The Gift of Findependence


Michael Drak

By Michael Drak

Special to

Today there are a number of early-retirement bloggers out there doing great work, teaching people how important it is to adopt a frugal lifestyle so they can quickly regain their freedom.

They continue to preach the merits of “early retirement” but as far as I can tell none of the one’ I follow are really retired. They continue to earn money from some activity but the key difference is that they earn that money on their own terms doing something they enjoy. They have earned the option to take a traditional full-stop retirement but for some reason have chosen not to. The question we all need to ask yourselves is why?

The other day I read an article in the Toronto Star about “Canada’s Youngest Retiree” and his book that outlines the strategy that enabled him to retire at the early age of 34. The article went on to say he authored six national best-selling books after retiring and became a millionaire through investing.

Why not retire at 14 and make millions revealing how you did it?

I found the article interesting and said to my son Austin (who still lives at home): “Why don’t you pack in school, and retire? Being 14 years of age we could probably get you into the Guinness Book of Records as the earliest retiree on record. Then all you have to do is write some best-selling books about how you were able to retire at such an early age, go out on the seminar circuit and preach to everyone about how you were able to do it.


Canada’s next youngest retiree, 14-year-old Austin Drak?

You will make millions as people always want to find the quick-fix, the easy way to become financially independent without doing all the hard work. Austin was really excited about retiring and not having to go to school anymore but then the Contessa got involved and let’s just say that was the end of that.

I’m concerned we are being oversold on the illusion of early retirement as if it will be the solution to all our problems. Believe me on this, it will not be. You still need to have a well-thought game plan for what you plan to do for the rest of your life. In simple words, you need to find something fulfilling to do. Based on their actions most of the early-retirement bloggers and Canada’s Youngest Retiree would seem to agree.

A Retirement Lesson from my Father 

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Will the Liberal landslide delay your Findependence Day?

The “Hair” Apparent? National

The Financial Post provides my take on last night’s Liberal landslide, as it pertains to Financial Independence in this blog that just was published online: So long $10,000 TFSA, and other personal finance fallout from the federal election.

The gist is that we’ll likely lose the $10,000 annual contribution TFSA limits that were only hiked earlier this year but as aging boomers move into semi-retirement or full retirement, it’s likely they’ll fall into the middle tax bracket where the Liberals’ 1.5 percentage point cut should provide several hundreds of dollars of annual tax savings. There are also significant implications for an expanded Canada Pension Plan, Old Age Security and I expect that Ontario will now no longer see a need for the Ontario Retirement Pension Plan or ORPP.

Plenty of other links via my Twitter feed (@JonChevreau), which can also be viewed under the new “Social” tab over at the Hub.

UPDATE Oct 21. See the updated version of this blog at sister site Financial Independence Hub, with links to various Financial Post stories by me, by Jamie Golombek on tax bracket changes, Garry Marr on lost TFSA limits, and Fred Vettese on an expanded CPP and probable elimination of the ORPP.

How to maximize your CPP benefits

Because the Financial Independence Hub is being moved today to a new server to accommodate ever-rising volumes of web traffic, for today we have taken the liberty of posting the normal Monday “Hub” blog here at sister site The guest blog below is on optimizing CPP benefits:  the same subject as my Financial Post column that ran online today under the headline: Optimizing Your CPP is no trivial exercise. Now let’s get it from the horse’s mouth: Doug Dahmer. — Jonathan Chevreau



Doug Dahmer

By Doug Dahmer, Emeritus Retirement Income Specialists 

Canadians are an easy going and trusting people. Every year thousands of people, across the country, carelessly start their CPP payments and in the process are forgoing hundreds of thousands of dollars in payments to which they are entitled.

I call this “The Great Canadian Pass Up.”

To ensure you fully appreciate the value of making the right decision, before you elect to a start your Canada Pension, Emeritus Retirement Income Specialists have created a powerful tool CPP Optimizer. Give it a try here.

 Most people seriously underestimate their lifetime CPP income entitlement:

Your CPP benefits are a big deal. For a couple, where both spouses have regularly contributed to the CPP plan, the lifetime CPP income they can anticipate will likely exceed $700,000. Consequently it represents an important strategic contributor to the creation of a sustainable retirement income. Therefore, decisions about this benefit need to be taken seriously.


