More Money Podcast - 286 The Procrastinator's Guide to Retirement - David Trahair, CPA, CA, Author and President of Infowin Inc.

Episode Date: June 16, 2021

Today’s podcast episode is on one of my favourite subjects…retirement! I’m joined by David Trahair, author of The Procrastinator’s Guide to Retirement. We chat about the great practical advice in his book and its overall message of hope for people 50+ who haven’t yet saved for retirement David Trahair is a CPA, CA, personal finance writer, trainer, speaker, and eLearning developer. David is the author of several personal finance books and currently operates his own personal finance training and eLearning development firm. He also offers live webinars and online courses to people through organizations including the CPA provincial and territorial bodies.  David is a wealth of knowledge and I’m so glad I was able to ask him so many questions when it comes to retirement. Our conversation covered everything from practical advice like the difference between RIFFs vs. annuities to why running out of money in retirement shouldn’t be as big of a worry as financial institutions would like us to think. I can’t wait for you to listen and enjoy! For full episode show notes visit https://jessicamoorhouse.com/286 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello, hello, and welcome back to the More Money Podcast. I'm your host, Jessica Morehouse, and this episode is episode 286 of the show. And we're going to be talking about retirement or procrastinating in planning for retirement. I have the wonderful David Traher on the show. He is the author of The Procrastinator's Guide to Retirement. He also has a number of other books, including Smoke and Mirrors, Enough Bull, Crushing Debt, Cash, Cows, Pigs, and Jackpots. I will link all of his books in the show notes for this episode, just in case you're like, I want to know what all of these books are. So make sure to check out jessicamorehouse.com slash 286 after listening to this episode or right now whenever you want. Now, David currently operates

his own personal finance training and e-learning development firm and offers live webinars and online courses to people through organizations, including the CPA provincial and territorial bodies. But he is on the show to talk about his book which is in its second edition it is called the procrastinator's guide to retirement and i know you're gonna love it because you know what everyone loves i mean this is maybe maybe i'm biased because i love talking about retirement but i also get so many questions about retirement and retirement planning and because it's like kind of the biggest scary thing to plan for right we're all terrified that we're not going to have enough for retirement or how to even start it's a big kind of. And so we're going to talk about all of that

important stuff in this episode. So you're going to love it. But before I get to that interview with David, here's just a few words I want to share about this podcast episode sponsor. This episode of the More Money Podcast is supported by TD Direct Investing. TD Direct Investing is marking June as Options Education Month with the goal of helping investors learn more about options trading. Throughout the month, they are hosting a number of free virtual events for beginner and intermediate investors alike. Want to learn about some of the things people wish they knew before they began or build on some of the knowledge you may already have on options? Visit td.com slash options education month to register for one of the many live webinars

TD Direct Investing will be hosting. Or if you're more interested in getting an introduction to options in the first place, there are a number of on-demand video lessons available too. To learn more and to check out the list of free events, visit td.com slash options education month. Once again, to find out what webinars, masterclasses, and on-demand video lessons are available to view for free, visit td.com slash options education

month. Welcome to the More Money Podcast. David, so excited to have you on the show. Thanks for having me, Jessica. You're so welcome. So let's get started. I mean, your book, I really liked it. I told you before I hit record on this episode, I'm really liking a lot of books that are coming out of CPA Canada. They get to the point. And you said maybe it's because it's accountants writing them and they get to the point. Fair enough. They'll be happy to hear that. Yeah. So I think your book, again, I like it because it's not just any old retirement book. It is very specific, focusing on people that are really approaching retirement 50 plus,

which I was honestly going through this, like, this might be something I want to send to my mom or something like that. So it's kind of tricky. You're like, I don't want to offend anybody and say, you know, you need some financial. It's more like, this is just a good resource. And I just want to send it to you. There's so many books I want to send my mom, but I'm not sure if she'd like that. But I might just, I might just send it to her maybe after Mother's Day, not on a Mother's Day. Yeah, maybe not a Mother's Day present. Maybe not a Mother's Day gift, not a good Mother's Day gift, but really great resource. But before we kind of dive into the topics, because I have a whole bunch of things to ask you that I know listeners are, would die to

be able to ask you in person. Tell me a little bit about your background. You're a personal finance writer and trainer, speaker. You do a bunch of courses. You have other books. Share a little bit about how did you kind of get into this world? You seem very, very passionate about what you do and teaching others about personal finance and also retirement planning. For sure. Well, basically, I'm gonna be 63 this year. Really? You did not look 63, I'll tell you. Thank you very much.

And I didn't pay you to say that either. I know. Well, basically, I graduated from University of Waterloo in Ontario in 1981. And I went there for engineering because I basically had no idea what I wanted to do in life. I thought I wanted to be a photographer, sort of like your background in film, right? I thought I wanted to be a photographer. But I figured, well, I better go to university and get some kind of degree. I don't think you

can get a degree just in photography or you couldn't then. So I went for engineering and absolutely hated it. I hated every single day of my first term in 1977. So I switched from engineering into something called science and business because I thought, well, I'm kind of good at the science subjects, but I think business might come in handy. So when I graduated, totally lost, had no idea what I wanted to do. And it was a recession then too. I believe you graduated in recession. Yeah. 2009. Fun times. Well, 81 was like that too. 81, 82. And I basically got a job as a photographer. But when you dream of being a photographer, you think about working for Sports Illustrated.

