Retirement » Pension

No pension? Go out and buy one

Anyone who is retired or planning to retire in the next few years needs to be very careful with their investment decisions. Those with no pension may want to consider options to pensionize their retirement savings because errors at this stage can set back your retirement dreams by years.

Just ask the folks who had all of their retirement savings in equities in 2008 only to see their portfolios drop by a quarter when markets crashed. Some had to delay their retirement four or five years, take part-time work or make other changes to protect their retirement lifestyle.

You do need to be cautious, but it’s a mistake to let fear paralyze you. Bank GICs generate a negative return after the ravages of taxes and inflation. Keeping your long-term money in cash is definitely not the solution.

Retired individuals need to have some of their money in growth investments. Just don’t put all of your savings there. That’s what caused some retirees grief in 2008.

Authors Moshe Milevsky and Alexandra Macqueen have written one of the most important books I’ve ever seen for retirees and near-retirees. Pensionize Your Nest Egg should be the authority for people who want to ensure that they have enough money to last a lifetime.

I would summarize this book as follows: “If you don’t have a pension – you can go out and buy one.”

Retirement in Canada

With poor markets, record personal debt levels and low savings rates, many Canadians expecting to retire in the next decade won’t have a sufficient nest egg to ensure a worry-free retirement. Only a third of Canadians belong to a registered pension plan, and even some of the fortunate third will have insufficient savings.

The book covers the basics of the two types of pension plans: defined-benefit pensions and defined-contribution pensions. This is important reading if you have a pension plan but don’t understand it.

Related article: Understanding Group Pension Plans in Canada

Some people start to get really nervous as they near retirement age. In their 30s or 40s they still have decades to get retirement-ready so it’s not urgent. However, the decisions start to get crucial as retirement approaches, and mistakes can be crippling.

My clients Norm and Sue retired a few years ago with plenty of money – investments of $745,000, a defined-benefit pension plan and government benefits. Despite my efforts to calm their fears, they still worry that their money will run out. Everything costs money so they rarely leave home. They aren’t rich but they can afford to live better. It troubles me that they’ve turned into hermits.

Investment products can be very confusing and people don’t know who they can trust. What then should you do?

Guaranteed income for life

This book shows that the most money doesn’t necessarily provide the best retirement plan. The investor who owns the right type of investments, and wisely uses product allocation (which is different than asset allocation), can be better off. Pensionize Your Nest Egg provides a step-by-step guide on how to turn your savings into a guaranteed income for life.

There are two common ways to create your guaranteed income for life: life annuities and segregated funds. They just do it differently.

With a life annuity you turn a sum of money over to a life insurance company in return for a guaranteed lifetime income stream. Live to be a hundred, no problem.

Related article: Everything you need to know about life annuities

The other product is guaranteed minimum withdrawal balance (GMWB) segregated funds – variable annuities. Now, that’s a confusing term if I’ve ever heard one. The income for life from GMWB products should increase with markets gains, which is an advantage over life annuities.

This book will help you evaluate the various products that are available. Pensionize is a great place to start but also seek the advice of a qualified financial planner for specific advice for your situation. These are insurance products so your advisor must be insurance licensed.


  1. Patrick Connolly


    As a Canadian, I am currently living in Mexico as a tourist which is 6 months at a time or less. What are the requirements for CPP early reduced at 60, and how would this status affect OAS/GIS in the future.

    Your assistance would be greatly appreciated as I have heard horror stories regarding this. I am currently 58.


    Patrick Connolly.

    • Doug Runchey


      The only requirements for early CPP are that you are at least age 60 and you have made at least one contribution to the CPP.

      Taking early CPP will have no impact on your OAS at all. Taking early CPP means that you could receive more GIS than if you took your unreduced CPP at age 65.

      • Richard

        Should you retire full time outside of Canada you are not eligible for GIS. You can however still collect your CPP & OAS.

        • Richard

          Also keep in mind that you can not keep investments in your TFSA account should you leave Canada.

  2. rhonda

    where can I find the book you mentioned: “Pensionize Your Nest Egg”.
    I tried to view it but, it says page not found.
    Is it available to read online?

  3. Mia

    What if the Life Insurance Co. holding your annuity goes bust? They did in 2008.

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