Retirement is about facts and figures - and lifestyle
How much do you need to retire and live well for the rest of your life?
Is the number $1 million? Sounds good, but think again.
A million dollars, conservatively invested at 5 per cent, gives you a pre-tax income of $50,000 a year - not enough to revel in your retirement years.
How about $2 million?
But what about the tax you pay on your retirement savings? And what about the minimum payments you take each year?
After converting to a registered retirement income fund, or RRIF, you're forced to pull out 7.38 per cent of your savings at age 71.
RRIF minimum payments go up to 8.75 per cent at age 80, 13.62 per cent at age 90 and 20 per cent at age 94.
With such large withdrawals, can you stay ahead of inflation and taxes - and make your money last as long as you do?
There's a magic number for drawing down your savings without eating into capital. It's about 4 per cent a year.
This assumes you're 65 and you have half to three-quarters of your money invested in stocks, and the rest in bonds.
The number used to be higher, says Lee Eisenberg, author of The Number (Free Press, $36).
"Through the 1980s and '90s, financial advisers and money magazines touted generous withdrawal numbers of 7 per cent,8 per cent, 9 per cent, 10 per cent. Many retirees withdrew and spent accordingly.
"But - oops! - the financial advisers and magazines had overlooked the you-would-think-it-was-obvious fact that stock-market returns through that era were unusually robust."
And when did the government of Canada last revise its RRIF minimum payments? Would you believe 1992?
Memo to Prime Minister Stephen Harper: you pledged to help seniors during the election campaign. So, why not cut the RRIF minimums to take account of lower stock and bond returns?
Gordon Pape also has a message for those getting older.
"Don't put all your retirement eggs in the RRIF basket. You'll need some other sources of income if you live to a ripe old age," he says in The Retirement Time Bomb (Penguin, $30).
Pape has been writing about retirement planning longer than anyone else I know. His new book, released in December, is pragmatic, practical, factual, straightforward - a style similar to mine.
While paying due attention to risks and dangers, he avoids fear-mongering.
Best of all, he's optimistic about ordinary Canadians' chance of success with the right planning and advice.
Eisenberg, a former editor-in-chief of Esquire magazine, aims at a wider audience. He wants procrastinators to come out of the closet and work out their own magic number.
Now 59, he avoided thinking about retirement until seven years ago.
He was half in and half out of the workplace, consulting, dabbling, downshifting. But with two young children, he secretly agonized about whether he'd socked away enough money to be so casually employed.
Then, he got an offer too good to refuse.
Moving his family to Madison, Wisc., he spent five years with Lands' End, a publicly traded catalogue retailer.
When asked why he took the job, "what I didn't get into was the Number," he writes.
"I never came right out and said it, but our move was a swing for the financial fences."
He left Lands' End after it was bought out by Sears Roebuck & Co., but not before securing valuable stock options.
Then, he started talking with friends in their 40s and 50s about how confident they were about their financial prospects.
"'Do you have a plan?' I asked. I discovered right away that almost no one wanted to talk about it, althoughthey would admit they saw themselves coming to a fork in theroad."
That led him on a quest to find why there's such aversion in middle age to thinking about finances and the future.
His book is entertaining, wide-ranging, provocative, clever, sometimes glib.
"It's not an advice book, and it's not meant to be a wake-up call," he said yesterday during a publicity
tour in Toronto.
He steers clear of most numbers (except for the 4 per cent drawdown rule and a half-page worksheet in the appendix).
But his book could hit paydirt, according to these numbers: a first printing of 125,000 copies, 16th on the New York Times non-fiction bestseller list, 116th in sales at Amazon.com.
Retirement isn't only about numbers. That's Eisenberg's message.
You can't save seriously without some serious soul-searching about what makes you happy and what you want to do with the rest of your life.
For excerpts and an author's blog, go to on the Internet. www.thenumberbook.com
You can reach Ellen Roseman by phone at 416-945-8687; by fax at 416-865-3630; or at firstname.lastname@example.org by email.