And when you end up working for the Bay in a mall taking pictures of families, it ain't quite the same thing. Yeah, not exactly what you had in mind. Exactly. So I said, well, this doesn't sound like it's a good idea. So my dad was a CA, chartered accountant, and he basically got me in the back door in one of the big CA firms, Clarkson Gordon back then. And I sort of fell into the CA program, which was extremely difficult for me because when I started at that firm, I nothing about accounting I hadn't taken an accounting or a business degree so I was you know taking evening classes driving out to Waterloo from Toronto on Wednesday

evenings I was I took a summer off just to take to catch up the courses and the first few years they were really really, really tough. But thankfully, I survived and left Clarkson Gordon, which is now Ernst & Young, in 87, I think it was, and basically spent you did, started out with your own business. Mine was a small accounting firm. So I started as a sole proprietor in Toronto, where I still live and ran that accounting firm from 1988 to 2016. I basically gave it up a couple of years ago. But I had always been interested in the subject of personal finance, just like you, fascinated by personal finance. I loved numbers. I loved spreadsheets. And basically, I got sick and tired of hearing all these messages from big financial institutions about needing millions of dollars to retire. And you have to start an RRSP and maximize.

You're going to be living on cat food and crackers for the rest of your life. And I said, well, does that make sense? Or is there another alternative? So basically what I started doing was tracking my personal finances using a program called Quicken from Intuit for my family and a couple of other clients. And this gave me a full set of financial statements on my family's life as well as a couple of these clients. And from that experience tracking finances and dealing with spreadsheets, I said, well, maybe I should write a book about this. And it just so happened that my mother knew somebody who worked for a publisher based in Vancouver called Self-Counsel Press.

And we were at a cocktail party and I said, look, I got this idea of writing a book. So she told me, well, here's what you've got to do. Here's how you write a proposal, blah, blah, blah. And if you do it, I'll bring it into our publisher. So I did. Publisher wanted to do it. That was my first book, Smoke and Mirrors, Financial Myths That Will Ruin Your Retirement Dreams, that came out in the early 2000s, 2001. So I was still a full-time accountant, but I'd written this book that was selling quite quite well and I thought that was it you know I just have

one book in me that's it I'll go back to being a nice accountant but then after a number of years I started thinking well maybe I can go further with the personal finance angle I started writing other books in, I started actually giving courses to other accountants on the subject of personal finance. The courses started to do well. And basically, over the last pretty well 20 years now, I built it into a full-time gig. I've written six books on the subject now, including The Procrastinator's guide. And what I'm really doing now is focusing on creating on-demand personal finance courses, on-demand courses related to personal finance with video and audio. And I do all the editing in my home studio. So basically no longer in accounting

and my full-time job is in personal finance and course development now. Oh, wow. That is quite the journey. The journey, yeah. That's amazing. So yeah, let's kind of dive into your latest book, The Procrastinator's Guide to Retirement, a financial guide to retiring in 10 years or less. So I really liked the focus on this book because I feel like so many books or, you know, it's honestly quite difficult to find a book specific on retirement planning or retirement income planning. Believe me, I've been scouring the

internet. There's only a fair few and they're pretty good, but there's not a ton out there. A lot of them are mainly focused on when you're younger and you're building your wealth so you can retire one day. But I think there's a lot of people, I mean, out there, obviously, that are, you know, 50 plus, and they're like, well, what about me? What can I do to prepare for retirement? And so I'm so curious, why did you want to craft this book that I think is actually really, really good for people that are very close to retirement? Well, it goes back about 10 years when a friend of ours actually gave me the title of the book. She said, why don't you write a book called The Procrastinator's Guide to Retirement? And I know it's a bit of a mouthful, but when we were doing our sort of pre-testing on the idea,

everybody loved the idea because many people sort of in their 50s and 60s that I've dealt with, when they read that title, they said, oh, that's me. Yeah, that's me. Yeah. So we said, you know, there was a huge debate about whether to use such a big word. But it really sort of hit home. And I think a lot of people are in that situation, not necessarily because they're bad with money, but because it's expensive to live. You know, like when you're younger, you talk about your journey about, you know, paying for your own university education and things like that.

