Friday, June 29, 2012

Whining won't make it better

Note date on this receipt. I was 14 when I bought this stock.

When I wrote this post, I was fuming. I had just read an editorial in The London Free Press. It was another one of those woe-is-me pieces about retirement. It is not just the Baby Boomers Who Have Pension Worries the headline told us. I sat down and penned this blog but then I sat on it. I thought I'd wait until I calmed down before posting my response. A day after posting my response I took it down for a serious rewrite. I wanted to get this right.

First: whenever I see a reference to the baby boomers, like the one in this editorial, I prepare myself for some off-the-shelf thinking. Media folk have a lot of axiomatic beliefs. The mythical baby boomer, a member of a remarkably homogeneous generation spanning almost two full decades, is one of these myths.

The people facing retirement with dread are real folk with ages spanning many generations. What they all share is that they have all, for the most part, been given a lot of bad advice on investing and on saving for retirement.

The London Free Press tells us:

"Financial planners who used to tell clients to expect yearly growth of 8% in their RRSPs without breaking a sweat have turned less optimistic, suggesting a far more conservative 5% return over the lifetime of the plan is more realistic."

O.K., let's put our thinking caps on: If financial advisers were promising 8 percent annual growth but are now only promising 5 percent, what does this tell us? It says that the financial advisers consulted by the paper are not to be trusted. These financial wizards have cut their annual growth projections by 37.5 percent. Since they were so wrong in the recent past, why is the paper so sure that they are dead on the mark today?

Let's say, just for the sake of argument that the 5 percent number is correct. Working folk give their RSP money to a financial adviser for managing. The adviser charges a fee equal from two percent to three percent of the fund's value. This leaves only 3 percent growth, possibly less. Factor in inflation and these RSPs are not growing at all.

Now, put back those thinking caps back on: What does the above tells us? Answer: At five percent annual growth, most folk saving for retirement cannot afford a financial adviser.

Once a month I try to attend the Blackburn Group retiree breakfast. There are very few baby boomers in the group. Baby boomers have just starting to hit the magic age of 65. (Heck, I am one of the first of the so-called baby boomers and I am not yet 65.)

Many retirees at the breakfasts were born before the Second World war. Many folk in this group have a good grasp of personal finance. I believe being raised by parents who experienced the Great Depression gave many of these retirees a deep respect for money and personal finance.

I don't hear these people whining about living their golden years "doing without." This group did without during their working lives. They understood the concept of living within their means.

Our editorial writer has a good job. Yet this person confesses, "We’re still borrowing more money." If the writer is talking about much more than a mortgage and a car loan, we have found one big drain on the writer's financial worth.

I had parents who struggled through the Great Depression. After my father's death, my mother took in her aging parents, both in their 80s. My mother and I loved these two dearly but make no mistake, this was a necessary arrangement for my mother. (After her parents died, my mom sold her home and moved in with my sister. She spent her last years living with me. My mother was not one those born with a silver spoon.)

I admired my grandfather and loved talking with him. He shared books, magazines and newspapers with me and later we would chat about what I had read. One paper he gave me to read was the weekly Financial Post.

Before I was even in my teens, I realized that earning money, saving a chunk of that money, paying one's bills and not running up debt were all good goals. While I was still in grade school, I had flyers printed advertising my lawn cutting service and I plastered the entire neighbourhood. I distributed about a thousand flyers. I encouraged people who were going on vacation to contact me and I'd cut their lawn while they were away. I paid for the flyers by cutting the lawn of the printing company president.

Flush with wealth for a boy of about 12 I didn't know what to do with all my cash. Letting it sit in the bank didn't seem like the answer. I knew money should be put to work. I got on my bike, a used but solid two-wheeler, and rode to the James Richardson and Sons brokerage office. I was going to buy some stock.

You need not be rich to save. Put your money into stock not pop and chips.
I think the stockbroker may have broken the law doing business with me. I don't think he should have sold me stock. I was just a child --- not even in my teens.Surely there were laws against entering into financial agreements with a child. But, he did. Every time I had enough money to buy another couple of shares, I saw my stockbroker.

I was buying Bell stock and I don't think he saw that as risky. It was the classic widows and orphans investment.

Then one day I wanted to sell all my Bell stock and buy something called Pacific Pete, I believe. It was a small, junior oil company. I was acting on a stock tip from my uncle who lived in Detroit and who played the market.

My stockbroker was noticeably uncomfortable but reluctantly sold my Bell and bought the oil stock. The small oil play took off. I sold my holdings for a tidy profit. I bought back my Bell stock and lots more. My stockbroker relaxed.

When I read all the stuff about baby boomers and their silver financial spoon, I want to scream. I was born into a family with a dad who never earned more than $5000 in any given year and a stay-at-home mom. Until my early teens, we lived in what was known as Wartime Housing, a government subsidized neighbourhood. I most certainly was not born with a silver spoon.

It is now almost 65 years since my birth. I'm retired. I still have no silver spoon. My company pension after thirty some years did not deliver even $20,000 annually. I took about a 24 percent cut in my CPP in order to start drawing early. My wife took an even bigger cut. We needed both CPP payments if we were to get by in retirement. But, we are getting by.

Our editorial writer whines that "It’s becoming clearer that only those who are prepared for the worst . . . are facing a secure old age." And continues, "That’s a small group. And the rest of us need to be included . . . "

Get out those thinking caps again. If only those prepared for the worst are secure, what does that tell you? Answer: prepare for the worst. Join the small group. And don't whine about needing "to be included." If you are not a member of this group, it is by choice.

I have been preparing for my retirement since I was in my twenties. I can assure the editorial writer that it is not possible to foresee the future. The retirement life I envisioned in the '70s is but a hollow dream today. No surprise here. Four intervening decades have a way of doing that to dreams almost every time. Prepare for the worst as life has a way of tossing curves.

I have some advice for the editorial writer: Instead of worrying about buying your dinner coming from the "cat food aisle" (another media myth --- click on link) in your senior years, stop thinking about your RRSP as an "income tax dodge" and stop relying on others to guide you into a successful retirement plan. Get yourself up to speed on investing and take charge of your financial life.

The editorial writer should take her own advice. She should become one of those preparing for the worst. It is always a good approach to take when investing.

Addendum: It is early December and I am well on my way to seeing a return of about 8.75 percent for the year, 2012. Even after taking out a little more than four percent to live, I should end the year with more money than I started. Trust me, there's no cat food on the horizon.


  1. Well, that's excellent advice, also, enlightening. Interesting you pointed out we really can't afford financial advisors at current rates of return. So, must venture into this realm and do it myself. Thanks for your advice! Loved hearing about your drive, in your youth!
    Your niece.

  2. Yes, it is excellent advice and of course Rockinon will take 100% liability for your losses.

    1. Sorry to disappoint you Anonymous but there are few guarantees in life. I don't give guarantees. But if folk take the time to read some of the books available in the library on saving for retirement, they will most likely do O.K. It is not, as they say, rocket science. Hey, as I pointed out in my post --- It's child's play.