The Wealthy Barber Podcast - #54 — Frederick Vettese: Retirement Planning Advice on CPP, Annuities and More

Episode Date: April 28, 2026

Our guest this episode is Frederick Vettese — former Chief Actuary at Morneau Shepell (now Telus Health), longtime Globe & Mail columnist and one of Canada’s leading voices on retirement planning. Fred is also the author of four books on retirement, including the bestselling “Retirement Income for Life.” In this episode, Dave and Frederick cover a wide range of retirement topics from why many Canadians may be more prepared than they think to how annuities can fit into a retirement income plan. They also discuss reverse mortgages, whether it makes sense to delay OAS, RRSP meltdown strategies and how thinking around withdrawals has evolved over time. Along the way, Frederick shares thoughtful perspectives on carrying a mortgage into retirement, gifting to adult children, universal life insurance and his own estate planning approach. Whether you’re approaching retirement or simply want to better understand the key decisions that shape it, this episode is packed with practical insights and real-world advice from one of Canada’s top experts.   Show Notes (00:00) Intro & Disclaimer (00:55) Intro to Fred Vettese (02:21) How Fred Comes Up With Writing Topics for The Globe & Mail (04:30) Fred’s Career as an Actuary & Author (06:45) Why Many Canadians Are Better Prepared for Retirement Than They Think (10:31) Longevity Risk & the Case for Delaying CPP to 70 (12:15) The Role of Annuities in Retirement Income (14:29) When Reverse Mortgages Make Sense (16:32) Delaying CPP: Why Canadians Are Finally Coming Around (18:47) Should You Also Delay OAS to Age 70? (21:10) RRSP Meltdown Strategy & Income Smoothing (23:20) How the Industry Shifted on RRSP Withdrawal Thinking (25:27) Will People Get Married for the Financial Benefits in Retirement? (27:12) Insurance Products: Universal Life & When They Make Sense (29:38) Carrying a Mortgage Into Retirement (31:13) Gifting Money to Adult Children & The Risk to Your Own Retirement (34:02) Fred’s Own Estate Planning & Will Strategy (35:43) Fred’s Personal Investment Mistakes & Lessons (39:31) How the Financial Advice Industry Has Improved (41:10) Some Grandparents are Upsizing (42:14) Conclusion

Hey, it's Dave Chilton, the wealthy barber and former Dragon on Dragon's Dent. Welcome to the Wealthy Barber podcast. Well, we'll be hosting some of the top minds in the world of personal finance. Yes, that's to balance me out. The podcast is about making this subject not just easy to understand, but dare I say, even fun, honest. Whether you're trying to fund your retirement, figure out how to build a down payment, save for your kids' education, manage debts, whatever, will be here to help you. You do it. Before we jump in, a quick but important note, nothing we discuss here should be taken as

investment advice. We don't know you and your personal financial situation. So we're not here to tell you we're specifically to put your investment dollars. We're here to educate, get you thinking, and we hope entertain. But please do your own research and or consult with your financial advisor before taking any action. Hey, it's Dave Chilton, the wealthy barber with Wealthy Barber podcast episode. I don't know what. 50 something. Thank you again for following us. It's great that we're building all this momentum, but I want to get straight to the guest today. I am very excited about this guest. A true legend in the Canadian personal finance field, anybody in our field, any advisor, any writer, any educator follows Fred Vitesse. He has been around for a long time.

He's an actuary. He has a tremendous reputation, a great mind, has written. for the Globe Mail for a long time. I read every article. Retirement income for life. His book has been very influential. Just an exceptionally sharp guy. He really is. I said to him off air, he is not only influenced a lot of Canadian consumers directly, but the industry at large. A lot of advisors have factored his teachings into the way they approach their client business for the better. He is a very sharp guy. I love his stuff. Now, he and I tend to agree on almost everything. Maybe that's why I think he's so sharp. I judge him by that. But the real reason I wanted him on the show, beyond his brilliant mind and great communication skills is he's our first guest who is older than I am. So that is

even great. I love that even more. Fred, it's a thrill to have you on and I mean that. I'm a huge fan. Well, David, thank you. Thank you very much for the kind of words. I'm glad to finally be able to come on your show. No, you've done a wonderful job over the years. And one of the things that I was saying to you off there is that I think because you're an actuary and everybody knows how smart you are, there's an anticipation when you go to read your material or listen to your views that you're going to be numbers, numbers, numbers, numbers. And less about people and balance and different approaches. I find you quite the opposite. I actually find you're wonderful at weaving real life into all of this. Talk a little bit about how you come up with your ideas for your columns and your general line

of thinking. That's actually interesting. I'll tell you this. So I started doing my charts for the global mail about three and a half years ago. So what I did was I proposed to them that, you know, I do charts all the time in my writing. So why don't I just do a chart for you once a week? Turned out I couldn't actually do it once a week. It was a bit too much to keep up. So I started doing it once every couple of weeks. But initially, it was low-hanging group. There were all kinds of charts that I just had to produce. Like, for example, how the average would have timeered age in Canada is changing over time, what the kind of returns people can really expect based on their acid mis and their risk tolerance, that kind of stuff. I did the low-hanging feet first, and after a while

