The Globe and Mail

February 7, 2023
Kin Cheung/The Associated Press

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Former General Electric CEO Jack Welch once nearly died of a heart attack. Years later he was asked what went through his mind while he was being rushed to the hospital in what could have been his last moments alive.

“Damn it, I didn’t spend enough money,” was Welch’s response.

The interviewer, Stuart Varney, was puzzled, and asked why in the world that would go through his mind. “We all are products of our background,” Welch said. “I didn’t have two nickels to rub together [when I was young], so I’m relatively cheap. I always bought cheap wine.”

After the heart attack Welch said he “swore to God I’d never buy a bottle of wine for less than a hundred dollars. That was absolutely one of the takeaways from that experience.”

“Is that it?” Varney asks, stunned.

“That’s about it,” says Welch.

Money is so complicated. There’s a human element that can defy logic – it’s personal, it’s messy, it’s emotional. Behavioural finance is now well documented. But most of the attention goes to how people invest. Welch’s story shows how much deeper the psychology of money can go. How you spend money can reveal an existential struggle of what you find valuable in life, who you want to spend time with, why you chose your career, and the kind of attention you want from other people.

Morgan Housel, a partner at Collaborative Fund and author of the book The Psychology of Money, takes a look at the art of spending money and what it reveals about who you really are. For more of Housel’s revelatory observations on the art of spending money, read the full story here.

Do William and Lenore have enough saved to travel and renovate their home in retirement?
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William, 66, retired from work at year end, and with the market downturn and a recession looming, he is nervous. His wife, Lenore, is 53 and works in the arts. William says his separation from his first wife set him back financially.

As of January, he adds, there will be zero employment income coming in. He has some registered savings, but he’s not sure it’s enough to get them to the finish line.

In addition to the family home, William has a rental property that is held within his corporation and a small place rented to a relative to cover costs. Short term, the couple want to build a $250,000 addition to their house. Their retirement spending goal is $95,000 a year after tax.

William wonders when to begin taking government benefits, and how and when to withdraw funds from his corporation.

In the latest Financial Facelift, Ian Calvert, vice-president and principal of HighView Financial Group, looks at Frank and Michelle’s situation.

Want a free financial facelift? E-mail finfacelift@gmail.com

Your personal inflation rate: Calculate how you compare to the Canadian average

What is your personal rate of inflation? It’s probably different than the rate that gets reported by Statistics Canada every month.

Generally speaking, when people refer to the inflation rate, they’re talking about the 12-month change in the Consumer Price Index. The CPI comprises hundreds of goods and services that people buy – everything from eggs and electricity to car rentals and cannabis. Statscan tracks the prices of all those items, then generates a final number that accounts for how the average family spends their money. Thus, your experience with inflation is dictated not only by what you buy, but how much of your budget is allocated to that item.

Want to know what your personal rate of inflation is? Use The Globe and Mail’s personal inflation calculator here to find out.

In case you missed it
Retirement for this 72-year-old meant taking a relaxed approach, building stronger relationships and community

Mark Winston, 72, retired in August last year after working as a professor at Simon Fraser University (SFU) for 42 years, he says, in the latest Tales from the Golden Age. “During the last half [of my career], I was director of SFU’s Centre for Dialogue, which promotes democratic values and positive action through dialogue and engagement.”

Winston loved his work, but his perspective shifted, he says, partly because of the pandemic and partly because of his age. “I became less interested in accomplishing big things and more interested in relaxing, just being in the world, and enjoying friends and family.”

Winston gave a lot of thought to retiring and had many discussions with his wife, Lori, about what he would do and if he would get bored. “Lori retired when I did, which has made it even more enjoyable.”

While many people take on new hobbies in retirement or travel, that wasn’t part of the couple’s plan, “partly for financial reasons but perhaps more because our life at home is so rich,” says Winston. Now, he adds, there’s plenty of bonding and quality moments, walking and talking together outdoors; going out for coffee and chatting with friends or making new acquaintances.

