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Frances Woolley is a professor of economics at Carleton University



The saddest moment in Anne of Green Gables is Matthew Cuthbert's death. He suffers a heart attack after hearing of the failure of the Abbey Bank, where he kept all his and Marilla's savings. Today, deposit insurance protects customers against bank failures. Yet the fact remains: saving is a hazardous proposition.

Every year people invest their savings, just as Matthew Cuthbert did: "Here's $50,000. Keep it safe, make it grow, and give it back to me when I retire." What could possibly go wrong?

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Globe and Mail readers know the perils naive investors face. Those choosing to diversify through mutual funds face management expense ratios that are higher than those found in other countries. Independent investors must navigate hazards such as Bre-X and bursting bubbles. Most financial advisors give sound advice, but a few inflate commissions through churning. The truly unfortunate investor might meet an Earl Jones.

Employer pension plans typically have much lower management costs than mutual funds, but they are vulnerable on other fronts. In the words of a recent update from lawyers advocating for former Nortel employees: "For pensioners…who have an entitlement in one of Nortel's two defined benefit registered pension plans, the future is complicated and to date uncertain."

The Canada Pension Plan investment board is currently managing $138.6-billion in assets, a surplus it is accumulating to pay for the baby boomers' retirement pensions. The CPP investment board's slogan is "Independence. Accountability. Performance." Can any government see that amount of money and not hope for political returns, as well as economic ones? The CPP has an independent board of directors, but members of that board are appointed on the recommendation of the federal finance minister.

There is a lot of talk right now about financial literacy, and using education initiatives and public awareness campaigns to encourage retirement savings. Yet are people's current saving strategies really that bad?

Most people's savings are in tangible assets. Even if one's house halves in value, one still has a roof over one's head. Marilla Cuthbert was able to get by financially, because she still owned the family farm, and renting that out gave her enough to live on.

Moreover, money does not buy happiness. A study in Canadian Public Policy by Sule Alan, Kadir Atalay and Thomas Crossley found that, even though Canadians' income and consumption levels drop after retirement, self-reported happiness is remarkably stable.

Marilla Cuthbert had good health, purposeful work, a strong sense of community, and someone to care for. These things matter more for happiness than money does.

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