I kind of was more of a struggle to come up with ideas. And usually it's just a matter of getting an insight. And I might be doing anything like, you know, practicing my putting or talking to my wife or watching golf and television. And all of a sudden, there's something I'm thinking about where I would like to have the answer myself. And I kind of think I know what the answer is, but I don't really, I can't quantify it. And I thought it would be kind of neat to actually be able to do the research and actually get a dot. And because I have this ongoing pressure of having to meet a deadline with the global

mail, and I'll do that research every couple of weeks and produce that. How have you said that? Well, it's interesting is I never know which ones they're going to be successful. Right. Sometimes you think you have a killer chart and it stays on the global mail homepage for like an hour, then they take it off because no one's reading it. And other times you think, I'm just phoning it in this week. week. I don't know. I'll do it anyway. And it's the one that keeps on getting reposted again and again.

Well, I can honestly say I like them all. I think they make the reader think and that is a great achievement that any writer wants to be able to brag about. Tell our listeners, our viewers, a little bit about your career before we start with some specific financial questions. Okay, as you said, I'm an actuary. I became an actuary a long time ago. I worked initially with a consulting for a couple of years. Then I joined Morno back in 1988, and they changed the names a number of times over the years. And they were most recently Morno Chappelle when I retired from there in 2018. Before I retired, though, I had kind of a change of career, but within the same firm. I decided around the time I was about 55 that I no longer wanted to worry so much about profit and

loss statements and client pressures and so on. I still liked, I like the client business the best, but I just wanted someone else to handle all the details and the administrative stuff. So I asked it as to something else I can do. And that's when I started getting more writing and more public speaking and so on, because there was a role for that within the firm because we were growing at the time. So I took a huge cut in pay, of course, to do it. But it wasn't about money anymore at that point in my career. So that was what I did for the last 10 years of my career, pretty much,

where I did mainly writing for various newspapers. I wrote four books about retirement planning. and of course, many articles for the financial post, a national post as well as the global mail. And then I retired in 2018, and then I just kept on writing those articles, and actually a couple of more books from that point on. My most successful book probably would be retirement income for life. I actually published that in 2018, the year of retirement. Yeah, I enjoyed that book immensely. And then my least successful book was two years later. The book I actually was kind of my Calvin child, but the one I probably loved the most. But no one actually read it.

and that was the rule of clarity. Yeah, I read it. I love your stuff, as I said. By the way, our listeners should know you're being very humble there. You were actually the lead actuary at Morno, Canada's biggest consulting firm to the pension industry, etc. So that is quite a role to play, and you should be very proud of that. Tell us end up buying them at some point.

That's right. Mornow Chappelle, 30 after I retired, became Like Works. That was just simply a name change because they bought some small U.S. business. and the actual like works, they became TELUS Health. TELUS Health would have taken them over my, I'm guessing about four years ago. One of the points that you made when you first started hitting the scene, as you say, writing and speaking, was that a fair number of Canadians actually are in better position financially in retirement than they realize. In fact, some may have over-saved. And walk us through your thinking there a little.

This comes down to what's often called the rule of 70 or the 70% in retirement income target. I don't even know quite where this came from. I've tried to chase it down a few times, but generally the industry will tell you need to save enough so that you can generate retirement income equal to at least 70% of your final average income just before you retire. So let's say if you retired, to keep numbers simple up with $100,000 in income, then you ought to have total retirement income of at least $70,000.

And as I said, I don't really know where this came from. I found one source in the U.S. where they only were able to figure out about 55 percent, and the last 15 percent was like tar. Like, you know, you have it on a cigarette package. It seemed like it was tar. As far as I can say, they didn't actually even define it. But they had to find some way to get up to 70 percent because that's what they were told to do. The industry has a great impetus for wanting the number to be 70 percent.

The investment managers may make more money if you have more assets with them, so there'll be more assets that you're saving for 70 as opposed to a smaller number. governments, they have pension plans which produce 70% or more. So obviously they're not going to tell you that you don't need 70%. It's hard to find somebody actually who else says up. Of course, Malcolm Hamilton, who was my mentor for many years, he's been saying this for the longest time, and I simply took over. So I actually finally tried to really pin this down in my book, The Rule of 30, where I took a typical couple and the kind of expenses that they're going to have over the years. And then if you subtract off income tax, you subtract off daycare, saving for retirement itself, mortgage payments, and everything

else, and you see how much money they actually have left for the rest of their lives. It tends to be only 35, 40%, actually not even more than 40%, for most of their lives, up until they're maybe close to age 50. And after that, then the mortgage might finally be paid off, so that drops off, and that's a big number. Daycare drops off as soon before that. The kids might finally leave home and go to college, and maybe, if not be, to $1,000. financial self-supporting, they're not quite as expensive as they used to be, and all of a sudden you have a lot more disposable income. So the question is, what are you going to do with all that disposable income? If you start spending it all, then yeah, you're going to have a problem in

