Retirement Income for Life: Why Canadian retirees love Frederick Vettese’s books and his PERC

The many editions of Retirement Income for Life

I reviewed the previous (second) edition of this book for the Retired Money column back in October 2020: Near retirement without a Defined Benefit pension? Here’s what you need to know. And on a personal note, I know through a few lunch chats over the years that Vettese and I are almost the same age, within a few days. And MoneySense also looked at the first edition two years before that with this article: A guide to having retirement income for life. 

Vettese, as he prefers to be called, tells me the biggest change in the third edition of Retired Income for Life (ECW Press, January 2024) is “the recognition that inflation may rear its ugly head again. Hence, we need to avoid inflation risk in addition to longevity and investment risk.” 

The preface reads that after “playing dead” for 30 years, “we can no longer take low inflation for granted… Retirees with more or less fixed incomes cannot ignore the prospect of future spikes in the inflation rate.” 

As a result, Vettese has rethought the five “enhancements” outlined in the older editions. Those five strategies are: 

1. Reducing investment management fees
2. transferring investment risk to the government
3. transferring even more risk to insurance companies via annuities
4. using his PERC
5. and having a backstop, such as using home equity to supplement retirement income through vehicles like a reverse mortgage. 

According to Vettese: “Some of those enhancements have become even more crucial, while one of them is on the verge of demotion.” He’s referring to annuities, which offer little in the way of inflation protection, he clarifies. 

What is PERC? And how to use this calculator for retirement planning

Since we’ve not previously devoted an entire article on MoneySense to the PERC, most of this column will look at that. Note that PERC is in itself the fourth of Vettese’s five “enhancements,” with chapter 15 of the new edition of the book devoted to it, entitled “Using PERC.” 

Vettese developed the calculator when writing his first edition back in 2018. Take it for a test drive, at no charge, at perc-pro.ca. (Another generous offer: Anyone who buys the print edition of Retirement Income for Life can get a travel- and commute-friendly free e-book version by emailing details of proof of purchase to [email protected].)

Vettese emphasized two points about PERC in an email to me: 

1. “Mine is probably the only calculator that assumes one’s spending does not quite keep pace with inflation in our later years.” 
2. “My calculator is one of the few out there that isn’t sponsored by a bank or investment company. I’m not selling anything other than the best income estimate possible. Also, it is the only calculator to my knowledge that explicitly shows how much better you do if you buy an annuity or defer CPP (Canada Pension Plan).”

Deferring CPP: Sometimes people shouldn’t wait until age 70

For me, deferring the CPP ship has already sailed. I took it at 66 when my wife retired, although she waited until 68 to take hers. We had initially planned for her to wait until age 70, but we did it sooner because Vettese’s articles argued for an exception to his usual recommendation to wait until age 70. In 2022 and in 2023, he suggested that those on the cusp of turning 70 might take CPP a year or two early, owing to the high inflation adjustments Ottawa made to CPP and Old Age Security (OAS) in those years. 

But partial annuitization is very much still a possibility. My wife’s locked-in retirement account (LIRA)—which she opened when working—is likely to turn into a life income fund (LIF) sometime this year or the next. She has no employer pension, and I have only what I have dubbed a “mini” pension and an even smaller “micro” pension from previous employers. 

How to use annuities in retirement

So, I’ve always read, with interest, Vettese’s views about annuitizing at least part of RRSPs once they must be wound up at the end of the year one turns 71. At one point he suggested annuitizing 30% of RRSP assets, though the current book lowers that to 20%. (See also this Retired Money column on that very subject, written early in 2018 entitled: RRIF or Annuity? How about both?)

Incidentally, the third edition of the book also mentions a couple of annuity-like innovations that weren’t available when the first two editions were published. In chapter 16, entitled “Can we do even better?” Vettese described Purpose Investments’ Longevity Pension Fund and Guardian Capital’s Guardpath Modern Tontine Trust. 

He says that instead of annuities issued by Canadian insurance companies, these two new longevity financial products are offered by investment companies, thus chiefly use stocks and bonds for income. 

One difference is that, unlike with traditional annuities, the income is not guaranteed. Also, there are no survivor benefits. He concludes the chapter, stating both are “like a less nerdy version of annuities for retirees prepared to take a small amount of risk.”

But back to PERC

You can try a stripped-down version for free and with no obligation. In fact, you’ll have to print out the results because of privacy concerns: “The data from PERC is stored, but it’s not attached to anything that could reveal one’s identity,” he told me. 

If you want the full treatment with multiple scenarios, the price for a one-year subscription to a Canadian customized PERC is a reasonable $135 plus tax. You can enter the basics of your financial situation and that of your spouse (which Vettese recommends) and, in less than a half an hour, the PERC generates a summary of your likely future retirement income. You enter pre-tax amounts for pensions and other income and PERC handles the tax side of it automatically. 

Retirement income includes work income for me

Obviously, I’m not going to divulge my family’s personal information in this column. But after using Vettese’s PERC, I’m certainly left with the impression that I am still working because I choose to do so, albeit on a self-employed basis. As one fully retired friend quipped to me the other day, “You enjoy it.” 

I guess I do. 

But as I have said before, even if you enjoy working, at some point either clients or employers may make the decision for you to end your working days. Once that happens, whether gradually or suddenly, it’s nice to have a firm grasp of where your retirement income is coming from and how much can be counted upon. The PERC does just that. 

Read more Retired Money columns:

• Are GICs worth it for retirees?
• Tontines in Canada: Moving from theory to practice as a solution to our retirement crisis
• How much money do you need to retire in Canada? Is it really $1.7 million? 
• Inflation a scourge for retirees? Ottawa’s silver lining(s)

About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at [email protected], where he is the founder of Financial Independence Hub.

Linkedin Twitter Facebook Website