Reliance upon “conventional wisdom” can be costly

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How “Findependence” differs from “Retirement”

By Jonathan Chevreau, Financial Independence Hub


Road signs to savings and financial independenceHaving planted a stake firmly in the camp of Financial Independence, I’m often asked exactly how the phrase Findependence is different from Retirement.

There are a lot of distinctions between the terms, many of them subtle ones. I often say that Financial Independence means working because you want to, rather than because you have to financially speaking. In the latter case, the situation is akin to the bumper sticker that says “I owe, I owe so off to work I go.”

I may also say that Findependence (I’ll use the contraction of Financial Independence here now) often occurs years if not decades before traditional retirement. There are several Early Retirement practitioners running websites about how they achieved Financial Independence in their 30s or 40s, although they usually add that they continue to “work” in the sense of doing some work for money. That “work” will typically be as an independent supplier rather than an employee and may consist of writing books, running web sites and perhaps publicly speaking. They call this “Early Retirement” but I’d argue the better term is “Early Financial Independence.”

You can find more on this topic by simply googling the term “Financial Independence vs. Retirement.” You’ll find several results, including a couple of articles by me that have appeared in various web sites both Canada and the United States.

Consider this piece from FI Journey entitled Financial Independence vs Early Retirement: What’s the Difference? Here’s how the writer sums it up: “Financial independence is setting an annual income goal for yourself, and putting your money to work in such a way that you can live off the proceeds from your investments without ever reducing your retirement account. If you started your ‘retirement’ with a million dollars in the bank, the idea is that you would die with a million dollars in the bank, whether that was 5 years or 50 years later.”

Working even if you don’t need to do so

Then there’s an article from a year ago featuring a dialogue between two Early Retirement gurus, J.D. Roth of the Get Rich Slowly blog and the blogger known as Mr. Money Mustache: Coming to terms: retirement vs. financial independence. There, Roth notes that both bloggers have accumulated nest eggs that would allow them “never to work again” yet “both of us have elected to continue doing work for money.” Even so, they still consider themselves “retired.”

Mr. Money Mustache, aka “Pete”, replied that only certain personality types will sit around doing nothing in retirement but for him, retirement “just means you’re free to do what you really want to do.”

Roth said they both think it’s possible to call oneself “truly retired” even if they continue to work for money but added that not everyone agrees. One reader maintained that “retiring is stopping doing work for pay.” Then Roth segued to an excerpt from his one-year Get Rich Slowly Course that outlines four types of retirement: traditional “full-stop” retirement at 65 or so, Early Retirement that can occur between 30 and 50, Semi-Retirement and finally a series of “Mini Retirements” that can be distributed at various points of a long career of work.

Let’s retire the loaded word Retirement

Roth concludes much as I would, saying that because Retirement is a loaded word, he prefers to use the term Financial Independence, which he says “is essentially the same idea but without the baggage.” He also talks about something we’ve mentioned in this blog before: that there are degrees of Financial Independence, ranging from dependency on parents or employers, to dependency on creditors, to freedom from debt, to what I’ve called “barebones” Findependence and finally “complete” financial independence. He decides that once you’ve saved enough to fund 25 years of your current lifestyle, you’ve achieved financial freedom.

Jonathan Chevreau is the author of Findependence Day and runs the Financial Independence Hub. This article originally appeared at under the title How ‘findependence’ differs from retirement.









Reintroducing Tontine Annuities Might Shave Years off Your Findependence Day


Moshe Milevsky

By Moshe A. Milevsky

Special to

Here is a non-surprising fact. Most retired individuals do not choose to voluntarily annuitize their accumulated wealth or savings at retirement. They prefer the lump sum. This has been christened by financial economists: “the annuity puzzle” and has been the topic of Ph.D. theses for decades. I am guilty of supervising a few of these myself.

Sadly, life annuities are relatively unpopular – especially compared to stocks and bonds — in a large part of the world and simply unavailable in most others. Indeed, the few jurisdictions and countries in which there is a sizeable market for annuity products – such as Canada or the U.S. — it is often driven by tax-advantaged treatment and/or government “nudging and defaults” as opposed to an intrinsic consumer appreciation for longevity insurance. Like most insurance products, they are ‘sold’ but rarely purchased.