And then, you know, for those people who are able to do that, and once they pay off their student loan debt, then they tend to do things like get married, have kids, buy a house. So there's so much demand for cash that people in general have very little left to save for retirement. So they don't, right? So they end up in their 50s, 10 years or less to go to retirement. And many of them just say, oh, this is hopeless. There's no way I can't afford to save anything. So this book really is to give people hope to say, here's an accountant with real numbers is using spreadsheets to show you that it is possible in 10 years or less to build

up a significant amount of retirement savings. If you play your card cards, right. It's not to say, leave it. I'm not, I'm not telling people, you know, millennials don't worry about this and just wait till there's less than 10. I'm not saying do that. I'm saying if you are in that position for whatever reason, here is a clear plan for you to secure your retirement. And that's what the book is all about. It's never too late, basically, which I think is something that people in that age group are terrified about. They're like, is it too late? I know, you know, obviously no one, like you kind of said, it's not that, you know, people are bad with money or did this intentionally. It's completely intentional. That's why they, you know, kind of wake up one day, you're like,

oh my gosh, I haven't actually thought about this. And what do I do? And is it too late? And what are, is it possible to catch up? So you're saying it is possible to catch up. It is definitely possible to catch up. I mean, that's the, I think part of the problem with this whole area of retirement planning is that many of the people putting out messages about how much you need to save are working for financial institutions that sell and make money off you investing with them. So they have an incentive to convince people that, wow, you're going to need a million dollars or more to retire because they want money. They usually get a percentage of the assets under administration.

One percent of the average market value of your portfolio is what they make guaranteed every year, no matter what the market does. It's a beautiful way to make money. So they have an incentive to perpetuate myths that we are going to need this massive amount of money put aside before we can afford to retire. And I think that backfires in a lot of cases because people look at the piddly amount they've managed to save, compare that to what the traditional message is, and just give up. They say, look, this is hopeless.

There's no way. And that's why in all my books, including this one, I give away spreadsheets to encourage people, not to scare people, spreadsheets are not evil, to punch in numbers. It honestly doesn't take that long to punch in numbers with respect to your current position in your life and your plan about when you want to retire and questions about CPP and all that security and sort of look ahead to see, well, how are things going to be? I'm 55 now. If I continue to do these things, what is it going to look like when I'm 65? And a spreadsheet is a great way of envisioning what the future is going to look like. So the idea is that hopefully people

who are undersaved will be shocked into changing their behavior. And to be honest, there are wealthy people out there who, and this is a good problem to have, have saved too much. They're ultra frugal. They do really well financially. They have a massive portfolio. Often they own their own business that is worth a lot of money, they retire and they just cannot make the switch from being ingrained frugal to even spending any of their money. So they remain frugal for the rest of their lives, even though they've got a ton of money that they could spend to optimize their life. So that's because that's why when somebody says, well, how much do I need to retire?

There is no one number. Everybody's different. Each of our personal financial situations, there's individual as our fingerprints. Everybody's different. So there is a million of thumb. Everyone loves a rule of thumb. It gives you some sort of starting point. But I think some people, you know, who don't want to kind of do some of that kind of heavy lifting of like making kind of a retirement budget and using a spreadsheet like you kind of mentioned and see how, you know, what actually is, you know, the right number for you. You know, I know you mentioned in the book that, you know, typically, you know, for years and still even today, you know, advisors will suggest, you know, you need just 70% or 80% of your current income. And I'm like, that is such a random, like, where's that even coming from?

Like, I know there are some stats to say, yeah, that might be but it's like, it might not be you, it might be too much, it may not be enough. And yeah, I kind of hate those rules of thumb, because you may feel inadequate, or you may think that, oh, I've over saved. And yeah, I kind of hate those rules of thumb because you may feel inadequate or you may think that, oh, I've over-saved and maybe that still isn't enough because of how you actually want to live in your retirement. Exactly. A rough rule of thumb is just a total guess. So while it might be the right number for somebody, it might be totally, totally wrong. Might be totally, totally wrong. And I make the case, and again, it's part of this plan of really cranking up your retirement savings in a short period of time, is that you have to know where your money has gone in the past and sort of project where it's

going to go in the future. If you play your cards right, and again, I'm a big proponent of controlling debt right if there's one thing I'm sure you agree we want people to do is stay out of revolving credit card debt it's probably one of the worst things you could do right so if you play your cards right and if you can afford a house not everybody can afford a house we know that but for people who can afford a house if you can retire totally debt-free no ugly consumer debt no credit cards credit cards owing and no mortgage it's possible that you could live with much less than 70% maybe 50% or even 40% of what you're making before you retire that makes a huge difference to how much

you will need to save in your RSPSP, which when combined with CPP and old age security would allow you to replace 40 or 50% of your income rather than 70%. I'm just curious, you know, since we kind of talked about, you know, how to calculate your number, what, you know, 70% or whatnot. And I'm sure you get this question all the time. It's like, what, what is a good way to make that calculation or to get to that point where you have a good idea of if it's a million or less than a million or more than a million? Yeah. Well, with my book, Smoke and Mirrors, Financial Myths That Will Ruin Your Retirement Dreams, there's a spreadsheet in there called the Retirement Optimizer. And I give it away free for

