Retirement Income for Life (Second Edition): Getting More Without Saving More

by Frederick Vettese

Canada’s number one best-selling retirement income book is now completely revised and updated. Vettese will show you how to mitigate risk and secure your financial future in these unpredictable times.

As COVID-19 rocks the economy in an unprecedented black swan event, retirees and those who are preparing to retire need answers to pressing questions about their financial futures. Originally published in 2018, the second edition of Retirement Income for Life has been completely revised and updated, and now



New chapters on early retirement, retiring single, what to do when one spouse dies young, and more. Three strategies for mitigating your personal financial risk in the current downturn in equities and other investment products. Advice on how to plan for (and even benefit from) the coming bear market resulting from COVID-19, which will create unprecedented equity buying opportunities, possibly as early as 2021. Information on the impact of unbearably low interest rates on annuities and fixed-income investments and what to do if you hold them. The reasons retirees should be deferring CPP until age 70 and why the case for this is stronger than ever. Author Frederick Vettese demystifies a complex and often frightening subject and provides practical, actionable advice based on five enhancements the listener can make to mitigate risk and secure their financial future. With more than 1,000 Canadians turning 65 every day, the cultivation of good decumulation practices - the way in which you draw down assets in retirement, ideally to have a secure income for the rest of your life - has become an urgent matter that no one can afford to ignore.

PLEASE When you purchase this title, the accompanying PDF will be available in your Audible Library along with the audio.

Genres: Finance, Nonfiction, Personal Finance, Personal Development

Audible Audio

Published December 15, 2020

Reviews

[Alexa · Rating 3 out of 5]

This is a pretty decent book on retirement/finances. I appreciate that it actually focuses on the drawing down of investments, whereas most books about retirement predominantly discuss the accumulation phase. It was also really nice that this is a Canadian book! All too many of these books are American.
There was also some interesting thoughts on annuities. May be worth considering for some people.


There were a few aspects that disappointed me with this book though:

For some reason, the author describes yearly retirement income needs based on a percentage of pre-retirement income. This makes absolutely no sense to me. It doesn't take into consideration spending habits at all. Tracking expenses and budgeting for retirement spending needs is far more useful here than his recommended strategy.

The author repeatedly goes over how difficult and dangerous the DIY route can be. For a lot of people who just don't care to learn about their finances at all, fine, it can be hard. But it really doesn't have to be. One afternoon with a good finance book is enough for most basic investing needs.
The author states: "Finding your way through the maze of possible fund choices online on the website of a major bank can be confusing, but it is doable."
Why are you using a big bank? Especially when the author specifically recommends avoiding high fees, and recommends buying ETFs. I would have thought he would bring up Questrade as a great choice for anyone going the DIY route (since they offer commission-free buying for ETFs). The author curiously only mentions Questrade as a robo-advisor.
It's also *very* easy to set up a DIY couch potato portfolio. For instance, Canadian Couch Potato and PWL Capital have "model portfolios" that you can follow and set up very easily.
These days there are even all-in-one ETFs such as VGRO, XGRO and ZGRO which cover all diversification and rebalancing needs, so DIY is even easier (though I believe these ETFs came out shortly after this book was published, so I obviously can't fault the author for not mentioning these options).
Obviously, this only covers the investing portion of retirement, and doesn't cover a full financial plan. But it's still pretty simple to do this on your own and get a fee-only advisor to help with the rest.

My last disappointment is that there is very little mention regarding single people going into retirement (literally only 2 pages). The book assumes you will be in a couple.
It also assumes you have purchased a house and have paid off your mortgage.
And also that you are near traditional retirement age and will not retire earlier than 55yrs old.
Understandably, you can't spout advice for everyone and every specific situation....but still... It had a very specific retiree in mind.
Good advice can still be gleamed regardless of your situation though.


Although I criticised the book a lot, I do have to share this short passage that I really liked:
"Never mind the constant barrage of criticism from labour groups and academics that the pension coverage offered by DC plans is inadequate, that not enough is being contributed and that employees are subjects to too much risk. This is the 21st century. Individuals need to take some responsibility for their own welfare."
Well said.

[Julian Worker · Rating 4 out of 5]

Even though it's a few years away, it doesn't hurt to try and plan ahead regarding your finances.

This book has some valuable ideas and thoughts on how best to proceed with your finances specifically aimed at Canadians. All the initialisms and acronyms are explained clearly and easily.

