Malcolm Hamilton was a gold medalist in Mathematics at Queen's University and a National Research Council scholar at McGill University, where he obtained his Master's degree in mathematics. He decided to become an actuary after he took the actuarial exams on a whim and got the best scores in Canada: "I realized: 'Maybe I'm good at this,'" he told Benefits Canada in 2012. At Mercer Canada Ltd., Mr. Hamilton specialized in the design and funding of pension plans. He spoke at conferences, chaired task forces, wrote articles and gave media interviews – emerging as a thought leader on retirement issues. After 33 years with Mercer, retirement came in 2012, in his early 60s.
We talked to Mr. Hamilton about his retirement, and his concerns about the retirement system.
What's retirement been like so far?
Retirement has been very pleasant. No commuting. No deadlines. No debt. Surrounded by friends and family. I have time to reflect. Time to travel. Time to work out. Time to write. Time to relax. If I run out of things to do I just turn on the television and see what Trump's up to! What's not to like?
How did you prepare for retirement?
At Mercer, I contributed to a defined benefit pension plan. I also maximized my RRSP contributions, although they were small because I was in a pension plan and my wife was at home with the children. We paid down our mortgages as soon as possible, first on our home and then on our cottage, and we put our two girls through private school and then university.
By our late 40s we were debt free, had no unused tax shelter room and our children were becoming less of a financial burden. That's when we started saving outside tax shelters.
How are your retirement savings invested?
In addition to registered retirement savings plans (RRSPs) and pensions, my wife and I have residential real estate, tax-free savings accounts (TFSAs) and taxable accounts. We don't view the residential real estate as an investment. It's there if we need it but, if all goes well, the money will eventually go to our children and grandchildren.
We view the pensions as bond-like, that is, they are our 'safe' investment. This means that we can take more risk with our other investments.
We emphasize blue-chip Canadian dividend stocks in my wife's taxable accounts as she is taxed at a lower rate, particularly on Canadian dividends. I hold foreign equities and riskier Canadian equities for capital gains.
We try to hold assets that produce fully taxable investment income in our RRSPs and TFSAs to make the best possible use of the tax shelter. If interest rates were higher we would have more bonds in our tax-sheltered accounts, but for now it's mostly real estate investment trusts (REITs), limited partnerships and mortgage investment corporations – assets that generate fairly reliable long-term cash flows that would be fully taxable if held outside a tax shelter.
What was one of your better moves?
In 1991, a friend helped me buy the first real-return bond issued by the federal government. I put my entire RRSP into it because it guaranteed a 4.4-per-cent annual return above inflation. I held it until last year and earned an excellent risk-free return. By then, real interest rates had declined to zero so there was little opportunity for good returns in the future.
You have said that you probably over-saved for retirement.
We live much more comfortably now than we did as middle-aged adults. It's nice to live comfortably in our 60s. It's nice to be able to help our children if they need it. But the financial sacrifices we made to get here were, in retrospect, excessive. Of course, we didn't know that at the time.
What do you think of the concern about Canadians not saving enough for retirement?
As far as I can see, low income Canadians should not save for retirement because government programs such as Old Age Security, the Guaranteed Income Supplement and the Canada Pension Plan will take care of them. Others need to save but few need to save heavily and nobody needs to save when they are young and in debt. People should live frugally while maintaining a reasonable balance between their current and future needs.
Those who are looking for good advice should start by reading anything written by Fred Vettese. [Mr. Vettese is the chief actuary at Morneau Shepell and author of The Essential Retirement Guide: A Contrarian's Perspective.]
But you are concerned about government policies?
I believe that Canadian governments are not well prepared for the retirement of the baby boom generation. They appear to have no coherent plan to address rising medical and custodial care costs in the 2030s and 2040s.
Our governments have large debts. Their revenue may erode as heavily taxed working people retire and become lightly taxed pensioners. Most of their policy responses – raising the age at which government pensions start, income testing government benefits, holding interest rates down, encouraging inflation –will make it harder for people to retire comfortably at a reasonable age.
This interview has been edited and condensed.
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