Well it’s that time again. We have a bright shiny New Year ahead of us and an opportunity to set goals and resolutions to make it the best possible year ever. Whether you are just starting out in your career, you are close to retirement or you have been retired for some time, it is helpful to think about what you want to accomplish and how you are going to meet these objectives.

My resolutions are to make more time to appreciate and enjoy every day as I ease into retirement. I also want to take more risks and develop new interests. Two of the retirement projects I have already embarked on are joining a community choir and serving on the board; and, taking courses in the Life Institute at Ryerson University. After all, as one of my good friends recently reminded me, most people do not run out of money, but they do run out of time!

Here in alphabetical order, are resolutions shared with me by eight blogger/writers who have either been interviewed for savewithspp.com or featured in our weekly Best from the Blogosphere plus two Saskatchewan Pension Plan team members.

1. Doris Belland has a blog on her website Your Financial Launchpad . She is also the author of Protect Your Purse which includes lessons for women about how to avoid financial messes, stop emotional bankruptcies and take charge of their money. Belland has two resolutions for 2018. She explains:

• I’m a voracious reader of finance books, but because of the sheer number that interest me, I go through them quickly. In 2018, I plan to slow down and implement more of the good ideas.
• I will also reinforce good habits: monthly date nights with my husband to review our finances (with wine!), and weekly time-outs to review goals/results and pivot as needed. Habits are critical to success.

2. Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances and blogs at Money We Have. He says, “My goal is to work less in 2018. I know this doesn’t sound like a resolution but over the last few years I’ve been working some insane hours and it’s time to cut back. The money has been great, but spending time with my family is more important.”

3. Chris Enns who blogs at From Rags to Reasonable describes himself as an “opera-singing-financial-planning-farmboy.” In 2017 he struggled with balance. “Splitting my time (and money) between a growing financial planning practice and an opera career (not to mention all the other life stuff) can prove a little tricky,” he says. In 2018 he is hoping to really focus on efficiency. “How do I do what I do but better? How do I use my time and money in best possible way to maximize impact, enjoyment and sanity?”

4. Lorne Marr is Director of Business Development at LSM Insurance. Marr has both financial and personal fitness goals. “I plan to max out my TFSAs, RRSPs and RESPs and review my investment mix every few days in the New Year,” he notes. “I also intend to get more sleep, workout 20 times in a month with a workout intensity of 8.5 out of 10 or higher and take two family vacations.”

5. Avery Mrack is an Administrative Assistant at SPP. She and her husband both work full time and their boys are very busy in sports which means they often eat “on the run” or end up making something quick and eating on the couch.  “One of our resolutions for next year is to make at least one really good homemade dinner a week and ensure that every one must turn off their electronic devices and sit down to eat at the table together,” says Mrack.

6. Stephen Neiszner is a Network Technician at SPP and he writes the monthly members’ bulletin. He is also a member of the executive board of Special Olympics (Kindersley and district). Neiszner’s New Year’s financial goals are to stop spending so much on nothing, to grow his savings account, and to help out more community charities and service groups by donating or volunteering. He would also like to put some extra money away for household expenses such as renovations and repairs.

7. Kyle Prevost teaches high school business classes and blogs at Young and Thrifty. Prevost is not a big believer in making resolutions on January 1. He prefers to continuously adapt his goals throughout the year to live a healthier life, embrace professional development and save more. “If I had to pick a singular focus for 2018, I think my side business really stands out as an area for potential growth. The online world is full of opportunities and I need to find the right ones,” he says.

8. Janine Rogan is a financial educator, CPA and blogger. Her two financial New Year’s resolutions are to rebalance her portfolio and digitize more of it. “My life is so hectic that I’m feeling that automating as much as I can will be helpful,” she says. “In addition, I’d like to increase the amount I’m giving back monetarily. I donate a lot of my time so I feel like it’s time to increase my charitable giving.”

9. Ed Rempel is a CFP professional and a financial blogger at Unconventional Wisdom. He says on a personal finance level, his resolution are boring as he has been following a plan for years and is on track for all of his goals. His only goal is to invest the amount required by the plan. Professionally, he says, “I want 2018 be the year I hire a financial planner with the potential to be a future partner for my planning practice. I have hired a couple over the years, but not yet found the right person with the right fit and long-term vision.”

10. Actuary Promod Sharma’s resolutions cover off five areas. He says:
    

• For health, I’ll continue using the 7 Minute Workout app from Simple Design.
• For wealth, I’ll start using a robo advisor (WealthBar). I’m not ready for ETFs.
• For learning, I’ll get my Family Enterprise Advisor (FEA) designation to collaborate better in teams.
• For sharing, I’ll make more videos.
• For giving, I’ll continue volunteering.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

 

Today I’m interviewing Ed Rempel for savewithspp.com. Ed has been a Certified Financial Planner for over twenty years, and an accountant for thirty-three years. After building one of the largest financial planning practices in Canada, he partially retired in his fifties to focus on his passion for writing.

