In the last six months, at least three new Canadian books have been published that bear the word “Retirement” in their titles (counting the one I co-authored with Mike Drak.). I’ll leave it to others to review Victory Lap Retirement (indeed, it was excerpted in MoneySense last summer) but am happy to review the others, since they all provide valuable input to retirees and would-be retirees who read this column.
Let’s start with Create the Retirement You Really Want, by veteran financial advisor Clay Gillespie of Vancouver-based Rogers Group Financial. Over the years of covering the personal finance and retirement beat, Clay has always been a useful journalistic source. His new book takes the “Pseudo Novel” format that many others have adopted in the wake of David Chilton’s perennially best-selling The Wealthy Barber (including myself in Findependence Day).
Such books seldom read like Ludlum thrillers but if you ever wanted to be a fly on the wall for conversations between financial advisors and their clients concerned about retiring, Gillespie provides the next best thing. The fictional couple – named Rachel and Mike, a composite based on multiple real clients Clay has advised – are walked through the five major stages of retirement.
Those five stages also serve as the underlying structure of the book: Dreams, Reality, Transition, Adjustment and Legacy. These allow Gillespie to hammer home one of his major themes: that retirement isn’t an isolated one-time event, but a drawn-out process that begins years before you actually retire, and continues well after the momentous day when you withdraw from the full-time workforce.
While you’re still gainfully employed, you may merely dream about your future retirement, possibly five or six years before it actually happens. Once you’ve fixed the actual date that may be six to 24 months in the future, you’re at the Reality stage: you come to grips with your projected sources of income, evaluate whether they will be enough, and start to confront the lifestyle issues your new life will revolve around.
Between age 62 and 70, typically, the third stage is one of Transition, a topic we’ve covered several times now in this space. Five or six years into retirement you’ll be in the Adjustment stage: you’re adjusting to the reality of your new cash flow (Retired Money indeed!) but just as important must deal with the emotional side of having all that time on your hands, while still feeling useful to society and family.
Those are the four main stages but of course we all must eventually confront our personal mortality, so the final Legacy stage deals with estate planning, wills, inheritance and leaving a legacy, financial or otherwise, for those who succeed us.
All in all, a thoughtful insider look at the reality of retirement.
Next is Calum Ross’s The Real Estate Retirement Plan (coauthored with real estate broker Simon Giannini). Ross, a mortgage broker, organizes the book into three major parts. The first one addresses Threats to your retirement and how to overcome them. The biggest one is the lack of traditional Employer-sponsored Defined Benefit pension plans. The solution is the title of the book, which in a nutshell is borrowing to invest in multiple rental properties: this is of course leverage, a topic many conservative Canadians (including me) tend to shy away from; Ross devotes a chapter to Mental Modelling Flaws in an attempt to counteract the aversion to borrowing to invest.
Part 2, also by Ross, explores the power of borrowing to invest (chiefly in real estate but you can also borrow to invest in quality-dividend paying stocks or indeed growth stocks). Part 3, by Giannini, makes the case for Real Estate as an asset class, one that’s potentially more powerful than the traditional ones of stocks and bonds favored by traditional retirement savers. Throughout, the authors emphasize a “portfolio” approach to the topic, ideally one that encompasses all asset classes. The book ends with some nuts-and-bolts chapters on how to be a landlord, how to understand real estate expenses, and how to find mortgage professionals and real estate agents.
Here I should close with a confession. Personally, I’ve always believed that a paid-for-home is the foundation of financial independence, and therefore that retirees should strive to be free of all consumer and mortgage debt. This philosophy is also seen in Sean Cooper’s new book, Burn Your Mortgage, which this website has previously reviewed.
However, Ross and Giannini provide the alternative perspective that, provided you have the stomach for it, you may be better off tapping all that home equity from your paid-up principal residence, and using it to borrow for multiple rental properties. Yes, you will carry debt into retirement in all likelihood but the interest will be tax-deductible and over the years, your tenants will be paying off all those mortgages on your behalf.
At the end of that process, you will certainly be wealthy enough to retire in high style, especially if you are not fortunate enough to be in a lucrative Defined Benefit pension plan. It’s a perspective worth considering, although Ross says the process is best begun before age 60.