Tuesday, August 8, 2017

Create the Retirement You Really Want

Most retirement books focus strongly on finances and investing, but in Create the Retirement You Really Want, Clay Gillespie looks at a wide range of retirement issues from figuring out what you want to do during retirement to leaving a legacy. Readers are likely to find some topics relevant to improving their own retirements.

The book is a mix of standard non-fiction style writing and story-style using hypothetical retirees. Thankfully, the stories get to the points quickly rather than trying to be good fiction. I found this worked well. I would not have had the patience to read longer fictional parts.

I was surprised the book contained so little about investing. The hypothetical retirees deal with an advisor who offers three portfolio possibilities with targeted real returns of 2%, 3%, and 4% per year. Apart from varying the allocation to stocks, there was little mention of how these returns would be achieved. I thought it would at least have made sense to discuss the importance of keeping costs low. Canadians who pay 2.5% or more per year for their mutual funds can only dream of earning a compound average annual return of 4% above inflation for decades.

The topics covered included figuring out your dreams for what you’ll do during retirement, what it will cost, health, wills, events that derail your plans, cottages, and family bickering over inheritances. I particularly liked the discussions of cottages and inheritances. I’ve heard accountants and advisors warn about problems in these areas, but Gillespie illustrated the potential complexities and conflicts well.

One part of the discussion of inheritances surprised me: “giving back and leaving an inheritance is always important to retirees.” I know many people who’ve said they have no intention of leaving money behind. Either Gillespie is saying that people tend to change their minds as they age, or perhaps he only advises wealthy people who end up leaving inheritances.

The author shows a better understanding of inflation than some advisors. “When most people think about returns, they think only in nominal terms. They forget inflation. But inflation is very real, and retirees feel the impact more than any other group because they often live on fixed incomes. Real return is the number that people should really focus on.”

Gillespie believes that “an initial withdrawal rate of 5.5 percent is sustainable if you have the proper retirement income strategy in place.” I’m skeptical that an income strategy will make much difference. This sounds a lot like a claim to be able to beat the market. The right withdrawal rate depends on age, asset allocation, portfolio costs, and willingness to reduce spending if market returns disappoint.

The book contains some plugs for financial advisors. One is included with some statistics: “Only 29% [of Canadians] use the services of a financial advisor (even though investors who use an advisor are more confident and optimistic about their financial futures).” Of course, the implied causality here is questionable. Having lot of money makes people “confident and optimistic about their financial futures.” Also, financial advisors seek out people with a lot of money, and those with a lot of money are more likely to find a good advisor. The root cause of the correlation between financial optimism and using an advisor is having a lot of money.

While many financial advisors push their clients to leverage their portfolios, Gillespie believes it’s a mistake to avoid paying off debt in favour of saving for retirement. He gets full marks for this in my opinion. The best plan involves getting total debt down to a manageable level while you’re relatively young and then keep it dropping while simultaneously building savings. Gillespie says “good debt and bad debt is just splitting hairs,” a point I’ve made before.

“It’s always a good idea to exhaust your non-registered funds before dipping into your registered savings.” I don’t think this is always true. Between retirement and age 71, it can make sense to make an RRSP withdrawal in a low-income year where the withdrawal would be untaxed or taxed at a very low rate. Figuring out when this makes sense can be tricky, though.

In one section a hypothetical couple derail their carefully constructed retirement plan to follow the advice of a do-it-yourself (DIY) investing brother-in-law. This section paints DIY investing as chasing risky biotech stocks. There certainly are people like this who try to draw others into their risky strategies, but DIY investing can also mean low-cost diversified investing.

Advice we hear frequently is not to put money in the stock market if we’ll need it within 5 years. Gillespie has an interesting way of saying something similar: “Always invest based upon when you want your money back.”

Overall I found this book useful for its treatment of a wide range of retirement issues. However, its main purpose seems to be to drive home the point that you need a financial advisor to steer you. Of course, the challenge for most of us is trying to find a quality advisor, particularly for those with modest portfolios.


  1. Am appreciating your book reviews..

  2. Hi... I heard an interview you did on Mostly Money Mostly Canadian with Preet Banerjee, who I have also just recently discovered.
    I am totally into Index Funds (much to the chagrin of my HR person at work who insists I need a financial advisor). What got me into all of this was the book by Michael Edesees 'The Big INvestment Lie'. What a bombshell. Math doesn't lie. So anyways now I am reading your blog.
    I am just 65 and not retired. I teach and love it.
    My question is about balancing index funds and then sleeping for a year. I just have 5 or 6 different index funds with TD and another 5 or 6? with my benefits company at work Sunlife. Seems good to me. Anything glaring that you think I might be missing

    1. @Art: Preet's a smart guy. Check out his book, too: Stop Over-Thinking Your Money. I haven't read the book by Edesess, but it sounds like it covers similar ground to others I've read.

      Yearly rebalancing is fine. I choose to use thresholds, but the difference isn't big. I only own 4 different index ETFs myself. The main thing is to keep costs low and have a reasonable asset allocation.