the thought of, "Oh my  God, if this happened again and I was stuck in a condo and I had no green space," I got to think this is a  shell shock for a lot of people. It's going to leave a lot of them to want to maintain their current home  residence, if not at least a freestanding home, as opposed to a smaller, shared unit facility. 

Alexandra Macqueen: We didn't discuss this in the book at all, but the explosion of home equity, the rising... I discussed it a  few minutes ago saying that there's a generation shut out of home ownership, but the other side of the  coin is people who all of a sudden have a million or more of home equity. And we haven't really  integrated that into our thinking so is that all for the kids? You're staying in the house until you die so  that the kids get this tax free gain on the principal residence, or are you selling and "downsizing?" What  does that look like? Are you moving to a smaller place, a different place, a cheaper place, a more  expensive place, a place that's more suited to living? 

Alexandra Macqueen: You don't want to go up and down stairs all the time in your 80's and 90's. Maybe you're moving to a  condo or a residence that's designed with fewer stairs or the reverse mortgage, the most hated product  on the Canadian financial landscape, but it allows you to take that equity, to harvest the equity out of  the home at a cost. But if you have all this surplus equity and you have lifestyle spending needs, maybe  that's the right thing to do. 

Jason Pereira: Yeah, I never understand in most cases, product hatred, and we had this discussion about you may not  like the reverse mortgage, but in many situations, it's the only bloody option so just be grateful it's there  as an option because otherwise you'd be in worse shape. 

David Field: I think the trouble is you look at the ads on TV for something like reverse mortgage and they encourage  you to use it in the absolute, worst, possible financial way you can, right? 

Jason Pereira: [inaudible 00:30:02] and yeah. 

David Field: Reverse mortgage is a backstop. You've run out of non-registered savings. You've run out of your TFSA  savings. Now you tap into the reverse mortgage. Not, I'm putting in my second hot tub. 

Jason Pereira: No, agreed, or you're getting close to that ruined point. The other thing I think is going to be a pressing  issue for this generation is, especially in areas like Toronto, Vancouver, and Montreal, congratulations,  your house is inflated in price now, and you've made a killing off it, a generational killing off it. Taxes are  going to start to creep up on the value of that thing and every year without failure, at least once a year,  some newspaper in Canada publishes this profile of an 80 year old little widow living in downtown  Toronto, typically off little Italy, little Portugal, and I'll say that because it's my culture, and they'll be like,  "This poor woman, taxes on property are so high, it consumes 80% of her CPP and OAS," right? And it's  like, "This is an issue with society." And I sit back and say, "She's sitting in a $2.5 million house. This isn't  an issue of society. This is an issue with the choice." 

Jason Pereira: And I think that the problem is, is that we're going to start to see a lot of this, a lot of people just like  that little old lady around that that age, living in those downtown communities that are going to start to  see this problem become more and more of an issue. I mean, governments are starved for taxation.  Property values are higher. It's based off a percentage. Those assessments will eventually catch up with  people probably at a faster rate than inflation. 

Alexandra Macqueen: You should obviously reverse mortgage, just the amount for her property taxes. 

Jason Pereira: Funnily enough, I had three different FinTech startups in the last six months contact me specifically  around this, specifically citing old people in downtown Toronto and their inability to maintain the  property without having to reverse mortgage. It is a 

Alexandra Macqueen: But that's a logical use of the reverse mortgage, if you want to stay in that home. 

Jason Pereira: Absolutely. 

Alexandra Macqueen: If you can pay for long-term care, you don't want to send mom or grandma to the long-term care facility  because you have concerns about their safety, really, it's a risk-free in the sense of you're tapping into  the equity, yes, you're reducing a potential estate. Is that what's mom's home was for? Was it to give a  tax-free windfall to the kids when she passes? 

Jason Pereira: Well, we've discussed this before. The concept of principle residences investment is something that's  still relatively new within the psychological landscape. Really, I won't say renewal. It's caught the last 20- ish years with the explosion in real estate property values. But in general, historically, that numbers  track closer to inflation and I know many people will just laugh at that statement, but it is true. And no,  it was never intended to be this massive growth asset that gets passed on tax-free. And that's why post election, that tax-free nature might be looked at. We'll see what happens there. Before we wrap up, I  want to ask you both, in terms of the advice you would give boomers who are at, or near retirement or in the early stages of it, what are the most important things they should be contemplating or looking at?  Give me your top three each of you. I'm going to let Alexandra go first and put David under the gun after  to come up with three different ones. 

Alexandra Macqueen: Oh my goodness. Okay. The first thing I would say is that, and in fact, we've underscored it throughout  this entire conversation that your retirement is personal. Be careful that you're not relying on  assumptions about I'm going to... Just that you've thought through what are the assumptions  underpinning your individual retirement? At the age you retire, how much you think you're going to live  on, where you're living, all those things. Don't rely on other people's assumptions. Set your own  assumption. The second is actually put deliberate thought into it, right? This is the top three things to  do. Yeah. I mean, again, we've underscored how personal this is and also how complex it is. 

Alexandra Macqueen: Unless you have that magic DB pension where your work paycheck just transfers into a retirement  paycheck and all that happens is... Actually, nothing. It's still paid essentially by the same payer and it  goes into the same bank account, maybe even on the same schedule. Unless you have that, you have to  design this yourself. Put some time and effort into it. And before you put time and effort into it, do some  thinking about what is it that you actually want? What is a fulfilling retirement for you? You're looking at  the assumptions underpinning retirement in general. You're spending time deliberately planning and  you're thinking about what you want retirement to look like. Over to you, David. 