There's also an emphasis on 'Black Swan' events which are out of our control e.g. invasions causing spikes in energy prices, pandemics, and the approach of climate catastrophe.

This is a great book to use as a reference but people should always receive more than one opinion on financial matters from robo-advisors, financial advisors at credit unions, and a friendly accountant.

[Sterling · Rating 5 out of 5]

This is a great book explaining Vettese's 5 enhancements for a more secure retirement. Wealth "decumulation" as he puts it. I found it easy to understand and follow with lots of useful charts.

Enhancements
1) Use low-cost ETFs
2) Defer CPP until the age of 70
3) Buy an annuity with 30% of your retirement assets
4) Be flexible in your spending
5) Reverse Mortgage

It takes you through an example couple who have $550,000 saved up and are in their mid-sixties. I like this example, as that is not a lot of retirement money in my opinion. At that level, it should make people feel more comfortable moving into retirement with larger nest eggs that you can have a comfortable baseline retirement.

The books focus is the decumulation phase and it does a great job at that. But I would like to see some different advice in a couple of areas.

First, your retirement income should be based on what you will spend...not a generic calculation of 50-70% of your income. In order to know what you need for income, you should be sitting down and tracking your spending and budgeting. Otherwise the income your producing is a guess. Not only will this provide the knowledge to know what you need in retirement but it'll get you there with more money saved up in your accumulation stage. Budgeting saves.

I would have liked to see more focus on the flexible spending (enhancement 4). He mentioned that this may be the greatest enhancement of the 5 but it was severely downplayed. This topic is the focus of many other books and financial podcasts so he gets a pass.

[Janine]

got the 2023/2024 version

[Brahm · Rating 4 out of 5]

Fast read - one sitting, couple hours, skipping stuff I knew (ie. Index Funds / ETFs, "be frugal sometimes").

Super good. This fills in some of the blanks logistically for what actually happens in retirement. Plenty of books cover strategies for saving & accumulation but none for decumulation.

Key concepts: defining income targets, RRSP->RRIF transition, start CPP at 70 (not 65) and double your income from that stream, purchase an annuity with a % of your savings, use the "4% rule" with extreme caution (or not at all).

While I am a looong way from retirement (I'm 33 as of this review) this will help me update my personal finance spreadsheet with some post-retirement projections. I would recommend this book to other young people because there are some good insights into knowing what you'll need. Doesn't hurt to have the awareness!

[Lynn · Rating 4 out of 5]

The right book at exactly the right time.

They don’t really prepare you for how shocking it is to transition from saving money all your life to drawing it down in retirement. There needs to be a class in decumulation!

[Kevin Massey · Rating 4 out of 5]

Updated and great information for those thinking of retirement. Nice to have a retirement book written for Canadians and not the US.

[Chuck Slack · Rating 5 out of 5]

I enjoy reading financial planning books and this is one of the best ones I’ve read, particularly about the decumulating phase (I.e. post-employment/accumulating phase). An easy read with lots of thought provoking ideas, facts, and analysis. Highly recommended for people planning their finances for post-employment.

[Jeff Perron · Rating 4 out of 5]

Great strategy book for people nearing retirement, teaches you how to maximize Canadian benefits vs your savings in the decumulation stage of your life.

[❀ Susan · Rating 4 out of 5]

I probably read this book too early but it gives lots of helpful tips for retirement and optimizing income until the end of life with a Canadian perspective.

[Denise · Rating 4 out of 5]

I learned a lot. So much that I now feel secure with our retirement plan. I’ll be keeping this book on my shelf so that I can reread it when a retirement date draws near - years from now. The book is informative and an easy read.

[Vincent · Rating 4 out of 5]

Definitely something interesting to think about. When I consider retirement, I also tend to think along the conventional path and worry most about the total amount put away. But Vettese makes the argument here that we should consider investment risk as well, and try to push that risk to the government or insurance companies.

He would be right except for the fact that annuities are not an attractive investment in the current financial climate (which he admits).

The book is targetted mostly towards a very middle-class audience who might save, say, $500k before retirement. There isn't all that much here if you manage to do better than that, but then I suppose the argument would be that you no longer are in such strong need of balancing risk if you have enough assets to begin with.

