With 1,100 Canadians reaching the official retirement age of 65 every day, there’s a sea of change occurring in the investment world. The move from wealth accumulation is rapidly moving to its opposite, de-accumulation or “decumulation.”Decumulation is actuary Fred Vettese’s preferred term over “drawdown” and his new book Retirement Income for Life (Milner & Associates, Toronto, 2018) seems destined to become the bible of any new or near retiree challenged with converting large RRSPs and other savings into reliable income.
The only retirees who may not need this book are the fortunate few and increasingly rare members of traditional Defined Benefit (DB) pensions. As Vettese says – the chief actuary for Morneau Shepell Inc. – decumulation is a much trickier act than accumulation. The book covers some ground previously occupied by Moshe Milevsky’s Pensionize Your Nest Egg or Daryl Diamond’s Retirement Income Blueprint but Vettese takes the topic further.
What I like about Vettese’s book is a 5-part strategy involving what he terms “enhancements.” In a nutshell, it’s all about cutting investment costs with Exchange-traded Funds; delaying receipt of Canada Pension Plan benefits to age 70; annuitizing initially 30% of an RRSP at the onset of Retirement; adjusting spending “dynamically” up or down as markets surge or falter; and – as a last resort – the “nuclear option” of a reverse mortgage.