Winston considers it good fortune that they have a lot of young people in their lives – their children and their friends’ children they’ve watched grow up, as well as some of his former students. He is also a writer of several non-fiction books and continues to enjoy mentoring young writers.

Are you a Canadian retiree interested in discussing what life is like now that you’ve stopped working? The Globe is looking for people to participate in its Tales from the Golden Age feature, which examines the personal and financial realities of retirement. If you’re interested in being interviewed for this feature, and agree to use your full name and have a photo taken, please e-mail us at: goldenageglobe@gmail.com Please include a few details about how you saved and invested for retirement and what your life is like now. We look forward to hearing from you.

Emmanuel Macron wants the French to work more. They might have other ideas

French President Emmanuel Macron put a damper on his country’s New Year’s eve celebrations by telling his compatriots what none of them really wanted to hear.

In a televised Dec. 31 address, Mr. Macron told French citizens they would have to work more and retire later. He vowed that 2023 would be the year that his government finally tackled the third rail of French politics by reforming the country’s convoluted and expensive system of public pensions. And he described the challenge in epochal terms.

“In the long history of our nation, there have been generations who resisted, others who rebuilt and still others who extended the prosperity that had been achieved,” he said. “As far as we are concerned, it is up to us to face this new chapter of a difficult era … to take on the job of reforming a number of the pillars of our nation.”

For Mr. Macron’s opponents on the left and far-right alike, those were fighting words. And they pounced when Prime Minister Élisabeth Borne last week unveiled the details of the government’s pension reform package – including an increase in the retirement age to 64 from 62, and a lengthening of the contribution period required to be eligible for a full pension.

“This is not a speech, this is a declaration of social war,” Mathilde Panot, leader of the far-left France Insoumise (France Unbowed) in the National Assembly, tweeted as Ms. Borne spoke.

Pension reform could be the spark that inflames a country already on the edge.

Retirement Q&A

I’m newly retired, in my late 60s, and in relatively good shape. I want to continue investing, but I’m also a bit hesitant to get into what seem like volatile markets with my retirement savings, as I would like the money to last as long as possible. Are there strategies you can suggest that pay stable and consistent income, and are still tax efficient?

We asked John DiSabatino, Portfolio Manager and Investment Advisor at The Donath & DiSabatino Wealth Management Group, BMO Private Wealth, in Markham, Ont., to answer this one.

Thank you for your question. Generating stable and consistent income is of particular concern for many retirees.

As always, diversifying your holdings into multiple investments is a good start. Further diversification can be obtained by utilizing various asset classes such as bonds, stocks and alternative strategies, which can help reduce risk and enhance your returns.

Since you are seeking tax-efficient income, a good starting point would be to hold all your interest bearing bonds and GICS in registered accounts and focus on investments that generate dividend, capital gains or return of capital distributions in your taxable accounts.

Outside of traditional dividend paying stocks, preferred shares and REITS (Real Estate Investment Trusts), which can be volatile, we focus on a few investment classes that, historically, have provided the consistent income you seek.

One area to explore, used extensively by pension funds, are alternative strategies such as private real estate. Many private REITS can provide monthly income and tax-efficiency to individuals through return of capital and capital gains distributions. As an added bonus, many private real estate trusts typically demonstrate much lower volatility than publicly traded REITS.

A second area would be split-share corp preferreds, a very under-utilized type of preferred share available to individual Canadian investors that can provide monthly or quarterly dividend payments. Split-share preferreds are structured to provide downside protection and, unlike most preferreds, offer a fixed redemption date that allow holders to redeem their shares. They can also trade on the TSX at discounts to their maturity value, providing an opportunity for capital gains in addition to stable dividend payments.

As a final word on the above-noted strategies, both private REITS and split-share preferreds can vary substantially from issuer to issuer, so proper due diligence and a full understanding of the underlying investments and liquidity characteristics should be undertaken before deploying capital.

Have a question about money or lifestyle topics for seniors? E-mail us at sixtyfive@globeandmail.com and we will find experts and answer your questions in future newsletters.

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