retirement because then you will have a high number to try to achieve. If you end up saving a chunk of it, then you're doing two things. You're actually still having a better lifestyle than you ever had before your 50s, and at the same time, you're maybe saving sufficiently for retirement. You know, you mentioned Malcolm Hamilton. He's another one of my heroes. I absolutely love him. He was incredibly gracious to me. When I wrote the wealthy barber returns back in 2010, he was one of the key reviewers. And we'll go through each of the chapters, looking at the math, et cetera, didn't want anything in return, was eager to help, and just a gentleman. And obviously exceptionally sharp. And I really enjoyed that association. You know what's interesting? A very basic point. It's incredibly basic. But you're one of the first people to really bring it up aggressively is that when you're in retirement, you no longer have to save for retirement. And I know that's extremely straightforward, but you shone a light on it and said that,

think about it. For a lot of people, that's 10 to 15% right there. Yeah. That now they don't have to set aside. And it's so true. And let's say if you're a middle-aged or even younger than a middle-aged couple, younger, a young couple in a place like Toronto or Vancouver. And you'll try to pay a mortgage on a house.

That might be 25 or 30 or 35% of your income right there on top of it. Right. And that should go away by the time you retire. There's all kinds of reasons as to why the number of and be less. Okay. Now, the counter arguments are going to be, you don't know how long you're going to live. If you don't have a defined benefit pension plan, you could deal with all kinds of longevity challenges, plus assisted living and some of the healthcare related challenges are growing in

cost. Admittedly, not everybody has to tap into them, but that's a legitimate risk. Plus, we can't be sure market returns are going to continue to be as strong as they have been in the last 20 and 30 years. What do you say to those arguments? We don't know how long we're going to live. So what I do with my writing is I make the assumption just for the purpose of my spreadsheets of assuming that you're going to live until sometime in your early 90s. That'll leave about five years roughly, five years more than the average person will actually live to. I mean, it can expect to live. Makes sense. Now that may not be enough. 93 may not be enough. It may end up being 98 or 100. So in my software, which I make available, I call it P-E-R-C, it's available online. In my software, other people actually choose their own age. So they might say, you know what, I want to be able to

make sure I have enough money until 95 or 100. So that's one thing. Second thing I do is I suggest to people that they ought to be deferring their CPP, Canada pension plan until 70. And what that does, it means that you're running down your risk assets like your RIF or your RSP sooner. But what you have left with is a much bigger Canada pension plan because it's 42% higher at 70 than 65. So what you're doing, you're increasing that, and that goes up with inflation for the rest of your life, even if you live until 105. And so what happens is that if you do the numbers and you show the bar charts, to show where all the income comes from, by the time you hit the 85 or 90, most of your income is coming from, like totally safe sources like OAS and CPP. And on top of that, I'm suggesting

it may not be such a bad idea to be allocating about 20% of your assets toward an annuity. On top of that, I'm not a huge fan of annuities ever since COVID started. That's simply because I thought negotiation was dead and it's not. So we can never assume it's going to be dead again, as far as I'm concerned. You never know what's going to raise it. It won't be COVID next time. It might be a war with Iran. It might be who knows what. You know, it's interesting. You and I are two of the only people out there who have a open mind to annuities. In general, Canadians are afraid of them and they think the old I'm going to pay for one and they get hit by a bus. The industry doesn't love selling them because commission-wise, they're not as lucrative as some of the other

alternatives. And I don't think either one of us wants people to put all their monies and annuities. Interest rates are relatively low. If inflation comes back, you're in a lot of trouble. You lose control. There's lots of negatives. But for a portion of your money, I often think they're a very good tool that can make a difference. In fact, in some cases, I'm astonished they're not used for 5, 10, 15 percent or 20 the number you used. Why are you and I on the same page, but almost nobody else is? I guess we're just a couple of smart guys. But have you did that? But all the arguments you gave for them, those arguments become stronger and stronger with time. So maybe you don't apply an annuity at age of 60 or even age 65.

You should seriously think about it at age 70. And for sure by the time you're in, you're early 70, 75 because there's something called a mortality credit. So that annuity is, it's worth more and more because it's not just a matter of you get the same amount of interest as you get off a bond, whatever. You're also getting the mortality credit on top of that. The fact that you've survived and other people haven't survived, and the longer you live with it, with that annuity, the more of that mortality credit you're getting. And it ends up being a better and better deal. I couldn't agree more.

And I'm, again, surprised they're not used more than they are. The other thing is all of the research saying that psychologically, having money that you know is going to become in tends to tie into happiness more. Yes, you have CPP OAS. But having that little bit more, if you don't have a defined benefit pension plan, can often relieve stress and lead people to being a little happier in general. So you and I are on the same page. Now, I wasn't going to go to this early, but it made me think about it when we talked about

annuities. What do you think about reverse mortgages? You know what? I actually talked about that in my book. That actually is my step five. They're like a five-step way of securing your retirement income. And that's the last one. I talked about the importance of having a backstop. So everything else fails. I mean, you already spat you deferred your CPP until 80. You saved it off. You used a tool like perk in order to figure out how much income you can actually draw. So you did all the right things. Then sub-five is, if all those things all failed because you lived too long, your investment returns were even worse than you thought, then you want to be able to tap into your home equity.