One issue I have is that Vettese puts a lot of stock in a particular, online, retirement spending calculator, making it one of the pillars of his approach. However, I don't believe you can trust a private company to run a service consistently for all the decades you might be retired when it will bring no direct profit.

[Deanna · Rating 2 out of 5]

I never really regret my single status until I start reading about retirement planning and this darn book is 100% about couples. Well. Not 100%. There are two pages on retirement income needs of singles. Two pages. I guess it's not worth talking about, eh? Im sure there must be some good stuff in here, but that's a turnoff for sure. I'll persevere and hope there is something relate able and applicable to my life.

[Fred · Rating 4 out of 5]

Most relevant financial book I’ve read in years because it addresses the overwhelming challenge of decumulation. Very helpful to read hypothetical examples as they apply to Canadians. Don’t overlook the value of the Morneau Shepell Income Calculator; it gave me a jaw-dropping 20% higher annual income projection. Special thanks to Mike Drak author of “Victory Lap Retirement” and our FaceBook group “Younger Next Year—2018” for bring us together.

[Dan · Rating 5 out of 5]

This is a must-read if you are nearing or already retired. You should also read it before making your decision on when to start collecting CPP.

[Bob Webb · Rating 5 out of 5]

This an excellent book geared specifically for Canadians, helping them to navigate decisions and planning as they enter retirement.

[Zahwil Dossa · Rating 4 out of 5]

This book gives Canadians the knowledge and tools to realize peace of mind in their retirement, without being paralyzed by fear of depleting the assets they spent their working years accumulating. Vettese uses the term “decumulation” to refer to the drawdown of those assets.

I came away feeling fortunate to be a Canadian. Our government pays senior’s prescription drug cost; our socialized healthcare system insulates us from financial ruin in the event of illness; and the Canada Pension Plan (CPP) is sustainable based on current funding levels for at least 75 years.

Conversely, in the United States, Americans can face bankruptcy when their health fails, and the social security system, a pay-as-you-go plan, is currently unsustainable.

Vettese’s advice is practical and subsumed within a free online tool he calls PERC (Personal Enhanced Retirement Calculator).

Based on your and your spouse’s assets, PERC indicates the amount of income you can withdraw each year and the amount you can spend (after taxes), within a lower and upper bound.
The lower bound assumes worst-case scenario investment returns (5th percentile) while the upper bound assumes median returns, based on a Monte Carlo simulation.

The two scenarios assume your make a few “enhancements” over a base case that is also shown in PERC. Much of the book is devoted to explaining the rationale of four enhancements.

First, lower your investment fees to 0.6% or less by using a Robo-Advisor that will build and maintain your portfolio at a pre-set ratio of stocks to bonds. Or, for even lower fees, you can create your own portfolio of low-cost index funds.

Second, defer your Canada Pension Plan (CPP) payments to age 70, in exchange for 40% higher payments. By doing so, you transfer two key risks to the government: (1) that the market will yield poor returns, and (2) that you will live a very long life. The CPP absorbs the risks, and you receive a larger and reliable income stream for life.

The third enhancement is buying an annuity with 20% of your retirement savings. The annuity – a “joint and two-thirds survivor policy” – pays a regular stream of income for the rest of your life (with two thirds of the amount paid to the surviving spouse, upon the death of the other).

The above two enhancements mimic a Defined Benefit (DB) pension plan –a prized asset for those lucky few who have them. Yet, perhaps due to our psychological quirks, they are passed over by most retirees. Vettese does a good job showing why the reasons people give for rejecting the CPP deferral and the purchase of annuities are unsound.

The final enhancement is, if you get into trouble due to “spending shocks” or poor investment returns, you can convert nonfinancial assets into income. Specifically, you can tap into your home’s equity by taking out a “reverse mortgage”. The interest rate is higher than a regular mortgage, but you are safe in your home for the rest of your life, and your estate will never be liable for more than the home’s equity.

Without Vettese’s book, many people assume you just withdraw 4% of your assets a year (the so-called 4% rule) and expect to leave the principal value of your assets unchanged.

The 4% rule is flawed because it ignores the fact that you probably want to take out more money in the early years of retirement when you can enjoy it more. Vettese presents strong empirical evidence that spending declines when people reach their 70’s, which makes sense as health issues make spending money more difficult (e.g. travel) and less enjoyable. By that point in your life, your income needs are lower, but you want the source of that income to be secure and persist as long as you do.

