If you are one of the many Canadians who is a decade (or less) away from retirement, and haven’t had time to really think about it, there’s an ideal book out there for you.  The Procrastinator’s Guide to Retirement by David Trahair walks you through all the decisions you’ll need to make, and the strategies you may want to employ, to have a solid retirement – soon.

Trahair makes the point early that you need to track your current spending to have an accurate sense of how much you need to save to fund your retirement.  He says the old 70 per cent rule – that you will be comfortable if you can save up enough to live on 70 per cent of your pre-retirement income – is “problematic… it may be the right answer for one person, but totally wrong for you because your financial situation is as individual as your fingerprints.” Knowing what you spend now, and will spend when retired, is a key piece of knowledge when setting savings targets, he explains.

Through the deft use of charts, examples and worksheets, Trahair explains that most of us have “golden opportunity” years for retirement savings when we have surplus funds, thanks to paying off a car loan, or having a child graduate from university. What you do during these periods of excess money “can make or break” your retirement plans, he advises, noting that an obvious destination for some of this cash is retirement savings.

He looks in detail at whether it’s a good idea to save for retirement in a registered retirement savings plan (RRSP) or pay off debt, like credit cards or mortgages, first. Trahair says anyone with high-interest credit card debt should pay that off first before saving for retirement, because of the “rate of return” you get by eliminating the debt.

“A lack of cash outflow is as good as a cash inflow, and better if that inflow is taxed,” he explains. In other words, all the money once spent on paying down the credit card is now in your pocket instead.

Whether to pay down the mortgage versus saving for retirement is a trickier calculation (Trahair has a spreadsheet for you to make your own choice). He says the “commonsensical” approach is to make an RRSP payment and then put the refund on the mortgage. However, later in the book he warns of the dangers of not paying off the mortgage until after retirement.

“If you went into retirement with a $200,000 mortgage, you’d need $293,254.75 extra in your RRSP just to break even,” he writes. “Put another way, you’d be just as well off as someone who had a zero-mortgage balance and $293,254.74 less in their RRSP.”

There’s a lot of good stuff here. There’s a chapter on selecting an investment advisor, and good advice for those investing on their own. He warns that those saving later in life often look for higher returns, which can be risky. “Hoping for a 10 per cent rate of return to solve your problems will mean you’ll have to take extreme risk… chances are good this strategy will result in dismal failure. So, he advises, have a disciplined investment approach, and manage risks. A rule of thumb he likes is the one that suggests 100 minus your age should be the percentage of your portfolio that is in fixed income. The rest should be in the stock market.

Later, he explains how GICs are his favourite investment, especially when held in RRSPs, Registered Retirement Income Funds (RRIFs) and Tax Free Savings Accounts (TFSAs).

He examines the concept of how much you’ll spend in retirement, noting that some costs, like Canada Pension Plan (CPP) contributions, car operating costs, dining out and dry cleaning will drop once you’re no longer going to work, well-dressed.

He talks about how you can maximize both CPP and Old Age Security benefits by deferring them until later – and covers the pros and cons of doing so.

Later chapters cover the “risk” of living a long life, the “snowball” versus “avalanche” methods of debt reducing, and estate planning.

This is an excellent resource for all aspects of retirement planning, and – even better – it is written for a Canadian audience.

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