readers of the book and people who take my courses, but also for your listeners. If you go to my website, Traher.com, and click on spreadsheets, and then go to my Smoke and Mirrors book, you can get the Retirement Optimizer free, the latest version of that. And that will, in a very short period of time, it just asks you basic questions about your financial situation, like how old are you when you want to retire? What's in your RRSP? How much are you going to put in per year? Are you eligible for CPP, OAS? And it'll project in future dollars what your cash flow is going to be and whether you can afford that based on what you're currently doing. That's so helpful. I'm going to check that out. Yeah, try it. Yeah. See, let me know what you think. It's, you know, again, that was the first book that came out with the first book. And I believe that's part of the reason why the book did well is because people, you know, they didn't want to read a book saying, well, a million dollars is a myth. You don't have to worry about it,

period. It's, well, here's a spreadsheet that can tell you a more reasonable number for you in your situation. Because there is no one answer. I couldn't publish a book saying the answer is this. Yeah, exactly. But that is like the number one worry of people I talk to is, will I have enough? And terrified that they won't be. Because I feel like, and you kind of mentioned this in the book, that people are terrified of retiring and have to live on cat food. Because we've heard that story. I personally don't know anyone who's actually done that in retirement. But we're afraid that that's going to be us. No one wants to be in poverty in retirement when we're at our kind of most vulnerable. So I think that's why we're terrified of that. But I want to kind of talk because you mentioned how important it is to kind of retire debt free, which I completely agree.

But then you also mentioned, you know, if you have kids and lots of other financial responsibilities, you're juggling a lot throughout your, you know, 30sies, forties, fifties, really, you know, while your kids are still at home. And this is what I see with a lot of people in here with a lot of people is how do I, I think part of it is, and I've seen this with a lot of, you know, couples that are in their forties and fifties, but my kids still need me. Maybe they still need some financial support. I have to pay for their school. I'm helping them buy their first home because it's so incredibly expensive.

How do you balance all of that with planning for retirement? Is it that you need to take care of yourself before your kids? Is it, you know, it really kind of depends. Like, what would you say to someone being like, I, you know, I want to take care of my kids still, even though they're adults, but I should take care of me and I don't know what to do. It's a tough one because I believe there's a good chunk of Canadians who are in that exact situation. They are perhaps in their late fifties or even sixties. Their kids in their twenties are buying a house, but the parents have not saved enough for their own retirement. And then they're taking out lines of credit on their own home to help their kids get into the housing market.

I think that's a dangerous strategy. It's a dangerous strategy because how are the parents going to retire? They're adding debt, not adding investments. They may even be getting their children into the housing market when the children can't really afford to do that. Because we know once you buy a house, there's all kinds of expenses that you don't have when you're renting. It's not just the down payment. It's everything for the rest of the time that you own that house that you have to worry about. So again, one of my favorite books is The Seven Habits of Highly Effective People by Stephen Covey. And one of his recommendations is you begin with the end in mind.

So I would recommend somebody like the parents in this situation with the kids who are wanting to get into the housing market, use a spreadsheet like mine or something else to see how short you really are of being able to afford to retire. And the answer may be, look, there's no way you should help your kid get into the housing market. You just cannot afford it if you ever hope to retire. That may be the answer. Or maybe the answer is, you'll be fine. You can help your children out.

Again, it depends on the specific situation. I shudder to think of a couple in their late 50s that are credit card revolvers, still have a big mortgage and can't even afford to pay off their credit card, going out and taking out a HELOC, a home equity line of credit on their house to help their kid get into the housing market. I mean, they're already in financial difficulty before borrowing more to help their kids out, you know? Yeah, no, i completely agree it's a tough situation but yeah i kind of feel like you do need to kind of put your i was like using the analogy of like when you're on airplane put your mask on yourself before you're you know the person next to you because yeah at the end of the day maybe your parents you know your your kids will be able to

buy a home but then how are you going to retire you may that may mean you have to delay your retirement for five years and then you don't retire until your seventies. And that may not be something that you want to do. Another concern I hear a lot is trying to determine what are going to be my costs in retirement. It's, you know, very easy to kind of figure out the general, like utilities and rent, or maybe still have mortgage payments and all those kinds of things. But there's other things that I think, because, you know, until you're in retirement or in that kind of older age group, you may not even think about like health care, like, you know, maybe getting into a long term care facility, things like that. What are some some kind of expenses that we need to

kind of keep in mind for retirement life? Well, first of all, the best recommendation I can make and have been making for years for people who want to get control of their finances is to track their current spending. You know, whether it's downloading it to a spreadsheet, if you're proficient at that, or using a free website like mint.com that I have no relationship with, just track where your money is currently going. That is the basis upon which you can then project what your expenses are going to be after you retire. So for instance, your mortgage, you know, when is your mortgage paid off? Is it before retirement, 10 years into retirement? Where is it? That's going to make a huge difference to your cash requirements when

you retire. Healthcare is a huge wild card. I mean, at least we live in a country with a national healthcare system so that for many people, much of their health costs are covered. But, you know, what's the history of your family? Is there some horrible disease that is in your genes that you potentially might get that requires drugs that aren't covered by the provincial health plan? You know, those kinds of questions need to be thought about. With respect to your point about going into a long-term care facility or a nursing home, I mean, I think people are even going to be much more less willing to go into one of those now with COVID. So people, I think, are going to incur