What are you going to do with all that home equity when you're, you have a paid-off home and you're 88, and now all of a sudden you have a need for some money? What would you do with that otherwise? So the great thing about a reverse mortgage is that you don't have to pay any of it back as long as you live in the same house until death. And so it'll be your, so it'll be your, so it'll be your, you know, your, you're estate that worries about paying it back, and there obviously will be the equity in the home to pay it back. Obviously, you don't want to pay more interest than you have to, but yeah, the interest rates on a

reverse mortgage are going to be higher than on a basic or rate that's a rate that your mortgage, but that's still something you can afford. Once again, just like an annuity, I would say don't consider a reverse mortgage until sometime in your 70s because you want to make sure that you're actually going to stay put. You're not going to think about moving again if you're going to buy the reverse mortgage. And you don't want to use that. last lever until you really absolutely have to. Yeah, again, you and I, I think, view so many of these things in a similar fashion. I don't view reverse mortgages or being good as bad. They're a tool. And in the right case, they can be valuable. My father's plan five, his plan B is for me to take

out a reverse mortgage if he runs out of money. I mean, he's, yeah, he's got all this laid out absolutely. He's announced a couple years ago. He's 93 now that he's never going to die, that he's going to be the first person to live forever. Initially, I laugh, but I'm I'm actually starting to get concerned he may pull it off. He's in a pretty good shape still? Yeah, he thinks he is. Mentally, he's starting to lose it a little bit, but he doesn't recognize that. Going back to delaying CPP, you and I are in full agreement there,

and I find most experts who study this are, yet most Canadians, are still taking it as early as they possibly can. Where's the disconnect? I don't know if you saw my last chart in the Global Mail. That's what had come out last week. And this is based on looking at the most recent actual report on the Canada. a pension plan that came out six months ago. Anyway, they have a chart in there that shows what percentage of Canadians actually start their CPP at age 70. And it was always less than 1% up until about

2016, which I always knew. And that's why in my books I always keep on site, people don't do it, they should do it. You know the reasons why they should do it. And it was, but then all of a sudden, it started cooling up in 2016, very slowly at first for a couple of years. And then it started jumped up. And now it's about 7%. Now, that may not sound like a lot, but it was the It used to be like one half and one percent. Yeah, a big growth. It's a separate rate. Obviously, I'd like to take all the credit for it.

I mean, my book came out in 2018 and boom. That's when it started going up. It's not a coincidence. It is not a coincidence. But I know other people have been also struggling to say that maybe more authority to take its voices than mine. I've been saying that as well. And also interest rates still remain low.

So the old argument, well, you know what, I'm better off to take a, get a lesser amount earlier on, and then they earn interest on. And that would put me in the same. you can't really make that argument because it's not a valid argument to me. So maybe those are the kind of reasons other than my book as to why people are starting to do it. So the 7%, here's one reason why this way might still be at the tipping point and it may end up becoming like 20 or 25 or 30%. And that's because one of the biggest arguments against doing it before was I told people they should do it.

And they say, if it's such a great idea, then why is nobody doing it? But now people are doing it. And the more that are doing it, the more are acceptable. The stigma's gone. It becomes acceptable. It's embraced. Yeah, I agree. No, I think that's exactly what's happening now. And also all of these platforms out there were finally getting Canadian podcasts and you're seeing more people interviewed authority voices like your own. And so the word is spreading a little bit.

There's more fee only, advice only financial planners. They tend to go that route and use RSP meltdowns. We'll talk about in a few moments. Now, it's interesting on the OAS front, there you have a lot of people say, look, you can make the same compelling. mathematical argument, but there's a higher risk the government's going to make changes to OAS. The clawback level, for example, could be pulled down and maybe you're best to take it when you can get it. What's your thinking there? There's some truth to that in my 30 addition of retirement income for life, which came out two years ago, I actually started saying that, you know what,

I've been focusing on CPP. OAS, you should start that early as, I'm sorry, you should start that late as well at E's 70. And for all the reasons you said, because, there's still a compelling financial argument for it. But another reason for doing it later is because it's going to be index to inflation for the rest of your life. And what we're finding is that you want to have as much inflation-protected income as you can get. So if you have a much bigger, not much bigger, somewhat bigger old age security. That's inflation-protected rest of your life. You're better off than having a small amount and then having all your other assets being at risk of getting an investment loss at some point. People are, I think, are becoming

a little bit complacent. We've had about 15, 17 years, I guess now, a pretty damn good investment returns. Obviously, there have been some poor years, but there hasn't been a long stretch of very good good results. So people are starting to think that it's always going to be like this, but it's not going to be like this. And at some point, they're going to say, you know what, wish they had more inflation-protected sources, and OES might be, then be better. However, having said that, yeah, there is that chance that they would claw it back. I hate to think that they're going start plowing it back from people who are already retired and already over 70. I mean, these are voters, and these are people of Wilbo, you out of office if you end up doing that. You like to think that's not going