Could the past hold the key to Longevity Insurance?

Well, I believe one of the reasons for the lack of interest or disdain for life annuity products – while the demand for fixed income bonds is undiminished — is the opacity, public confusion and limited selection of mortality credits; which are the raison d’etre for annuitization. Indeed, there are hundreds of ways to save (i.e. accumulate) money for retirement – instruments such as stocks, bonds, mutual funds and ETFs – but there are precious few choices for dissaving (i.e. de-accumulating) and generating income in retirement.

So, here is my pitch. Perhaps a resolution of the so-called retirement “annuity puzzle” is to design products that make it easier for buyers to determine exactly what they are getting in exchange for giving-up liquidity and sacrificing some bequest and legacy value. In fact, these sorts of products that I have in mind were available and quite popular centuries ago. It might sound odd, but when it comes to finance and insurance products, I look to the past for inspiration.

King William’s Tontine

tontinebookHere is the story. In the year 1693 – back in England — the government of King William III, previously known as William of Orange, needed vast sums of money to finance his war against King Louis XIV of France. This was actually year or so before the Bank of England was established primarily to finance wars, and parliament was in the early stages of experimenting with new and untested borrowing schemes.

Anyway, parliament decided to borrow the money — in increments of £100 units — from wealthy investors in London and abroad. Today we might call what they issued a government bond. In fact, it operated in a way that was quite similar to modern day debt instruments, except for one very small but rather chilling feature.

Investors or buyers would receive annual coupons of 7%, paid semi-annually by the Exchequer. Year after year the bond paid £7 to investors who were willing to ‘lend’ King William and his government the £100 in the year 1693.

But – and here is the key – if and when the investor or bond buyer passed away and died, he or she would not be able to bequeath or bestow the investment to a family member or loved one. The investment benefit would extinguish itself upon death. Instead the forfeited 7% coupons would go to those still living. To paraphrase Mr. Goldfinger in the famous movie named after its main villain, the ‘bond’ was ‘expected to die’ with the master.

This ladies and gentlemen is a tontine (rhymes with Drunk Queen) scheme.

Tontine: The dead subsidize the living

If this sort of arrangement seems odd and morbid – and you wonder why anyone in the world would buy such an odd thing – think about it carefully from the perspective of those who didn’t have the misfortune to die young. The longer they lived, the more income and cash they received, that is other people’s money. The coupons increased with age; which actually served as an inflation hedge of sorts. After all, living to a grand old age can be rather expensive today or in the 18th century. In the case of King William’s Tontine – as this scheme was known — the oldest known survivor lived to the amazing age of 100. She earned thousands of pounds per year, which is quite the pension and envy of many retirees today.

Over time this tontine scheme and many others were superseded by ‘the sturdy bond’ we use today and insurance companies took over the business of selling ‘retirement life annuities’, which are based on the same principal.

The pension and income annuity we all know today is a distant relative of the tontine. Alas, a number of countries banned these tontines outright in the last 19th century, partially under the misguided fear that some of the longer living investors might try to kill each other. To my knowledge, this never happened.

Time to resurrect tontines? 

Sadly though, today, tontines are more likely to appear as a plot in a fantastical murder mystery or as punch line of a joke, rather than in serious discussions about government financing. But in fact, there is a strong argument to be made that these sorts of tontines should be resurrected from the dead and re-introduced in the 21st century. I think it is time to look to history for new (or old) ideas.

In sum — and without getting too technical here — my simple back-of-the-envelope calculations indicate that if retirees were willing to allow for a just a little bit of “demographic variability” around their income, they could increase their expected retirement income by 10% to 15% without taking on any stock market (or any other) risks. Stated differently, your Findependence Day might arrive a few years earlier.

