We all run pensions now

We all run pensions now

Most of us are forced to pay more attention to personal finance than our parents.


Apr2014-WEBStocks are volatile as usual, cash and bonds still pay a pittance, many are being laid off and it’s tax time again. Little wonder early retirees are going back to full-time jobs. About the only people who enjoy both guaranteed employment AND guaranteed Defined Benefit (DB) pensions are government workers.

According to Statistics Canada, 60% of early retirees aged 55 to 59 have returned to work, as have 44% of those aged 60 to 64. When you see articles on couples struggling to retire with a $4 million net worth, something is awry. As one wag put it, “you can’t live a six-figure lifestyle on a five-figure income.” Nice problem but even with less robust finances, the same principle applies: you can’t live a five-figure lifestyle on a four-figure income, or a four-figure lifestyle on a three-figure income.

Over lunch one day, MoneySense senior editors were discussing why this magazine even exists. It was founded only in 1999; hence we celebrate our 15th anniversary this year. I mentioned this last time but can confirm the event will take place in downtown Toronto the evening of May 15th. Most contributing editors will be there to discuss where to put your money in 2014; the grand finale is a talk by The Wealthy Barber author David Chilton.

To return to our luncheon conversation, why wasn’t MoneySense launched before 1999? We speculated the opportunity arose because of the ongoing decline of employer-supplied DB pensions. My late father was a high-school teacher and beneficiary of the much-praised Ontario Teacher’s Pension Plan, a classic DB plan that shelters retirees from risk. He bought a home for $12,000 in the 1950s and paid it off in 15 years, all on one income (Mum was a traditional “home-maker.”)

Dad bragged he “didn’t know the difference between a stock and a bond.” The point is he didn’t HAVE to. Once retired, he stayed retired. My parents lived well on the pension, a small RRIF and non-registered GICs (which paid generous interest compared to today), plus CPP and OAS.

Most MoneySense readers would love to be in that situation, but are forced to pay more attention to personal finance than they would if they had 30 years in a DB pension backstopped by taxpayers. Instead, they in effect run their own personal pensions and fret over asset allocation, picking stocks, bonds or investment funds in Defined Contribution pensions, RRSPs, TFSAs and taxable accounts. They worry about mortgages and their kids’ education. They need help, so seek financial planners, scrutinize the costs of investments and look for objective second opinions from sources like this magazine.

In short, MoneySense regularly deals with topics my father could ignore. Which brings us to this issue. David Aston looks at the topic flagged above: working in retirement. Evelyn Jacks is back with an expanded tax column to prepare for the April 30th tax deadline. Dan Bortolotti’s feature on behavioural finance tells you how to be a better investor. Norm Rothery looks at big returns from small-cap stocks. James Daw’s new “Insurance Uncovered” column looks at group insurance plans offered by employers.

Finally, Mark Brown weighs in with our annual “Best Places to Live” survey, a feature that always generates plenty of traffic on our website, MoneySense.ca.

See you on May 15th!