many more costs of having nursing care come into their homes so they can stay in their homes as long as possible. That costs money too. A lot of people who get to the point, say they get Alzheimer's or something and they have to go to a facility. Well, many people can only afford to do that because they own their home. And again, one of the main reasons for those people who can afford a home to pay off the mortgage or at least pay down the mortgage as much as possible is that when they could sell that principal residence, capital gains tax-free, and that's the money that then allows them to afford to go into an expensive say nursing home. I mean,

ideally they have saved enough money to be able to afford that with their cash flow. One of the big difficulties is a couple, one of them gets dementia or whatever and has to go into a retirement home. The other stays in the house. Then you sort of doubled your housing costs. So it depends on the situation. There's no magic solution. I'm hoping that people aren't hoping that there's somebody

that's going to tell them, here's what you do and that'll fix everything. Personal finance goes back to the basics. It's simply cash flow. Are you spending more than your take-home pay during your all-important working years and building up credit card debt? Or are you spending less?

If you're spending less, that frees up money for you to crank up your RRSP or TFSA or pay off the mortgage. It depends on how you choose to live your life. And I know another thing that you talk about in the book is, I mean, ultimately to figure out how much do I need and will it last in retirement is to kind of estimate how long you'll live, which I feel like lots of people don't like to think about that because that means you're trying to predict your death, which is difficult. But it's hard's it's hard i think you know i'm in my 30s it's so hard to figure out how long will my generation live you know we have stats for typically how how long the the typical canadian

lives you know which is kind of mid 80s really but then you hear stories of people living until 100 which is to me terrifying like not only do i'm, I'm not sure if I want to live that long, you know, I'll be a very old person. But I mean, that's another, you know, couple of decades on to what you may be predicted. And that's a big worry of people. What are some things people should keep in mind? I mean, you know, because we don't know when we're going to,

how long we'll live. And I think, again, a lot of people are afraid that they're going to outlive their savings. Yes. I mean, it's a good question. What bothers me is that some people in the financial industry perpetuate this idea that we're going to live to 100 or 110. It freaks everybody out. They say, look at the numbers. There's no way I can afford to spend what I am the first year of retirement all the way to 100. There's no way. And I don't mean to be a downer, but if you look at the statistics, you are very, very unlikely to live that long.

Very unlikely. And the problem is that people who think, well, I'm going to beat the odds. I'm going to live to 100. They don't end up optimizing their life right they retire at 65 it's like oh my goodness you know i got 35 years to go or whatever i better not spend anything so the first 10 years of their retirement when they should be spending their money because they're in the best shape they don't because they think they're going to need as much money when they're 95 as when they're 65. But the sad reality is the vast majority of us are not going to make it anywhere near 100.

The average, as you said, is mid-80s. I think it's like 82 for a male and 84 for a female or something. So planning for sort of 20 years of retirement versus 25 or 30 or even more makes a huge difference. And I think we really need to get realistic about this idea and essentially stop worrying about financing your life from 95 to 100. You know, even if you do make it there, you're not going to be traveling the world and, you know, going out to restaurants every night. You're going to be ordering in Swiss Chalet and watching Jeopardy every night.

That sounds nice. I wouldn't mind that right now. The other thing I think is interesting is talking about Canada Pension Plan and old age security. People worry about, well, if I hit 90, 90 I'm gonna run out of money anybody who is getting Canada pension plan and old age security is not going to run out of money because those are defined benefit government pension plans that continue until you die adjusted for inflation now unfortunately most people don't get enough from CPP and OAS to be able to afford only on those on those

amounts but you know that's at least something that people can rely on, even if their savings run out. So it's very unlikely that people are going to literally run out of money. I mean, you would naturally start becoming frugal. You'd be forced to become frugal if you said, okay, look, my RRSP is going to run out next year. Right? So people will change their behavior. Exactly. And I know you do talk in the book about the, you know, the difference between a RRIF, which is, you know, what you convert your RRSP into when you're retired versus annuities. I think people don't talk about annuities enough. They're not sexy. That's probably why. But so, you know, when would it make sense for someone to consider getting an annuity? Because I know it could be, you know, an option, you know,

for people that are afraid, I don't want to run out of money. This might be a good option. Well, basically, we know that by December 31st of the year, you turn 71, you have to close your RSP. You could cash it out, but then you pay tax on everything. So the two options are roll it into a registered retirement income fund or buy an annuity from an insurance company. With a RRIF, there are minimum withdrawals. It happens to be 5.28% of the opening market value of your RRIF. You have to take out by December 31st of that next year, that year you turn 72. Instead of doing, and you do that for the rest of your life, take the money out and it's taxable when you take it out. The alternative is you could send a check directly from your RRSP to an insurance company to buy an annuity. So say you've sent $100,000 to an insurance company,

