Sherry Cooper's "The New Retirment"

I like to read retirement planning books even though I'm already retired. Sherry Cooper's book The New Retirement is a nice "how to" book without all the silly paraphernalia of forms to fill out and overly precise "rules" to guide you. Her simple rule -- the real heart of this book -- is found in Chapter 9 and says:

Rule of Thumb: You will need a retirement nest egg of between 20 and 25 times the level of additional desired pre-tax income (over and above government and employment pensions) to generate the extra income you need.

There! I saved you from needing to read the other 200 pages.

Well, there is some fun in the other stuff. She has some wonderful demographic data in Chapter 2 showing why Canada has a bigger problem than the U.S: we had a bigger boom and a bigger baby bust than the US. But, if you compare Canada to the rest of the world, we are in pretty good shape demographically because of our large immigration.

Chapter 5 talks about the problems of government funding for pensions and health. Here's where I get to see just how bad a problem the U.S. has. They offer up a larger government pension -- US$25,392 -- but they only collect 12.4% on the worker's income (split between worker & employer) to pay for it. Compare that to the Canadian pension of $10,365 paid by collecting 9.9% on the worker's income. You can see quickly that the Canadian funding is on a sounder basis. That's why we actually have a CPP Investment Board with money invested at a good rate building up to handle the boomer flood. The US doesn't. It lets the money it collect flow into general revenue and -- as the Republicans point out -- they just have pieces of paper in the Social Security Trust Fund. (OK, these are government bonds, but the Republicans make it pretty clear that when push comes to shove, they will default on those bonds because they are "only pieces of paper".)

Her chapter 7 is fascinating because it looks at the different composition of wealth when comparing Canada to the U.S. We have a lot more of our wealth in our homes. This is a bit odd when you think that the US just went through a housing bubble. But it makes sense when you realize that the "mortgage deductability" in the US encourages people there to not pay off their homes in order to get the deduction off their income taxes. She gets into something unusual in this chapter, a discussion of income disparity. She notes that the "average" wealth of a household in the US is 5.7 times their disposable income while the "median" wealth is only 2.3 times. In Canada, we have a much more egalitarian society, so our "average" wealth is 5.4 times disposable income and the "median" is 3.5 times.

In Chapter 8 she has a discussion of the fall of DB plans (Defined Benefit) and the rise of DC plans (Defined Contribution). How this is creating a two-tier society since government workers get the gold-plated DB plans while private industry has moved to DC or even gotten rid of its pensions. This discussion of pensions and fairness is unusual in a "retirement" book, but I love it. Fascinating stuff that makes you think about the role of government and how the ground under your feet can change between different segments of society quietly move in different directions.

The book is full of wonderful graphs. I love graphs. They distill so much into a picture.

So, this is an excellent book. As I said above, the essential "retirement" message is the one little quote I inserted above. The rest of it is a wonderful discussion of demographics, economics, government policy, wealth effects, etc. In short, a wonderful romp through a lot of interesting material. It is well worth the read!