to happen, but I can't rule out that possibility. What I would rule out is the people who say, well, you know what, I don't want to start my CPP late because I want to get it now because it maybe won't be around when I retire. That's nonsense. That is not going to happen. It is. Yeah, it's fully funded and in a great shape, actually. And I've said this in another podcast, but I had a friend in mind. He was looking at RSP meltdown strategies and whether to delay CPP and he started talking about the OAS clawback and he said, I've got $22 million in my RRSP. What do you think I can do do to avoid the OAS clawback? And I basically said, shut up. Okay, you don't need the money. Give it to people who do need it. And plus I don't know any strategies that are probably going to get

you around that. Now, that's a good segue into the RSP meltdown, something we're hearing more about, dramatically more about in the last 10 years. I love listening to you talk about it before when you said, look, let's not get this too complicated. You're really just trying to even out your retirement income more or less because that's the tax optimal strategy. This is not as deep and as confusing as sometimes it sounds. Talk a little bit more about that.

And this is saying I don't understand. Every source, like big companies, whether they find contribution pension plans, the government, they all want to make sure that you end up getting a steady, a slowly increasing stream of income from your RRS slash RIF slash defined contribution pension plan for the rest of your life. I say, why do you want? What you want is what you're slowly increasing level of overall income.

You don't care what the individual components are. Absolutely. If you end up deferring secret key until 8070, you got to make up. You have to backfill the part up until 8070, which means you've got to take more from your RSP probably, if that's going to be the same. case. I still had trouble getting that argument through. I remember, this goes back about eight, nine years ago or so. I was speaking to some fairly elevated officials in Ontario, the ones who actually worry about pension plans in Ontario, and saying, why do you guys insist that people

can't withdraw too much from their defined contribution pension plans in the first couple of years? And anyway, you want to try to get that steady stream. And then I showed them that the overall amount of income they can, people can actually produce is greater. if they can defer CPP until 70. But guess what? They can't defer it until 70 because they're a defiant contribution. They have limits on how much money they can take out.

So they looked at me like, they gave me that deer in the headlights. Look, after I presented all this, they had no argument for it because they only had that one mantra, you know, for so many years that they could not see outside of that envelope. Yeah, keep a tax deferred as long as you possibly can, but not thinking through again all the other moving parts. And to your point, trying to equalize the income more or less,

because that's the tax. optimal strategy. You know, again, I've said, you've been very humble. I'm going to give you more credit and that I think, again, you were the first person I heard talk about how you have to look at all these sources of incomes together. That if you just look at them in isolation, you're almost inevitably going to make a mistake from a tax perspective, especially on where to get out things. Now, the industry is really improved on that front in the last five and 10 years. In fact, a lot of the best advisors are focusing their energy on making sure they, do the right thing there. But you were really the first person to start talking about that in an

outweigh. It seems pretty obvious. It's hard to believe I'd be the first one to talk about it. But you know, you really were because even though you and I think it's obvious, do you remember for years, everybody said, just to your point a moment ago, keep the money inside the RSP and RIF as long as you possibly can, no matter what, to take advantage of the tax-sheltered aspect of it. There was no room for other strategies or other line of thinking. Some of the reasons that financial advisors have given as to why you ought to be collecting CPP early. They're totally ridiculous. So without naming any names.

One financial advisor in the newspaper, I won't even say which paper he was in. He actually was saying, well, you know what? I want my CPP early because I don't want to wait until I'm really old to enjoy my income. And I'm saying, I've never said you should wait until you're really old. I'm just saying draw that income from another source. Absolutely. When you're really old, you're going to have more income that you would otherwise have.

in addition to being able to enjoy more as much as you want to be enjoying right now. But that's the kind of argument that they actually, you know, so they had so used in the past, I don't think I'm seeing that argument as much. You're 100% right. And again, I give credit to some of the online, the YouTubers who've done a marvelous job of educating in this space. And now you're hearing less of that. They're realizing you're not saying take a cutback in income. In fact, I've heard you say it's sometimes better to have a bigger income when you're early in retirement

because of travel and everything else. but you are saying get it from a different source. What I still hear, though, is I don't want to delay it. What if I die? And my comeback often is you're dead. I wouldn't worry about it. You're dead. If you die, you've got much bigger problems than not having totally optimized.

Yeah, exactly. Okay, here's an odd question I was actually really looking forward to asking you. You're in retirement. You're looking at all this income splitting and these other opportunities available to marry couples. Your neighbor three is doors down. you think, no, we get along well. We should get married even though we're not in love because from a tax perspective,

it really can add a lot of value to our lives. Do you think that ever happens? I think it ever happens. I don't know. I never really thought about it before. I would think off the top that financially certainly would seem to make some sense because I know the opposite.

When couples divorce in retirement, it's pretty bad. And it's bad because all of a sudden, you only have half the assets, essentially half the income, but you need more than 50% of income if you're a single versus couple. The general feeling on this amongst the exports would be that one individual, one person needs about 70% as much as the couple does in order to have the same lifestyle, same standard of living, but 70% it's based on the square root of the number of people.