On his blog Unconventional Wisdom, Ed recently discussed his very interesting research* which reveals that if you want to withdraw 4% a year from your retirement portfolio without running out of money in 30 years of retirement, you need to hold significantly more equities than bonds in your portfolio. And that’s what we’re going to talk about today. Welcome, Ed.

Thanks a lot Sheryl.

Q: So how do you define a successful retirement for the purposes of your study?
A: For the purpose of the study, I defined a successful retirement as providing a reliable income rising with inflation for 30 years. That means you retire at 65 and your money lasts to age 95.

Q: Many financial planners use the 4% rule, which essentially says that you can withdraw $40,000 a year plus inflation for life from a $1 million portfolio. What do you think?
A: I have 146 years of data on stocks, bonds, cash, and inflation. I looked back at all those years to see what would have happened in the past if people retired that year, with each type of portfolio – e.g 100% bonds, 100% stocks plus various other permutations and combinations. 

I also tested these scenarios with inflation, to see what actually happened in the past. And the surprising result was that the more equities you actually have the safer your portfolio is. My whole blog is about “unconventional wisdom.” I love challenging ideas that most people believe aren’t really true and that’s one of them.

Q: So, to what extent does retirement success link to whether or not retirees follow the common of rule of thumb which suggests that they shouldn’t invest more than 100 minus their age in equities? For example, the portfolio of a 70-year old should include 70% bonds and 30% stocks.
A: We call that the age rule and its one of the things I tested in the study. I found that it actually gives you a significantly lower success rate. If you have 70% bonds at age 70, and the bond allocation is growing as you get older, that’s a very low component of stocks. In these circumstances you will have a much lower retirement success unless you withdraw a lower amount of income each year. 

Q: And what would the lower amount of income be in your view?
A: If you are more comfortable with a conservative 70% bond/30% stock portfolio, I would suggest you use a 3% not a 4% annual withdrawal rate. 

Q: Then what is the stock/bond allocation with the highest success rate, which we defined earlier as having enough money to withdraw 4% annually plus inflation, for thirty years?
A: The highest success rate will result if you are invested 70% or more in stocks. This is a very heavy allocation. And if you plan to withdraw more than 4% (i.e. 5% or 6% annually) the highest success rate will occur if you have 90% or 100% stocks. 

Q: What about bond or GIC investors? What percentage of their accounts can be safely withdrawn so their money will last thirty years?
A: I would suggest bond and GIC investors stick with 2.5%. That’s a little bit more than the interest that they’ll get, so they would be encroaching on their principal.

Q: Many financial advisors tell investors to keep cash equal to two years income, to draw on when their investments are down. Will that improve the possibility that these people won’t run out of money?
A: That is another example of “conventional wisdom” that people subscribe to. And I agree it kind of sounds logical, but my study found that holding two years’ worth of cash will not enhance your chances of making your money last for 30 years. In fact, there were a number of cases where keeping cash actually meant investors ran out of money, when without cash they didn’t.

The only possible benefit would be entirely behavioral. For example, if investments go down some people might get scared and cash them in. However, if they have cash they might leave their investments alone and just spend the cash for a little bit. But in general I don’t recommend this because I like to follow what actually works and I found no actual benefit in holding cash to cover expenses for several years after a market downturn. 

Q: Based on their risk tolerance then, how would you advise clients or readers who are nervous about holding a high percentage of equities in their portfolio?
A: They still need to stay within their risk tolerance. Therefore, even though the study showed a higher amount of equities is safer, and would give them a better retirement, that’s not what I’m recommending that everyone should necessarily do.

Q: So more conservative investors are just going to have to understand they will either need more money to meet their retirement goals or they will have to spend less?
A: Right. Adding bonds gives you a fixed income that reduces volatility that can make you less nervous. But then you have to lower income expectations. 

Q: Say that somebody does go with a higher stock allocation, what about the risk if there’s a stock market crash early in their retirement? How much will it throw out the calculations?
A: In the study I went back to 146 years, and there were a lot of big market crashes in the last 146 years, to see what actually happened. In actual fact that I found that historically this almost never a factor except in one very clear case for people who retired in 1929. It was actually inflation that eroded buying power over the years.

Q: What’s the biggest mistake people can make if there is a market decline?
A: The biggest mistake, in fact, I call it “the big mistake,” is to sell your investments, like sell your equities or switch to more conservative investments, after a market decline. The bottom line is you must be able to stay within your risk tolerance and stay invested in the market, through the inevitable crashes. That’s the only way you’re going to get the retirement income that you want.

Q: My last question, what is your best advice to retired investors, or investors close to retirement, regarding how to structure their portfolios.
A: Well the bottom line is to have a proper retirement income plan. You have to think through what the lifestyle is you want to have and how much money you need to support it. And then look at how you are comfortable investing and come up with a plan that gives you what you need. There will be trade-offs, but once you make a proper retirement income plan, then you can have a sustainable income throughout the rest of your life.

Thank you Ed! It was a pleasure to chat with you today.

Thanks a lot Sheryl.

*For the full report of Rempel’s research discussed above, see How to Reliably Maximize Your Retirement Income – Is the “4% Rule” Safe?

 

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.