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February 16, 2016 | Told you

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.


If you were waiting for the Liberal politicians in Ontario or Ottawa to save your retirement, forget it. In fact, write off governments entirely. You’re on your own, baby.

The feds and the country’s largest province made a weird statement Tuesday, announcing they “have reached an agreement to work together to achieve their mutual goal of improving pensions for Canadians.” Some agreement. Ontario will delay implementing its own pension plan. And Ottawa will try again to reform the CPP. The odds of that happening are close to zero, since any reform of the pension system means more personal and business tax. Way more tax.

Now I hate to be a told-you-so. But I told you so.

In 1995 I wrote a feisty little book called “2015: After the Boom. How to Prepare for the Coming Retirement Crisis.” The point was simple – I forecast that twenty years hence truckloads of Boomers would be shuffling off into wrinkledom, abysmally unprepared to finance the next decades of their lives. The reason? They were house-horny and failing to build up what everyone ultimately needs – assets that pay you income. Cash flow.

And here we are. 2015 plus one. As forecast, we have a crisis.

Did you catch the Broadbent Institute report issued yesterday? Half of all Canadian couples between 55 and 64 have no corporate pension plan. Of those who are pensionless, 80% haven’t saved or invested enough to avoid some form of poverty in retirement. “The vast majority of these Canadians retiring without an employer pension plan have totally inadequate retirement savings,” it says.

Worse, half of the people without pensions (which is 50% of everyone in this cohort) have enough money saved to finance themselves for just a year. One year. Incredible. Thus, we will have a mess of people (especially women) soon slipping below the poverty line – Boomers, who the moisters here love to paint as the most financially-favoured generation ever. The one they want to emulate.

“This new data on retirement savings and gaps in support makes one thing perfectly clear – we have a retirement-income crisis on our hands that requires urgent government action now,” says the Institute’s director. But there’s no government action possible. Changes to the public pension plan – which haven’t been determined yet, let alone enacted – take decades to result in increased benefits. So neither Trudeau’s enhanced CPP nor Ontario’s new scheme will be in place to help any wrinkly. Yikes.

And there’s more. Nearly half of Canadians just surveyed by Ipsos Reid said they are within $200 of not being able to pay their monthly bills.  A quarter of them are already running behind. And 31% said an increase in interest rates – any increase – would hurtle them towards bankruptcy.

Meanwhile nobody can live on the current government pogey. The average CPP payout is about $7,500 a year for men and under $6,000 for women. OAS is only $6,800 annually. So, run the numbers. If you have no set pension (and 70% of working people today don’t), you’d better plan on heaping a major pile of liquid assets by the time the next generation squeezes you out of a job.

Of course, most people don’t. They have houses, instead.

That might be okay if those Boomers (and others) had the good sense to cash in their chips as they head towards their thirsty underwear and sex pill days. But they don’t. More and more, as housing appreciated in many markets, people concentrated their net worth into a single asset. So while their nominal wealth may have increased, they don’t have any more money. In fact, usually less.

Moreover, houses root people. What may make sense during the child-rearing years (so little Alphonse can grow up with his gang) becomes a liability when you age. Suddenly the thought of selling, moving and hauling all your crap around is overwhelming. So real estate turns into a psychological burden. People end up living on KD and shutting off rooms just so they don’t have to move. Folks with hundreds of thousands in equity live in poverty. Such a human failing.

Anyway, you have time to change all this (unless you don’t).

The latest CREA stats show people in the GTA or the Lower Mainland have done well with real estate over the past year. In Alberta, not so much. Elsewhere, housing is often stuck in the mud. However, mortgage rates are still low, governments are still pumping houses and the media is transfixed with property greed. Rest assured this will not be the case five years from now, or three. Or maybe even one. If you’re in your sixties or fifties, with the house as your biggest single asset, this could be the best, or even the last, chance to maximize.

So go ahead. Find some idiot moister who doesn’t believe a mortgage is ‘debt’, willing to borrow epically to buy your hideously inflated unrenovated asset at the peak of the market, believing it will go up forever. Then invest the money prudently to throw off enough income to lease a better abode, and be assured of lifetime cash flow.

Or, you can turtle and wait for Justin to save you.

Let us know how that works out.

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February 16th, 2016

Posted In: The Greater Fool

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