But the trouble is if you go from two people to one, you're only going to be getting 50% of that income as opposed to 70%. So it's a problem. So if you go the other way in terms of shuffing it up, I guess it's a good thing. financially. Shacking up, haven't heard that in a while. I love that expression. But you know your point, I think the 70, by the way, just based on empirical evidence, I think it may be about right. And a lot of it is because, of course, your housing costs go up so much when you break up. And even if you're willing to move down to smaller homes, your housing costs still go up. A lot of times, by the way, nobody wants to move down to a particularly smaller home. They want to stay in a relatively good

neighborhood, blah, blah, blah. And so I think that figure just instinctively may be about right. And I do think you'll see some people go that route because as you know, the income splitting alone can make a huge difference on your tax bill. That's right. When you look at insurance products, which obviously you're an expert in being an actuary, I love analyzing insurance policies. I have one of the worst social lives you're ever going to see, Fred. This is the kind of thing I do on a Friday night is I look at a lot of these policies and I love analyzing them. And they are complex. Like I've told the story before about a universal life policy that came out from one of Canada,

makes firms and two of the actuaries involved in developing the products were with me at a conference arguing about how it worked. And I'm thinking they're actuaries that develop the product and they don't agree on the subtleties of how it works. These are complicated products. But I still am in the camp that for the vast majority of Canadians who can't fully fund their R.S. P, their TFSA, you go those routes first and you use term insurance to get the insurance you need. Are you still an agreement with that? I wouldn't be in agreement with all that. Like for example, the whole life insurance thing and all that. My problem with it is I haven't fully tried to get my hands really dirty to understand all the angles, I guess, involved with these, whether these really are good things or not.

If I don't fully understand it, then I have to figure that the average individual out there wouldn't fully understand. I'd say, do all the things that make sense to you with an advisor you trust before you start doing anything really esoteric like that. I wouldn't be doing it until, unless I fully ever got there and I just haven't got for yet in terms of saying, yeah, these products make a lot of sense. I got a feeling that they probably do make sense in certain situations from a tax point of view. But you know what? I think back to my own dad when he was like 65, 70, he started getting investments on the advice of his accountant based on tax. And whenever you invest in something just based on the tax aspect and nothing else, it usually ends up being a mistake

and it was definitely a mistake. Great. So that's why I'm a little bit worried about it. I have to heck keep an open line because I haven't really dealt in. 20-week yet. Maybe there end up being a good thing, but, you know, I think I would have known by now if this was the best thing since life spread. No, I agree. Now, I do think at corporation that has excess retained earnings, for example, and they're doing it for estate planning reasons, because of certain tax aspects, it can make sense. But again, I tend to teach the under 50 crowd, the under 45 crowd, even, who isn't taking full of RSPs and TFSAs yet. That's hard enough in the high-cost Canadian environment,

that's where I believe, go for those fully funded accounts first, get your term insurance in place, and go from there. Yeah, that's right. Now, what about mortgage as you're seeing more and more retirees now still have a mortgage.

And in some instance, they have one or they have a he lock because they borrowed against their home equity to help their kids out with down payments. And are you seeing that at all? And what are your thoughts in general about that? It's different from the advice they used to go. I used to say,

make sure that you paid off the mortgage before you retire. But sometimes you can't, and sometimes you still have a mortgage left. Maybe you will have sufficient sources of retirement income. But if it means you're having to liquidate, say, a part of your RSP, then it doesn't make any sense because of the tax. Right. So you can't just decide, I want to take a big chunk of my tax deferred savings and use it to pay off the mortgage, just like Fred said.

I'm not really saying that. I'm not saying to take a big tax aid to pay off the mortgage. obviously it would be much better to have a mortgage totally paid out before you retire. And if that isn't the case, then you better make sure that if you're working with a financial advisor that they understand it's not paid off. And then do you really have enough money to retire around? And if you have no choice because you're already retired and it is what it is, then just make sure that you're only drawing as much income as you can actually afford to be drawn. I had taken all that into account. Yeah, you said all that very well. You know,

I'm still back where you said you used to be. And that is I don't love it, obviously. And one of the reasons is again, psychologically, the research says that people are more stressed, even less happy in retirement when they have a mortgage, when they have debt. And they still, therefore, have interest rate risks do. When they go to renew the mortgage, if interest rates happen to be up, we've had a run of inflation or whatever, they're exposed on that front. I'm worried because in the last three, four, five years, especially three, four, or five years ago, I saw a lot of people my age just helping out kids because if they didn't, they couldn't get the real estate market. And in some cases, they could afford to, and it made perfect sense to give them, though,

now. In other cases, it put their own retirement plans very much at risk. That's the problem, though, when you have this expensive real estate market, people are forced to make very difficult decisions. You're right. And it's great to so many people at my age, I've been helping their kids with mortgages and so long. I've helped my kids to some extent as well. But it's funny because we don't really take that into account so much in our retirement planning. When you sit down with your advice, you usually talk about how much money do I need in retirement, me and my wife. And if you think about the kids, it'll be after death. I want to leave so much to my estate.

