Kathleen Wronski, director of wealth management for Richardson GMP, an independent wealth management firm in Toronto, has helped high-net-worth clients invest and plan for more than 30 years. But her book, If I Retire, How Will I Know When It's the Weekend?, speaks to preretirees who want to keep their portfolio – and health – intact.
She agreed to a quick talk days before heading out to walk the Camino de Santiago, a pilgrimage route in Spain.
Your book is not just about money. The first section deals with health and lifestyle. Makes sense – having a million dollars in the bank doesn't help you if you have a heart attack when you're 63.
Well, it's a clichéd saying, but it's very true: There's nothing more precious than your health. I felt these points had to be in the book – not as an afterthought, but as a first thought.
You say a lot of people don't actually want to kick back with an umbrella in their drink and retire. A lot of us want to keep working longer. So does that mean work defines us?
I would suggest that my clients who work past the normal retirement age are brighter, more engaged and, quite frankly, better for society because they're giving to society. Of course, sometimes your job is far too taxing as you age. All those hours, all those pressures. But if you could find something you can work at in retirement, it's better for you.
One of my dearest clients, who lived to age 101, was still managing a small apartment building at age 83. The fact that she was needed in people's lives gave her tremendous satisfaction.
What kind of work do you suggest?
The clients who have it the best in retirement, to my mind, are academics. I actually have one gentleman who was a professor of history. He retired at 65, and he was the main speaker on a cruise talking about the history of the land they were seeing.
There's another retiree in the book who worked for IBM, built his own business, then felt he still had more energy, so he worked at a delicatessen in a grocery store, four days a week, four to five hours a day.
So it's not just about the money.
In fairness, money always helps, and it also takes pressure off you to save enough for 30 years of retirement.
The flip side of savings is debt. That's the elephant in the room when it comes to retirement planning.
It really is. It's a tremendous worry for me. Interest rates are so low that servicing debt at this moment is not a problem, but at some point that debt has to be paid back. It just leaves you vulnerable. Things could go terribly wrong.
But so many people are loathe to give up their credit cards. They're 65 years old and saying, "I'm not going to stop using my card. I'm going to go to Costco."
You know, I don't see it all that often in my retirees, because a lot of them are still of the mindset of saving and having the money before you spend it. I actually see debt in people in their 20s, 30s and 40s. Credit cards are maxed out. We try to find alternatives to spending.
Speaking of interest rates, we're in a low return environment, so what's the solution?
If you want a risk-free portfolio – and I understand that thinking after 31 years in the investment business – you're earning 2 per cent now. So you would have to save a tremendous amount of money for retirement. If you're retiring at 65, the odds are you will live for another 17 to 18 years after that. That's just the norm and not taking any good genes into account. You can be too risk-averse.
My favourite type of investing is a diversified portfolio with an emphasis on dividends. A dividend is a distribution paid out by a Canadian corporation normally on a quarterly basis, although it can be monthly.
That's where I think we have a benefit here in Canada. The dividends are taxed at half the rate of interest income. So if you're investing outside of a registered account, that's a bonus. But even in the registered retirement savings plan (RRSP) accounts, because our banks have passed the test to prove they were the safest in the world, there's a lot to be said for having a portfolio with good dividend payers, with an emphasis on the banks. That has provided a very solid retirement for many people.
Some people are still shy when it comes to the markets, though.
When people say, "I don't like the market. I only have my money in savings," I say, well, God bless ya. You earned 1 per cent last year while the Toronto Stock Exchange was up close to 10 per cent and the U.S. exchange was up 35. That's thirty-five years of return. I just don't like all-or-nothing comments. I like a diversified portfolio.
Interview has been edited and condensed.