A related insight Vettese shares is that low interest rates are probably here to stay, due to demographics. The high saving rates of seniors create ample supply of money, while there are fewer young people looking to borrow. Thus, bonds are not likely to be a good investment, and your best bet is stocks or a high-interest savings account.

While retirement is not on my horizon quite yet, this book gave me a great sense of how to “decumulate” assets when the time comes.

[Steven McGee · Rating 4 out of 5]

A great retirement planning resource that I came across on the RR podcast. I’ve read about 2 dozen personal finance books in the last 3 years all of which have focused more on wealth accumulation but this was the first book I’ve read that focused on wealth “decumulation” as Vettese puts it. The fact that this book is for Canadians also made it particularly useful.

Vettese presents the situation of the typical Canadian couple in their retirement and how financial ruin can happen even if they follow all traditional advice. Vettese then offers 5 enhancements which stave off the couple running out of assets before they die.

The 5 enhancements are:

1. Minimize investment expenses (avoiding costly actively managed funds and opting for robo-advisors or ETFs that have lower fees)
2. Deferring CPP until age 70 (if your investments can sustain you until then)
3. Purchasing an annuity (more applicable in the 90s but may still be worthwhile)
4. Calculating the income that is appropriate to withdraw (as opposed to following guidelines such as the 4% rule)
5. If all else fails and you do not plan on moving, taking out a reverse mortgage can be a helpful backstop.

He demonstrates the effects of all these enhancements on the couple’s financial situation by running multiple Monte Carlo simulations. The empirical nature of this book is what I valued most. I also valued his overview of CPP, RRIFs and some of the quirky rules regarding their contributions and withdrawals. Some of his insights as to his views of different types of retirees (YOLO vs Super savers) I found to be more conjecture than empirical.

Vettese certainly covers a lot in this book, even if most of it is brief. It’s hard to pack all the information and possible scenarios into one 200 page book but this is certainly a good place to start if one is thinking about retirement.

[Steve · Rating 5 out of 5]

Retirement Income for Life is a concise and clear Canadian book covering strategies (coined "enhancements") in the retirement drawdown phase, with a focus generally on middle-income traditional retirees. Even though the book isn't very long, it covers a lot of ground while continuing to be interesting, and there are even some interesting tidbits of information at the end of the book in the Amex I wasn't aware of (did you know if you have a younger spouse, you can use their age instead as the basis for RRIF minimum withdrawals?). Probably the enhancement most underutilized by Canadians is CPP deferral, to transfer longevity risk to the Canadian-government.

One perhaps questionable assumption in the book was the fairly high allocation to bonds in portfolios. While this historically has been a prudent strategy in retirement, for those who do not choose to annuitize their income in a world of low rates and long life expectancy, high bond allocations may actually decrease your chances at success. But again, it's a much more complicated subject, and depends on the individual much more than the phase where you're accumulating your retirement nest egg.

I think this is a fantastic resource that Canadians approaching retirement should read, and perhaps savvy younger Canadians as well. While this book certainly doesn't cover every unique situation regarding retirement in Canada, it sets you up to think about retirement in a way that maximizes your income and minimize your risk. It helps us think a little more like an actuary!

[Codepoetz · Rating 4 out of 5]

Most financial books talk about the best ways to accumulate money. Instead, this book is about how to spend your money so that you don't run out of cash during your retirement years. The book begins with a very realistic example of a retired couple who followed all the conventional retirement wisdom (including the famous 4% rule) and all-too-quickly exhausted their retirement savings. Next, Vettese's book discusses five simple steps that remedy the problems encountered by this fictional couple: 1) reducing investment fees, 2) delaying social security benefits, 3) buying an annuity at the start of retirement, 4) using variable withdrawal rates, and 5) eventually employing a reverse mortgage as a last resort. Vettese, an accomplished actuary, provides a free online calculator to help compute the best safe-withdrawal-rate (SWR) given the complex Canadian tax and pension system. In my experiments, the computed variable SWR for a 40-year retirement was 2.75% when the markets performed in the bottom 5th percentile (really bad); on the other hand, the SWR was 3.75% when the markets performed at the 50th percentile (average). If you are a Canadian DIY investor, you'll want to read this well written investment book.