they promise to pay you approximately $500 a month for the rest of your life. Okay. So the benefit of an annuity is it continues being paid for the rest of your life. So with annuities, if you live long, you win. If you die young, you lose. So a lot of people who might send that $100,000 to the insurance company die before they even get the $100,000 back. Then it's been a bad investment. One strategy I've heard that might be worth considering is you track your current spending, project what your spending is going to be after you retire, adjust for inflation, see how much of your core expenses, the core expenses that you're always going to have in retirement, are covered by guaranteed income like CPP, OAS, maybe a pension from work. And if you're short, then you buy an annuity with part of your RRSP to pay out enough

each year to cover your core expenses when combined with CPP and OAS and any other pension and leave the rest of your RRSP to roll over into a RRIF, Registered Retirement Income Fund. A Registered Retirement Income Fund is essentially the same thing as your RRSP. The investments in your RRSP stay as they are. It's basically just a name change on the account and you have these minimum withdrawals. So how well you do in that depends on how well your investments do, just like when it's in your RRSP. The disadvantage is you could get overly excited about stock market gains and leave everything in the stock market. And then the market crashes after you retire.

And the problem with that is that you have fewer years to allow the market to come back and and get your gains back so it depends on the situation the problem with annuities is because interest rates are so low the amount being offered by the insurance companies is also very low in other words you don't get a great rate of return on annuities if you live a typical average number of years. So they're really not popular at all. But at least it's worth talking about with your advisor when you are making your plans

for retirement. Yeah, I think it could be a good option if you're in that group and you're just, you know, again, worried about having enough income in retirement, like it's an option. But yeah, like you said, that's probably why another reason they're not so popular is when you look at kind of the rate of return. It may not make sense, but, you know, it depends. It really, really depends. You mentioned a really important thing. And I also get asked about this a lot is when you have a company pension plan, which I think if you're one of the lucky ones who either has a defined benefit or defined contribution plan, good for

you. As a self-employed person, I'm like, I don't know what that is. I wish I had one of those. Must be nice. But I get asked a lot, how do I kind of fit that into my retirement plan? I think there's a lot of confusion with, you know, because when you look for information about, you know, saving for retirement or investing for retirement, it really is about you personally, you know, because when you look for information about, you know, saving for retirement or investing for retirement, it really is about you personally, you know, investing your money so it can grow. A lot of people don't really understand how do I fit my pension into that plan? Is it more difficult? I mean, for me, it means that you have to save less ultimately, because you have this pension as well. But I think, and also then, you know, there's a big difference between a defined benefit and contribution plan. I think a lot of people kind of get confused between what is the difference

between those, you know? Yeah. Well, I mean, a defined benefit pension plan is basically where you work for a company for, say, 35 years, you earn 2% per year, 2% times 35, 70%. Usually, if your top three years average salary guaranteed for life. So you hit 65, you retire, you got CPP, old age security, and your defined benefit pension plan for as long as you live, sometimes adjusted for inflation. That's the way it used to be, right? The problem is that most companies that have a defined benefit pension plan find that they can't make a good enough return on their investments to make good on their promises. So most companies in the private sector have said, forget it, it's too much risk, right? We've got this huge underfunded pension

plan that's dragging down our company. We're going to cap that, end it, and convert any new employees to a defined contribution plan to find contribution plan is similar to an RRSP matching plan they withhold money from your paycheck they match it they ask you what do you want to invest in then when you retire whatever that pool of money is worth is what you've got there's no risk to the company so totally different plans and as I say the only people these days now with defined benefit pension plans are pretty well people who work for the government, because the federal and provincial governments a defined benefit pension plan, the first place I would go is the HR department or the pension department. They probably put on seminars on how to finance your retirement that would factor in things like CPP and old age security because they, you know,

the company cares enough about their employees to give them a pension plan. They probably care enough to help them implement that pension plan. So that's probably the place to go is the company that is running the pension plan to help with the retirement planning. Absolutely. And I know another thing too that I think is so important too, and I've read this in other books is, you know, you mentioned CPP OAS and I think typically people will just, you know, start drawing on those as soon as they retire, let's say, you know, by age 65. But there are some kind of strategies you can do to kind of get kind of more bang for your buck, so to speak. What are some things people should think about in terms of maximizing those government benefits? Okay. Well, let's throw some numbers out

first of all, if you're eligible for the maximum CPP in 2021 at 65, you're going to get $14,445. If you're eligible for the maximum for OAS, it's $7,384. So just over $20 for enough years to be eligible for the maximum. I think the average is something like 60% of the maximum. So, you know, about 7 or 8,000, not 14. So you can't assume you're going to be eligible for the maximum. So, you know, that's the first thing is to think about that. The next thing is, well, when do you start? With CPP, you could start as early as age 60, but there's a penalty of 0.6% per month for every month before 65. So you'll be getting a lot less. There's a bonus of 0.7% per month if you wait till 70.

