The Reveal: go into retirement with a plan and your eyes wide open

In his book The Reveal, author Bryan Sommer, who is a Canadian accountant, financial planner and experienced retirement consultant, makes the point that retirement works best when it follows a well-considered plan.

“Don’t leap into retirement life cold turkey. In my long experience, it’s the clients that engage in the financial planning process and understand the risks and returns of their investments that have the most success in living their retirement dreams,” writes his colleague Allan Ecclestone in the forward.

In a section of the book highlighting the difference between wants and needs, Sommer says that no matter how much money people have accumulated “they share what seems to be a primal concern: `will I have enough?’ They want to know whether their savings and investments will be sufficient to maintain their standard of living, whatever that might be.”

He advises a strategy that seeks “a reasonable return… but we are not looking to invest as if we were at a casino. If someone is looking for a consistent 20 per cent return I would tell them that it is not possible.”

He makes the point that retirement may not be how we imagine it.

“As they envision the retirement to come, people often see it as a time of relaxation, of sweet visits with the grandkids and long conversations on the porch, of golf and travel and glorious freedom. When they get to retirement, however, they often find that they are as busy as ever – not in a bad way, necessarily, but they have no trouble finding ways to fill their time. They visit and they volunteer and they give back to the community…. In short, reality may not meet expectations,” he explains.

While we all focus on saving for retirement in our working lives, it’s a little different once we hang up the name tag for good, Sommer writes.

The “focus becomes not so much on growing their money but on preserving it and using it wisely.” Ideally, debt should be gone or going soon, and there should be no “immediate large expenses” to face. “What they are concerned about now,” Sommer explains, “is managing their level of risk during retirement so that they do not run out of money.” Generally, that means limiting stock market risk, “keeping up with inflation,” and controlling taxes, he writes.

In a later chapter, Sommer discusses the idea of having a “financial vision” for retirement – a written “big picture perspective” on what you hope to do and accomplish after work is over.

He asks clients to clearly state what their vision is. “`What do you like doing,’ I ask. `What do you want to make sure will be happening now and later on?’ Let’s talk about several things that are really important to you,” he writes. By comparing this vision to “where you are today” with saving, he continues, “I can quickly see if anything is out of whack.”

Your health needs as you age need to be considered as well, he notes.

“Retirees also must consider health issues and the potential costs of special care, or conversely, the very likely possibility that their portfolio might need to continue supporting them, year after year, into a healthy and active old age,” he points out.

Investments, he notes, should be long-term in nature.

“The longer the time horizon, the greater the likelihood of achieving a high annualized return, and the range of returns significantly decreases,” he states. “The length of time in the market, not the timing of it, is what brings success. When investors set long-term financial goals, with assets appropriately allocated, they are more likely to reach their goals. Trying to time the market may block their progress. Investors should not alter their long-term approach based on short-term market movements,” he adds.

It’s hard to do justice to a great, detailed book in a short review. Sommer covers topics like asset allocation, inflation and interest rate risk, and – in great detail – some ins and outs of the Canadian tax system of interest to investors.

We like how he describes saving for retirement. His folks, when he was young, wanted a new TV but weren’t getting around to that big expense. Sommer suggested saving small amounts of money – “an amount they would not even miss” – in a jar. They soon had more than they needed for the TV.

“On a much larger scale, that’s how saving for retirement can work. It should be made as easy as possible. When a couple automatically diverts money from the paycheque, somehow they don’t notice its absence.” All the bills still get paid – but if that small amount of money doesn’t get earmarked for saving, “much of it seems to evaporate.”

It’s nice to see an all-Canadian perspective on retirement planning and saving. This book is highly recommended.

Making savings automatic is a feature of the Saskatchewan Pension Plan, a voluntary defined contribution plan open to any Canadian with available registered retirement savings plan room.

SPP allows you to make contributions in several ways – by cheque, via online bill payment, and even by credit card. You can also arrange to automate the savings by asking SPP to receive pre-authorized contributions from your bank account or credit card (PAC-PCC-application.pdf). If you get the PACs happening on your pay days, you’ll be saving money before you have the chance to spend it – a “set it and forget it” savings strategy.

SPP then invests the money in our low-cost, professionally managed, pooled fund. At retirement your income options include a lifetime monthly annuity that never runs out or the more flexible Variable Benefit.

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