Fred Vettese: A Complete Guide to Retirement Income (EP.104)

Today, we get into a masterclass on retirement planning with a true expert in the field whose perspectives are distinctly evidence-based, Fred Vettese. Fred is a Partner and former Actuary at Morneau Shepell and author of three retirement books including Retirement Income For Life. We hear Fred’s thoughts on what people should be spending in retirement, why there is not a retirement crisis in Canada, and how Canadians can live on far less than they have been told. Fred talks about how to prepare for a bad investment outcome, as well as the problem of underspending early on and ending up with too many assets. He is a big proponent of people deferring their CPP until after 70 and buying an annuity with a portion of their money in most cases. Our guest weighs in on annuities, talking about how to buy them, which types to buy, and why ALDAs exacerbate the problem of early underspending. We query Fred about when people should start their CPP and OAS government benefits, and then move to hear his thoughts about different bear markets, how to invest during them, and what the current massive government interventions mean for the future of taxpayers. Fred gets into the risk of getting a retirement age date wrong, why he doesn’t endorse the 4% spending rule, and how retirement planning is affected by owning versus renting a home next. He also makes a case for when reverse mortgages are a good option, why long-term care insurance makes no sense, and why interest rates are so low right now. Wrapping up, we hear Fred’s thoughts on what this all means for early retirees, people still in the workforce, and those just entering it. Tune in for Fred’s brilliant perspectives on all this and a lot more in what should be an evergreen resource for any Canadian looking for solid retirement instructions.

Key Points From This Episode:

• Introducing Fred Vettese and his evidence-based work on retirement planning. [0:00:16.3]
• How Fred and Bill Morneau dispelled notions of a Canadian financial crisis. [0:02:45.3]
• Rethinking the rule that Canadians spend 70% of their income in retirement. [0:04:55.3]
• Fred’s conclusion about how spending tracks inflation during retirement. [0:09:27.3]
• Strategies for how retirees can take on less risk but still have enough money. [0:12:00.3]
• Avoiding underspending and ending up with too many assets later. [0:15:08.3]
• The benefits of annuities and why they might not be that safe anymore. [0:16:55.3]
• The pitfalls of annuities indexed to inflation over combining all income sources. [0:20:00.3]
• Why ALDAs exacerbate Canadians underspending at younger ages. [0:22:47.3]
• When to start CPP and OAS government benefits, and tips for exceptional cases. [0:25:59.3]
• Whether this bear market is vanilla or not and how it affects investment decisions. [0:30:25.3]
• The effects that massive government stimulus could have on taxpayers. [0:32:28.3]
• Drawbacks of saving for an over and underestimated retirement age. [0:35:12.3]
• Thoughts on the 4% spending rule now that bond returns are 0%. [0:37:20.3]
• How people owning versus renting a home affects retirement planning. [0:39:09.3]
• When it’s a good idea to take out a reverse mortgage. [0:41:36.3]
• Why long-term care insurance makes no sense; poor coverage for the price. [0:44:10.3]
• The link between aging populations and low interest rates/inflation. [0:47:40.3]
• The impacts of this low interest rate environment on early retirees. [0:52:10.3]
• Whether Monte Carlo simulation is a useful tool and what success rates to aim for. [0:53:49.3]
• Why early retirees can withstand a lower Monte Carlo success rate. [0:56:11.3]
• The reason people who are not retired yet should be saving 20% of their income. [0:56:59.3]
• Fred’s advice for people entering the workforce to live within their means. [0:58:52.3]
• How Fred defines success: having a minimal amount of regrets when it’s all over. [0:59:55.3]