Financial Crooks

Like most library patrons, I keep an eye on the books sitting on display shelves and happily pick up any that sound interesting: after all, if the book isn’t good it didn’t cost me anything to try it. (I prefer to only buy books that I will read more than once, like Terry Pratchett novels.) The Retirement Catch-Up Guide seemed like a catchy title, so I snagged it looking for any easy answers to increasing our savings or improving our pensions.

Check the Country of Origin of Retirement Books

When I opened the book at home the first thing I noticed was the annoying phrases “Uncle Sam”, “IRAs, and Roth IRAs” and “401(k)” littering the Introduction’s starting page. I had made the classic mistake of not checking the country of origin of the book. Fortunately, I hadn’t bought the book. I decided to read it anyway, in case there were ideas that could cross the border successfully. Sections on avoiding taxes and so on, however, were irritatingly common.

For example, in the USA State taxes can vary greatly depending on what services, or lack of services, the state provides. If you look at an income tax calculator for Canadian taxes, though, like the one that Ernst and Young provides, you’ll find there isn’t a huge difference in provincial taxes. That’s because our provinces all offer a fairly similar level of service . So the book’s advice to consider moving to another State to significantly lower your taxes isn’t particularly useful to Canadians intending to stay in Canada.

Some of the advice about minimizing taxes and mortgages is also not relevant in Canada. Generally speaking, we can’t deduct mortgage interest costs from our income taxes.

Check the Date of Original Publication of Retirement Books

The copy of the book I borrowed had been acquired by the library in 2006. But it was first published in 2000. That means it was likely written in 1998 or 1999. It had been revised in 2003 but not as much as you might expect given the dot-com stock market bubble popped.

The book is based on “real” examples of situations people found themselves in while approaching or in retirement. That means that the amounts of dollars that they were saving or receiving were the real amounts in the late 1990s when the book’s data was collected. With inflation, though, these numbers now seem ridiculously small. It’s jarring to read.

Similarly, the numbers quoted for “average” rates of return seem ridiculously high. Here’s an example, “She will sell an investment property that she’s been renting out, and re-invest the proceeds—hopefully at a 15 percent rate of return per year.” I wish!

What’s Good about The Retirement Catch-Up Guide

The book does have some good advice and some good points, though.
It leads the reader through the basic steps required to plan for retirement, although without a great deal of detail. For example, the reader should
Check all of the possible sources of income for retirement. The book gives examples of some that people might have overlooked.
Plan what retirement looks like. Someone who plans to travel the world playing the top golf course in each country will need more retirement funds than someone who plans to downsize to a rented apartment in a small town where their children live and provide childcare for their grandchildren in return for meals.
Estimate what retirement costs will need to be paid.
Look for creative ways to increase retirement savings or income. Some examples include people selling real estate and investing the proceeds or buying real estate as an investment or as a rental income option. Many people upgraded their skills and looked for jobs that paid more for their last 15 working years. Others planned to work part-time in retirement, often for themselves, and acquired the skills they would need to make that happen while still working.
Consider whether you can maximize your retirement living while minimizing your costs by re-locating. The book describes how some retirees moved out of the country and within the country to reduce their costs of living.

What’s Bad About the Retirement Catch-Up Guide

It’s outdated. This really shows up in the expected rates of return for investing and costs of living.
It’s fairly shallow. You can’t describe well how to invest in 10 pages including the stock market, real estate and a personal business.
It’s country-specific to the USA.

Recommendation for the Retirement Catch-Up Guide

If you have this book freely available, for example at your library, it may be worth a quick read through, especially if you live in the US. Generally, though, I’d skip this one and look for a more recent book written for the country you live in.

Related Reading

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Will Dropping the Number of kWh We Use Dramatically Drop Our Hydro Bill?

Maybe. Our bill is not just based on the amount of electricity we use. It also includes delivery charges, costs for the infrastructure, costs for regulatory charges, for who knows what, and debt retirement charges, which probably include the original debt on building the generating station at Niagara Falls. Some of these are based on the kWh used but I’m not sure that all of them are.

Why Is Our Ontario Hydro Bill So High for 2016?

The most obvious increase in price for our residential electricity costs in 2016 is a change in government sleight-of-hand. We’d been getting a 10% “discount” from a previous election promise. That’s over now, so we saw an immediate 10% increase in our bill.

The nasty part of the “discount” is while our electricity costs appeared to be temporarily reduced we still have to pay that amount either in increased taxes or in future electricity “debt retirement” charges—worse, we might even have to pay more as interest fees!

And let’s not forget we also pay HST. That was almost $30 on the most recent bill!

There have also been some painful rate increases as well. They’ve been much higher than the rate of inflation estimated by the federal government. I’m sure it hurts those on pensions such as CPP which are increased only at the artificially low cost of living increase calculated by the feds.

It hurts us even more as this is the third year with NO raise or cost of living raise at work. Yes, our take-home pay has been losing ground to inflation for three years now with no end in sight. That’s good training, of course, for retirement when only our CPP and OAS will be indexed. That’s also why I prefer some of our future retirement income to come from dividend-payers who increase their dividends to at least keep pace with inflation.

Should We Use Our Air Conditioner If We’re Already Spending Too Much for Electricity?

Every year I tell the kids that they should be grateful if we use the air conditioner at all. We didn’t have a/c when I was growing up and I can vividly remember sweltering. The best (or worst) benefit (or drawback) of air conditioning is that it drops the humidity significantly.

That can be a real blessing when the humidity is up near 100% and it’s also pushing 35-40 C.

How Do We Reduce Our Electricity Costs for Air Conditioning our House?

We usually only run our air conditioner from 7 p.m. till 7 a.m. We try to drop the temperature to somewhere in the low 70s between midnight and 5 a.m. The temperature then gradually climbs all day and it can get pretty hot by the early evening.

This compromise has helped keep the cost of the electricity to run the unit to something tolerable. It means the load is during the “off peak” hours which have the lowest rate at 0.087 $/kWh. That’s less than half of the prime time rate.

Air Conditioners also run best when their is a good differential between the temperature of the outside air and the temperature of the inside air. At night, in theory, it’s cooler outside, allowing the air conditioner to run more efficiently than at, say, high noon.

So for now, we’ll keep using the air conditioner. But I hope I don’t regret it when we get our next bill!