OAS starts at 65, but you can also defer that to age 70 and there's a 0.6% per month bonus for every month you wait for OAS. So one potential strategy, and again, it gets back to this age old question, how long are you going to live? But if you are lucky enough to be in a situation where people in your family have lived a long time so you're pretty you know confident that you will one potential strategy is to live off whatever retirement savings you have up to 70 uh delay cpp and oas to 70 and you're getting like 36 40 more than you would if you started at 65 in both cases so you got a lot more guaranteed pension coming in from the government. You use up your personal retirement savings to get from 65 to 70.

Then you're at much less risk of, say, a stock market crash ruining your investments because you're relying on those government pension plans. That's not for everybody. I know a guy, really intelligent, actually, he used to be my manager at Clarkson Gordon way back. And when he turned 60, he's still working full time. And he said, well, I put so much into CPP, I want to start seeing some money back. So even though he would accept the penalty of accepting early, and it'll be taxable because he's still earning an income, he just wants to see some money coming back. So it depends on your personality.

Again, there's no perfect way to calculate when is the best age to elect because you don't know how long you're going to live. Yeah, I do hear that, actually. It's like, I want to take advantage of those programs because I've been contributing to them, or I have the right to it, and I don't want to die before i

max you know get get my money's worth so to speak but so yeah i guess it depends um i think that's always a funny way to think about it though it's like i don't know i for me i i feel like i mean again who knows what'll happen i have a couple decades until i retire but for me i like the idea of uh for me like i think i'd get the get the most money out of the situation if I delayed it. But yeah, like you said, it's up to you as a person of what you want to do. Do whatever makes sense for you. Now, I'm sure I can ask you a million questions because you know all the answers and you really do have a lot of information in your book, which I really, really appreciate. Before I let you go, is there anything else that, you know, I'm sure you get tons of, you know, questions from readers and people all the time. You have to factor in human nature and behavioral economics

and how you think, how you make decisions. One of the vital things is thinking about what you're actually going to do with your time after you retire. You know, everybody thinks, oh, wow, I want to retire early as soon as I can because then there's no stress from work and I can just sit around and do whatever I want. Well, humans don't tend to do well in an environment where they've got nothing to get

out of bed for. So take the money aside. Many people, and I've had many stories from people who are wealthy, could afford to retire, retired, and just spiraled down into depression because they had nothing to live for anymore. They hadn't diversified. They hadn't developed their hobbies and things like that. So I think it's emotional as well as financial. Think about when do you really want to retire? What are you going to do after retirement? What are those activities going to be like? You've got a lot of time that you used to fill with work

that you're now going to have to fill with something else. Are those something else activities going to cost you money like before COVID traveling the world? Well, you're going to have to save more than somebody who's not planning to travel the world. Are the activities more or less cash neutral like gardening? You like to spend hours and hours in your garden every day. Great. Or are you in a situation where you're going to continue doing some kind of work and earn some kind of money, keep me busy, keep my mind going, takes a lot of pressure off having to build a massive portfolio to retire and do nothing. So I think that's the most important thing that people should think about with respect to the

retirement question is, well, what are your plans for after retirement? What are you going to do? Yeah, what do you want to do? Yeah, exactly. Yeah. I mean, that's kind of how me and my husband think of it is, you know, we like the kind of the idea of, you know, financial independence, like we don't need to work, but we'll most likely continue work. I mean, I personally love what I'm doing. He loves what he does. He works in the the industry. And his friend works in music and he was trying to get a hold of, I think it was an engineer or a mastering engineer to work on this album. And they just could not reach this guy. And it turned out that he actually passed away. He passed away because this guy was 90. This guy was 90 and still doing, know I assume what he loves working in music and me and Josh were like that is actually pretty freaking cool that he and he was still like an in-demand

guy but he only worked on the things he wanted to do and he didn't work that often because he didn't need to and yeah we kind of looked at each other I'm like that's probably gonna be us you know like they'll try to be reaching us. And it's like, oh, no, we passed away because we're 100 years old. Still doing what we're doing. And for me, I'm like, yeah, I think that's such an important thing to remember is, you know, I think we really focus on the goal of having enough for retirement, but also having the goal of really determining what do we want our retirement life to look like? What is that next

phase for us? And because, yeah, I've said this so many times on the podcast, sitting on the beach sounds nice, but you want to do that for a few weeks, not a few decades. It gets real boring real quick, I'm sure. Exactly. Yeah. Well, thank you so much for sharing all of your wisdom on the show. Where can people find more information about you and grab a copy of your book? On my website, trahair.com. Perfect. And presumably anywhere you can kind of find a book, basically. Yeah, there's a section there, Buy David's Books on the website that'll link them.

