Wednesday, November 7, 2007

The Retirement Time Bomb

While on our little vacation I was in Chapters and found Gordon Pape's book, "The Retirement Time Bomb". It was this book that alerted me to the impact that early retirement has on the Can Pension Plan with the zero years reducing one's pension, to a degree, if they wait beyond age 60 to take it. Something that the Fed Gov't has yet to do.

Overall I think that Gordon's book is a good one. His chapters on CPP and OAS and related clawback is well done. My copy is from the Vancouver Island library...the best price in town.

He includes a good section on how to estimate your money needs in retirement, starting with a review of your lifestyle choices. On page 61, he suggests that to just maintain one's standard of living, one will need about 80% of their pre-retirement income. He also states that 60 % will give one a very modest retirement. The text refers to after-tax income, then it says gross family income so I'm not sure what one he intended.

Like all of us he has some fears and some biases. Intended or not, his book might scare many people into continuing to work longer than they really need to. He fears that the Baby Boomer's will have to pay part of their own health care due to the demands outstripping the country's ability to cope. He thinks that early retirement is a pipe dream for most people, most having to work to age 60 or later. The reasons include health care costs and the effects of inflation.

At one point he supports reverse mortgages, as long as the money is invested, but at another point he warns against borrowing to invest in the stock market in case one does so just before the next big Bear Market. He includes some good information comparing the different options available for using the equity in one's home.

All in all...a good reference book on the subject of retirement.

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