Intrigued? More questions? Read the book: KING WILLIAM’S TONTINE: Why the Retirement Annuity of the Future Should Resemble its Past (Cambridge University Press, May 2015)

Moshe A. Milevsky is a tenured professor at the Schulich School of Business at York University and Executive Director of the IFID Centre at the Fields Institute for Research in Mathematical Sciences in Toronto. He has published 12 books, over 60 peer-reviewed papers, hundreds of newspaper and magazine articles and serves on the editorial & advisory board of numerous scholarly journals. He has written for the Wall Street Journal, the Globe & Mail,  the National Post and Research Magazine. Moshe has also delivered more than 1,000 lectures and keynote presentations to audiences around the world. He was recently selected as one of the 35 most influential people in the financial industry by Investment Advisor magazine. In addition to being the author of King William’s Tontine, he is also the co-author (with Alexandra Macqueen) of PENSIONIZE™ YOUR NEST EGG (2nd edition, WILEY, April 2015). 

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Why Work probably won’t end after your Findependence Day


Graphic courtesy of Challenge Factory

By Jonathan Chevreau

On Wednesday, the Financial Post ran an online column of mine it titled Life After Retirement: Your Working Career Probably Isn’t Over Yet — Welcome to the Encore Act.

Regular readers will know that if I had my druthers, the headline would read more like the one we’ve displayed above: “Why Work probably won’t end after your Findependence Day.” (that is, the day you achieve Financial Independence).

I don’t view the terms Retirement and Financial Independence as interchangeable. By definition, Retirement (or at any rate, traditional full-stop Retirement funded with a generous Defined Benefit pension) means no longer working for money. Financial Independence (aka Findependence), on the other hand, can occur years and even decades before traditional Retirement and so seldom means the end of productive work.

This very web site — as well as the now six-m0nth-old sister site, the Financial Independence Hub — is dedicated to clarifying this distinction. And of course the Hub also constitutes a big element of my own personal Encore Act: next Tuesday will be the one-year anniversary of my own Findependence Day. In my case, I define that as no longer working as an employee of a giant corporation or government entity, and having the financial resources to work if I choose to, and not if I don’t.

How to find your Encore Career

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Global study finds 15% of Canadians plan never to fully retire but many will embrace semi-retirement

nonameA global study on retirement finds 15% of Canadian workers don’t expect to ever fully retire, but many plan to downshift gradually into semi-retirement.

Compared to 14 other countries surveyed, Canadians do well in reaching their later-in-life goals, even if they have to spend all their wealth and leave less to their children.

HSBC’s latest global report — The Future of Retirement, Choices for later life – surveyed 16,000 working-age and retired people, including 1,000 Canadians.

When asked about their attitude towards spending and saving, 27% of working-age Canadians say “spend all your money and let your children create their own wealth.”

The study also found Canadian retirees are much more likely to reach their later-in-life goals than some of their counterparts in other countries. 44% of Canadian retirees have reached “at least one of their retirement hopes and aspirations,” well above the global average of 24).

Mixed sentiments on semi-retirement

Canadian retirees are among the most likely to feel forced into semi-retirement, but almost half of those still in the workforce are planning for it. Only 17% of today’s fully-retired Canadians say they semi-retired first, versus 45% of working-age respondents who say they plan to semi-retire before taking the traditional full-stop retirement.

While semi-retirement can be forced on some as employers look to downsize older more expensive workers, many full-time workers actually aspire to semi-retirement. 15% of Canadians who are retired say they made the decision to semi-retire due to a lack of employment opportunities later in life. Only Australian retirees (17%) reported a lack of job prospects in greater numbers than Canadians, and respondents from both countries were well above the global average (10%).

“This latest research suggests that older Canadians and those approaching retirement age may also be feeling the pinch of underemployment at time when saving for the future is often at its most crucial,” said Betty Miao, Executive Vice President and Head of Retail Banking and Wealth Management, HSBC Bank Canada, via a press release distributed Wednesday (April 29).

Semi-retirement can also be forced on mid-career workers

Even among younger workers, 10% of survey participants between the ages of 45 and 54 admit their shift into semi-retirement wasn’t their personal choice. HSBC suggests that in the post-downturn job market, many experienced workers are being overlooked for full-time positions. In fact, half of all semi-retired respondents globally say they changed careers when they stopped full-time work. HSBC says some of these will be high achievers who reached their career aspirations and financial goals before retirement, but the figures “also point to a pool of wasted potential among experienced employees.”