But yeah, Amazon or Indigo, you can find the books. Wonderful. Wonderful. Well, thanks again for taking the time to be on the show. It was a pleasure having you on. Great. Great being on. Thanks, Jessica. And that was episode 286 with David Traher. You can follow him on Twitter at David Traher. You can also find him at his website, Traher.com. That is T-R-A-H-A-I-R, exactly how it sounds, Trahair. He also has a YouTube channel, and you can follow him or connect with him on LinkedIn. Rather, I will link all of that good

stuff in the show notes for this episode, jessicamorehouse.com slash 286. And most importantly, make sure to grab a copy of his book, The Procrastinator's Guide to Retirement, and a bunch of his other books that because he has a number of books, again, we'll link to all of them in the show notes for this episode. And of course, I'm giving away a copy of his book as part of my big book giveaway. So I've got, you know, some details to share about that and some other exciting things. So do not go away. I just have a few words I want to share about this podcast episode's wonderful sponsor. This episode of the More Money Podcast is supported by TD Direct Investing. June is Options Education Month, and TD Direct Investing is hosting a number of free virtual events throughout the month to educate both beginners and more advanced investors about, well, their

options with trading options. Or if you want a full walkthrough of options trading for beginners, there are also a number of on-demand video lessons that will walk you through what options are, common option terms such as calls and puts, what the difference between in-the-money and out-of-the-money options are, and a whole bunch more. To learn more and to find out what free events you'd like to check out, visit td.com slash of this season, so make sure to check out this contest, jessicamorehouse.com slash contest. I will also link to it in the show notes for this episode, jessicamorehouse.com slash 286. And you can enter to win all the books that I am giving away. I will be drawing winners soonish. You know, once this season ends,

I will be drawing winners because I think I have like authors right kind of up to the end of the season. And I will, of course, if you are a winner, I will email you directly. But otherwise, a great place to stay in touch and to find out who did actually win is by getting onto my email list, jessicamorehouse.com slash subscribe. It's also a great way to find out what else is going on. You know, I'm going to be taking the summer off, but it's not like I'm just going to be, you know, hanging out on vacation. I mean, I'm not going anywhere because we cannot go anywhere. I'm not going anywhere until I get my second dose of that vaccine, but I'm very excited. I actually, oh, I'm so excited. I finally booked my flight back home to Vancouver for Christmas. And I know

that, yeah, we're in June right now. I'm already thinking about Christmas. But hey, there's a crazy deal. Number one. Number two, by that time, everything should be hunky dory and safe enough to get on a flight and actually see my family because I have not seen my family by that point. I will have not seen them in the flesh for, oh, I think it's two years. Two years. That doesn't sound real, does it? That doesn't sound possible or real. I mean, my baby niece is no longer a baby. She can walk and talk and she's a person. So we missed a lot because of this pandemic, but I'm excited about the months to come. It's looking good. I'm getting excited, guys. I'm getting excited. I hope you are too. Anyways, I forgot what I was supposed to talk about. I just started talking about me,

didn't I? Anyways, yeah, book giveaway. That's happening. Get on my email list. That's how you can stay in touch. Oh, yeah. I'm taking the summer off, obviously, from the podcast, but I'm always going to be doing stuff. I mean, typically, like really what I have planned for the summer, super exciting, is studying for another exam as I'm on the, you know, path to become a CFP eventually. But also, I'm for sure going to be doing some more webinars, maybe some more giveaways, a lot of exciting things. I have, you know, some ideas for some other kind of merch that I have always wanted to kind of do. There's lots of things in the queue, you know, going on. So make sure to get on my email list, JessicaMorehouse.com slash subscribe. But you can also continue to follow me on my other platforms. I'm on Twitter at Jesse underscore Morehouse.

That's J-E-S-S-I underscore Morehouse on the gram at Jessica I Morehouse. And of course, I have my YouTube channel, which I will, I'm trying to literally put even throughout the summer, one new video out every single week. So that is a great way where you can stay in touch with me and see some kind of different type of content because they're not interviews for the guests. They're just me and whatever the heck I want to do. And it's, I'm having a lot of fun. I'll be honest. I'm having a lot of fun. So that's what's going on with me. Thanks for listening. So yeah. So let me just actually take a look at the schedule. What do we have going on with me. Thanks for listening. Um, so yeah, so let me just actually

take a look at the schedule. What do we have going on for the rest? The rest? So I do have, Oh, I've got a really good episode next week. So make sure to join me in, um, next week. Um, I've got actually a lot of great guests. Like what am I talking about? I've got some amazing stellar guests. Um, but basically this, uh, season is going to be wrapping up in episode 291 on July 9. So not too, not too many episodes to not too many more episodes left is what I'm trying to say. So anyways, thank you so much for listening a huge shout out to my wonderful podcast editor, Matt right out. I'm going to be back here next Wednesday with a very, very exciting episode with a, you know, a pretty big time personal finance podcaster. I would even say like the OG,

really, because she's been around for a while. Or as the kids like to say, a minute. I don't understand that. A minute is not a long period of time. Is it supposed to be like contradictory? And that's the joke? I don't know. Sometimes I try to say it, but I immediately regret it because I know I'm not saying it right or I don't get it because I'm old. Because I've, I mean, if you follow me on YouTube, you'll know I recently had a birthday and closer to 40 now than 30. So there's that. Anyways, let's end this on a positive note, Jessica. And thanks for listening. See you back here next Wednesday. Have a good rest of your week.

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