So that's a pretty big part of our retirement income out during our early retirement years anyway. It's a pretty big part of it. And it actually comes into play in funny ways. For example, we talk about annuities. One financial advisor tells me she was trying to get some people around age 7580 to buy an annuity with part of their assets because it made a lot of sense in their case.

And do you know what? The kids really stop them from doing it. These are their older middle-aged children. Stop them from doing it. They don't want them to use a big chunk of that money to buy an annuity. My daughter's like that. I bought the book, Die was Zero, and she threw it out before I even had a chance to read it. She is sharp.

She is on it. No, you're right. No inheritors love the annuity route, even though I think it does make a lot of sense at times. But you must be seeing among your friends and colleagues a lot more of gifting money to adult kids, grandkids, helping them out in every way. You get to see the joy that it brings to their lives. They can do things with it that we can't. we've maximized things like RSPs and TFSAs, they can now do that. They can pay down non-deductible debt that we don't have because we're later in life

and we're lucky to do well. In so many ways, it makes so much sense from every perspective if you truly have the money to be able to afford it. That's 100% right if you have the money. And there's different segments of the retirement income market. I tend to be speaking to the people who are going to retire with, say, between $500,000 and $1 million, maybe call it between $5,000 and $2 million. And for that crowd, they should be able to have a comfortable lifestyle in retirement,

but they won't have very much money left at the very end if they end up living until 90. If you have more than $2 million, more than $5 million, then sure, you should have all the means possible in order to gift. And let's face it, if your kids are now 30 or 35, they'll probably need the money a lot more than they're going to need it when they're 50 or 55. So, yeah, this is the time to be doing it when they're still young enough to really need the money and maybe I appreciate you for it. I do think about King Year, though.

I mean, yeah, be careful. Yeah. So no give them everything. Now, you are truly one of the sharpest financial minds in the country. You can say that with no exaggeration. I'm putting you on the spot. Are you on top of your estate planning? Is your will fully up to date?

Have you thought through your executor? Are you practicing all the things that you and I would preach to others? And my will is fully up to date. I actually rewrote the will a few months ago. And the big actuary, I actually did this with parameters. So what I did was, I figured I wanted to give money to certain people. These will be basically my kids, my stepdaughter, my wife. But rather than say how much I want to be getting, I did say, but these are essentially

parameters. I can change those percentages at any point in time. So I didn't want anyone to be pissing me off anytime soon. Did you make it clear to them that you could change this at any point in time? These are parameters that's very easy to change, right? All the takes is one email to my lawyer. I'm pretty much on top of that. I actually bought an annuity a bunch of years ago with a...

A smallish amount, like about 10% of my, 10% of my assets. I did buy an annuity. I'm glad about it. You want to say, what if I died young? I could have said that like 80% months again. I made the argument. I shrugged my shoulders. So my assets would have been 10% less.

That's something that my estate would have to worry about. I would never worry about that. Did you buy a joint annuity? Did you have a guarantee period? Yeah, guaranteed. Yeah, I did. I did have that guarantee periods. And that would be, that would be the human part of me.

The actual part of me would say, what's the point of the guarantee periods? you're going to be reducing the amount by three or four or five percent of the payments. And as I said, I shouldn't worry too much about what happens if I die. People are probably going to be better off if I die than if I keep on living anyway. Well, we won't be. The financial community won't be. But I think your family are right. They would be a bit of a celebration, even though there would be some tears.

It'll be a quiet celebration. It'll be a quiet celebration. Now, when you go back to looking at your retirement plan in general, have you made any mistakes? Is there anything you look back on decisions you made 10 and 15 years ago, even though I'm an actuary, I wish I would have done this a little bit differently. Let's see the kind of mistakes I could have made. In my 30s and 40s and 50s, I should have had pretty much all of my money is invested in stocks, for example. He's certainly reached an age when you get to your mid-50s where you can't have all your money in stocks anymore.

But I should have been, I actually did. So that's okay. I did make that mistake. I wish I'd buy more shares of Morno when they were private and when I could. or bought them than they did, but once again, that's okay too. I don't have any really great financial regards when it comes down to it. One thing I do tell people, and I haven't made this mistake yet, as I get older, I may not be as sharp as I used to be. One mistake I tell people not to do is if you have the lifestyle you want right now, you have more than enough to meet the lifestyle you

want right now, why would you put you that money at risk? Why would you, let's say you had $5 million just to pick a big number. And let's say someone tells you about this, let's make it as much, month. Let's say you have a million dollars and you put 500,000 of risk, it's that it's great investment that's going to be tripling your money. If you don't need it in order to have to maintain the least so that you're comfortably maintaining right now, then why in the hell in the world would do it? But I do hear people who've done this. A risked money that you don't have to risk. It's such a good point. And I love the way you said that risking money you don't have to. I've seen a lot of that in the last two years where people, let's say, anywhere between 60 and 70,

are really ahead of where they thought they would be because markets have been stronger than the assumptions they used in their plan. And they're now looking at it and saying, I'm where I need to be, I'm past where I need to be, I'm going to lighten up on equities dramatically, not because I don't believe in equities

and not because I think I'm a good market timer, but because I don't need to take that risk. 100%. And so they've like, I'm not only that to a point that you made in one of the articles, the markets are very high. And so it's not like they're getting out at the bottom, They're getting out when markets by almost any valuation are quite high.