The research also shows a major shift in how Canadians plan to retire in the future. While only 17% of those now fully retired say they semi-retired first, 45% of working-age respondents plan to semi-retire before taking full retirement. Around the world, an average 26% of working-age people plan to semi-retire at some point.

Miao says that with expected shortages of skilled labour in some sectors and professions “career opportunities look bright for at least some of those planning to work into their golden years.”

The full global and Canadian retirement survey reports and online retirement planning tool are available online here.

Twice as many retirees now rely on home equity: Fidelity survey

House made of money in handSeniors are now twice as likely to rely on their home equity to fund their retirement than before the financial crisis, says a Fidelity retirement survey. They’re also more likely to work in retirement, provided they can find employment.

Since 2005, the number of Canadian retirees relying on home equity to fund retirement has more than doubled from 14% to 36%, says the survey, commissioned by Fidelity Investments Canada ULC.

Conducted by The Strategic Counsel, the 10th Fidelity Canadian Retirement Survey of retirees or workers 45 or older also finds:

• Since the financial crisis, the number of retirees saying it has been more difficult than expected to retire has dropped from 28% in 2009 to 20% in 2014

• More pre-retirees expect to work full or part-time in retirement (62% in 2014 compared with 55% in 2005)

• An increase in reliance on savings held inside a RRSP or RRIF (58% in 2014 compared with 53% in 2005)

• Despite changing trends over the past decade, the vast majority (85%) of Canadian retirees have a positive outlook on life in retirement

Half retired earlier than planned

Fidelity says 48% of retirees polled had retired earlier than planned, often for involuntary reasons. Of this group, 19% had to retire early because of health problems. Another 9% attribute early retirement to work stress and another 9% said “work stoppage” was the reason for early retirement.

Of those retirees not working, one in five would like to work if they could. The main reasons for retirees not being able to work are heath (38%), feeling employers are not interested in employing retirees (23%) and not being able to find a job (15%).

Planning to work is not a retirement plan


Peter Drake

“Planning to work in retirement is not a retirement plan,” says Peter Drake, vice president of retirement for Fidelity Canada. “Having a viable plan in place to generate sustainable income in retirement is arguably the most important aspect of retirement planning. Working with a financial advisor and setting goals for retirement is the best way to ease uncertainty and reduce stress around how to create the retirement paycheque. A good retirement plan should have flexibility in case circumstances change, as they often do.”

The survey of 1,390 adult Canadians was conducted online between October 22 and November 3, 2014.

Longevity changes everything: rethinking early retirement

foreverpillcoverHere’s my latest MoneySense blog, entitled Why you should re-think Early Retirement. This is a topic I’ve been researching for several months, going back to some blogs I wrote on Mark Venning’s, which challenges readers to “envision the promise of longevity.” He also sensibly counsels that we should “plan for Longevity, not for Retirement.”

As you can see by clicking through to the blog (also reproduced below), some of this message was articulated in a speech delivered Wednesday evening at the Financial Show, and which I also gave Monday night at the Port Credit chapter of Toastmasters.

By Jonathan Chevreau

I recently delivered a talk about how longevity changes everything. I began by showing the front cover of the latest Bloomberg Business magazine, which shows a woman celebrating her 173rd birthday. Read more

Working to 66 is no tragedy

Senior man working on a computerEarlier this week there was extensive mass media coverage of the latest Sun Life “Unretirement” survey, which found more Canadians now expect to work full-time at age 66 than the number who are retired.

Given that the traditional retirement age has been 65, and remains the age many older investors think of collecting Old Age Security and the Canada Pension Plan, the general tone of this coverage was that the idea of working to such an “advanced” age is in itself scandalous.

Regular readers will know what I’m about to say, and did say Wednesday night on a CTV item on the survey. With rising trends to longevity, more and more people are choosing to work longer or feel financially compelled to do so. Indeed, governments around the world generally would love to see us all work longer and pay taxes longer, which is why the age of OAS onset is being bumped up to 67 for younger Canadians.

Plan for Longevity, not Retirement

I still love the positioning of Mark Venning at, who says we should be planning not for Retirement, but for Longevity. Read more

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