Jason Pereira: Excellent. Well, before we get there, one comment to throw in there because you said something very  important in the first one is, what does it look like to you? The reality is I hate heuristics. I hate shortcuts  in this industry because they say nothing about the individuals' situation, right? Things like, "Oh, plan for  70 to 80% of your preretirement spending income," that has no relevance to anyone. Maybe on  average, it works out but the reality is, is that there's people on both ends of that spectrum where 100%  is necessary or 60 or 40% is necessary. Then the second point I'll make in regards to that is also around  things like life expectancy. I think I shared this story with you previously, but I once got into a debate  with a client where they argued why am I doing X because life expectancy was so many years. And my  response was, "Well, that's an average. You still have 50% of the population living beyond that." Their  response was, "Well, that's your opinion," and I'm like, "No, that's the definition." 

Jason Pereira: And the reality is, I'll tell my favorite actuarial joke is, "Three actuaries go hunting. They see a deer. One  shoots two feet to the left. The other one shoots two feet to the right and the third one says, "We got  them." Averages mean nothing to people individually. That deer got away, right? This is to reinforce  Alexandra's message. What is your situation, both financially, health-wise, family goals, all of that, all  those dynamics to be contemplated in order to you to the optimal solution? David, I'm going to turn it  over to you for three other pieces of feedback. What do you think? Three other pieces of advice? 

David Field: Well, mine plays off a little bit off Alexandra's. My first is plan and live your retirement based on what  you want to do and not based on the tax efficiency of your decisions, right? Too many decisions are  based on taxes and not on how you want to live your life. The second I would say, retirement is not all or nothing, right? There's a transition into retirement that can happen and it could be just getting a part time job. For business owners, it could be some succession plan that really just winds down the role that  they're doing, but they can still play a part or maybe really focus on what they really enjoy, right? It  doesn't have to be there's a dead set date that you're retired and all of a sudden you have this void of  not knowing what to do, right? 

David Field: And then my third takeaway would just be, I'm not a big fan of rule of thumbs, but I think a really good  rule of thumb is to look at delaying your CPP as long as you can as a default, and then start thinking  about, "Why should I take it earlier?" There's a lot of reasons why you should take it earlier, but I would  say use that as the default, rather than having your default be 60 or 65, especially if you don't have  pension income, that sort of thing. Those would be my three [crosstalk 00:36:26]. 

Jason Pereira: That's a very interesting point there. I think it's actually a mental accounting exercise or framing exercise  because if the default was 70, I'm willing to believe we'd see a heck of a lot more people taking it later  than we currently do. But because we think of it normal as 65, people think a couple of years to be a  little bit earlier or a couple of years of being a little bit later, but that is a very... I like that. I mean, I'm  not a believer in heuristics at all, and there's plenty of reasons why you take it early, but the reality is, is  that yeah, stop thinking of it as 65 as your primary option. 

Jason Pereira: But in general though, I mean, I would also say the other heuristic is get advice. It's not going hinder  your [inaudible 00:37:01] less. This is a complicated realm and I always say, "Unfortunately with this, it's  an unforgiving one because really screwing this up means abject poverty in retirement." And I've  unfortunately had a couple of cases in my career where I said, "If you don't fix this, you'll be living off  CPP and OAS and that's it. Your choice," and 

Alexandra Macqueen: That's why we wrote this book. I mean, there's an awful lot of retirement income books out there that  have a single message, right? You should do this 

Jason Pereira: Oh God, yeah. 

Alexandra Macqueen: ... whatever that message might be or not. And this really is a very agnostic book. It's like, "Here's the  things to consider. Here's the realm of things that you might want to think about. Here's the stuff you  should be thinking about and knowing about before you take this leap," without saying, "Reverse  mortgage is terrible or it's the best thing since sliced bread or retirement at this age is optimal." It's  really just is laying out, "Here's the options you should be thinking about as you start to plan for that for  yourself." 

Jason Pereira: Which is the correct answer, because I mean, as unsatisfying as it is for some people to not get a direct  answer from a book, the reality is, is that everyone's life is so complex and different that the answer is  always, "It depends." I joked the other day, "I should probably have a tax on my forehead at this point."  But one last thing to go back to you, and David, it was your comment about taxation. And yeah, the  obsession with that, oh my God, can that lead to suboptimal outcomes. And I'll say that the true irony of  it all is that there are plenty of people who will do what they can to avoid taxation to the maximum  every year just creating a massive tax liability for their estate. And if they had just basically been smart  about tax their entire life, the estate would have actually been larger. But penny wise, pound foolish,  what can I say, right? 

Jason Pereira: David, Alexandra, thank you for taking the time. The book is The Boomers Retire: A Guide to for  Financial Advisors and Their Clients, the 5th Edition, from Thomson Reuters, available in bookstores and  various locations. Remember, 5th edition, that's the current one. Please take a look at that. Everything  else is out of date. Thank you very much for taking the time today. 

Alexandra Macqueen: Thank you, Jason. 

David Field: Thank you very much, Jason. 

Jason Pereira: That was my interview with David and Alexandra, the authors of When the Boomers Retire. If you are in  this cohort, or if you are an advisor advising people in this cohort and want to understand the difficult  landscape of decisions, this is over 300 pages of decisions that have to be made to keep that in mind.  This is a great resource and great place to get started. I encourage you to check it out. As always, if you  enjoyed this podcast, please leave a review on Apple podcasts, Stitcher, or [inaudible 00:39:16] your  podcast. Until next time take care. 

Producer: This podcast was brought to you by Woodgate Financial, an award-winning financial planning firm,  catering to high-net-worth individuals, business owners, and their families. To learn more, go to  woodgate.com. You can subscribe to this podcast on Apple podcast, Stitcher, Google Play, and Spotify,  or find more episodes at jasonpereira.ca. You can even ask Siri, Alexa or Google Home to subscribe for  you.

FPCBOJason PereiraRetirement