[Marlise · Rating 3 out of 5]

2.5 stars. Very basic info. Already outdated after only 6 years.
—-
The author of this book clearly assumes that the reader is 1. In retirement already 2. Has already saved enough for said retirement and 3. Wants to efficiently spend all their money in retirement without running out of money but also without leaving anything behind. That is a lot of assumption and in my own 20 years of financial advising I can say that an extremely small number of people fit this description, like less than 1%. The author is from Toronto and he is over age 70. While his theories make sense, his assumptions are not relatable to anyone under 40 today and do not take into consideration the realities of housing costs (like in BC), starting families 15-20 years later than his generation and increased longevity. He has good advice but for a dying (literally) demographic.
——
After reading the entirety of this book, I have to admit there are a lot of sound principles but Vetesse overcomplicates the process while simultaneously undervaluing the help that a financial advisor can offer to help make these difficult decisions. Every rule has its exceptions and it’s important for every retiree to know what their options are and what makes sense for them.

[Glen Stevens · Rating 5 out of 5]

This book explained some very important points about investing in Canada that aren't always easily understood. I love that it is Canada focused, all too often these books will tell you all about investing in 401k and IRAs and as soon as I see that in a book I tend to ignore the rest of the advice. Investments are handled very differently in the U.S. and Canada and it's important to know the difference or at least know that you are getting advice for your country.
The chapters are short and succinct which makes it very easy to read on plane or somewhere you might get interrupted.
I think every Canadian should read this book and use it's framework for investing for retirement.

[Danny L · Rating 5 out of 5]

This is a great book. It is targeted for people that plan to retire soon and are just recently retired. Focused on Canadians. Book focuses on strategies and planning to start withdrawing your savings and investments. Does a very good in explaining different strategies maximize your funds as well as showing different scenarios. It also has access to a calculator that will estimate you expected income based on CPP/OAS and personal investments. Very happy with this book. It’s the most practical book I have found on Canadian retirement planning.

[Steve Thomson · Rating 5 out of 5]

Great book ! I really had no idea how to prepare for retirement. Self employed and never looked at retirement options . Never thought I had any ?
Thank you Mr . Vettese , you have definitely saved me thousands of dollars.
The Enhancement rule is a great way to guide yourself .
I will probably only accomplish Enhancements 2 & 3 but it’s a start .
How about a book on Self Employed Canadians coming to retirement?

[Paul · Rating 5 out of 5]

Great retirement planning book for Canadians! Thank you Frederick.

Easy read and enjoyed arguments that counter popular opinion. I found I was thinking a counterpoint and bam, next paragraph he was writing about it. Very much enjoyed seeing both sides of issues - CPP at 70, annuities to name two. It changed my opinion.

Must read for those close or in retirement. Really don't skip this!

[TwinklyOne · Rating 2 out of 5]

I'll list the pros first: well organized, thorough, author is knowledgeable, retirement advice meant for Canadians. Note: The book is written for people aged 60+. Cons: very old fashioned (boomer) advice recommending people keep working till they're 65 or more and that they defer their CPP and OAS till they're 70. No provisions for single people. This book was written for an audience of a specific age and marital status. I couldn't find any good net-worth based retirement advice in this book.

[Diane B · Rating 3 out of 5]

This Canadian reference was updated in April 2020 and is extremely helpful in navigating financial planning in retirement... not just saving for, but setting up a spending plan for the decummulation phase.

This book features one couple and makes some general assumptions, so it is not a one-size-fits-all approach, which the author freely admits.

One of the most useful references is for PERC, which is a free online calculator that helps identify how much $ can be safely drawn from investments each year: PERC.morneaushepell.com

[Amy · Rating 4 out of 5]

This book focuses on spending your savings during retirement - determining and maximizing your yearly income. This book is easy to read and focuses on an important topic that isn’t often discussed. The recommendations are a bit “one size fits all” though. The book does note some exceptions, but usually doesn’t deal with them. A good introduction to the topic, but left me with further research to do.
Review of first edition.

[Lisa · Rating 4 out of 5]

Easy to read and understand for a non-financial person like myself. Appreciate the Canadian focus and the many questions I had regarding our retirement plans. You have put my mind at ease tremendously!

[Simonew · Rating 4 out of 5]

Very interesting. Will have to read it in five years and again perhaps in 10 years. A lot of information to take in ! Very interesting approach to having enough income during retirement and changes you can make to maximize your savings.