Now, again, I'm not suggesting to listeners you try to time the market moving out. But in that particular circumstance, it makes perfect sense to me they did that. I didn't quell it at all. I said, yeah, I think you're on the right track there. And you're talking about things I might regret that over the past 20 years. I think more about the things I might regret within the next two or three or five years. That is that, as you say, the markets are very high. I measured them from every angle.

Look at pretty soonings ratios. they're really stretched right now to a point that they really can't be. If you believe in history, and there's always been a reversion to the mean. Whenever P.E. ratios get too stretched, they always come back. And it's going to have to snap back. The elastic right now is very tight. It's going to have to snap out. And when it does happen, if I could cut with my pants down with too much money and equities,

I'm going to be kicking myself and saying, why the rule did I do that? So in that sense, I'm very human. If I'm doing this now, it's partially inertia. I just don't have any better around to doing it. I would tell this to other people as well. If you don't need the rest that much money, and take it out at this point in time and we put more of that money into bonds.

Yeah, you know what's interesting is that I think that's very true of the group we're talking about. Now, for the ultra wealthy who have way more than they need, they may go, no, I can let it ride on equities because even if the market softens, I can leave the equities to people, they can patiently hold them over the long term, et cetera, the people inheriting them.

So, I mean, every situation is a little bit different, but I completely agree with you. When you look at the cyclically adjusted price, earnings ratio right now and where it is, typically the next 10 years of market performance on the standard and poorest 500 have not been particularly strong. And so I think again, those people who are already in a good position, it makes some sense to take a less aggressive stance. Now again, everybody has to get to their financial advisor and walk this through. Speaking of financial advisors, I think the industry is improving. When I started out 30 years ago, 40 years ago,

now I saw some stuff, I just shook my head, crazy, not just the cost of products either. but bad advice across the board, it seems to have gotten dramatically better. In fact, I would argue the upper echelon of financial advisors and planners now are outstanding. They've got great designations. They're good communicators. They understand the risk-reward ratios of the various things, the approaches, the importance of costs. Are you seeing that same trend? I think I am seeing that same trend.

I get almost all of my information about financial advisors indirectly. Now, they do write to me every once in a while and they say, great ideas. I really buy into it. I love to love the book. So I'm really pleased to hear about that because I used to be afraid that they would be telling people, leave all your money in the RSP, don't touch your RSP if you possibly can, take your CPP early and so on. I'm not hearing that as much as I used to hear. Also, from the viewpoint of the actual investors themselves, I used to get complaints from them that they didn't really trust their advisor. Their advisor was leaving them bad advice. They were telling them to do things that were diametrically opposed to what

I say in my books. I'm not getting that as much as they used to anymore. or how do you know what we used to see a lot of in Canada it wasn't bad advice as much as no advice that the people were put into certain financial products and then they weren't getting any advice after that including retirement income planning but again that's changed there's a lot of good software now and I think the leaders in the industry are using the social media platforms podcasts YouTube etc to kind of educate everybody else and raise the bar and so I think there's some positive things happening okay unusual wrap up you've mentioned the human side of things a lot I learned a lot about that years ago.

I was talking to a well-known Canadian economist, and I was explaining to him that a lot of Canadians that you would think would be selling their home in their 70s had opted not to. That home prices kept going up and they thought it's tax-free capital gains. Why would I sell it? But also, the bigger reason was they wanted room for the grandkids to stay when they came to visit.

And so it had nothing to do with math and numbers and all the things we get caught up. They wanted enough bedrooms that the grandkids could stand. them. In fact, I had 70-year-old friends putting in swimming pools. And the economist were on an airplane. He goes, and he said to me, you know what, that sounds silly. He goes, but we did that. We put in a swimming pool for our grandkids. I'm definitely saying that. And I know a bunch of people in their 70s, late 60s, who are moving. They're not downsizing. They're actually upsizing. And it's because of the grandchildren.

They want one more space for when the grandchildren come to visit. I've seen it to the upsides. You just didn't talk about that a lot, 10 and 20 and 30 years ago. But again, it shows you it's this mix. of numbers and humans and every situation is that little bit different. Look, and I've enjoyed this immensely. You lived up to your billing. You can tell I have great respect for you. I think you've been a huge influence in our industry.

You're an outstanding educator. And it's interesting, I didn't know you're tied to Malcolm Hamilton. And he's another one of, as I mentioned earlier, my heroes. I think he's just a great guy, super bright. Didn't he get the highest mark in the actuary exams at one point? He did. Yeah, he did. Yeah, I mean, like when you get the highest mark in the actuary exam,

that's pretty impressive. It really is. So thank you so much for coming on the show. You are invited back any time. David, it's been my pleasure. It's been great talking to you.