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Enough Bull: How to Retire Well without the Stock Market, Mutual Funds, or Even an Investment Advisor, 2nd Edition


Praise for ENOUGH BULL

"Investors have two strikes against them when it comes to saving for retirement. For one, the financial services industry offers products and services designed to make them rich at your expense. Second, we're our own worst enemy when it comes to investing—our behavioral biases often lead to poor returns. David Trahair shuns the traditional advice model, suggesting that it's better to pay off the mortgage, avoid the stock market, and keep your savings absolutely safe. And you know what? He's probably right."
—Robb Engen, fee-only advisor and author of the Boomer & Echo blog


Tired of making your financial advisor rich? In the second edition of the national bestseller Enough Bull, David Trahair shows you why: You don't need the stock market or mutual funds. You don't need to risk your financial life going over spectacular plunges or stagnating for endless periods of time going around in circles, only to hope you won't go under in the process.

Enough Bull overturns the conventional wisdom about retirement planning and offers the simple secrets to securing a comfortable retirement. In an accessible and straightforward style, this practical guide explains how it's possible to save for retirement starting later in life, retire comfortably on less money, and incur less risk. Revised and updated, this second edition offers a message of hope for average, cash-strapped baby boomers by detailing a step-by-step plan for avoiding all the traps—doing the exact opposite of what the major financial institutions recommend, and still coming out further ahead.

DAVID TRAHAIR, CPA, CA, is a speaker, national bestselling author, and financial columnist for CPA Magazine. His other books include Smoke and Mirrors: Financial Myths That Will Ruin Your Retirement Dreams, Crushing Debt: Why Canadians Should Drop Everything and Pay Off Debt, and Cash Cows, Pigs and Jackpots: The Simplest Personal Finance Strategy Ever. He is known for his ability to explain the often-confusing world of personal finance in plain English. Canadians appreciate his no-nonsense style and the fact that his views are totally independent because he does not sell any financial products. He currently operates his own financial consulting firm and gives seminars on his books to accountants in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Nova Scotia.

About the Author xiii

Acknowledgements xv

Introduction 1

The Fall of 2008 1

Angry yet? 3

Why I Wrote this Book 3

Your Retirement Journey 4

Down the River 5

Uh-Oh, it’s the Niagara River 5

Retirement Journey: Plan B 7

Here’s What They Don’t Want You to Know 7


Chapter 1--Avoid Personal Financial Disasters 13

The Ponzi Scheme 14

Bernie Madoff 16

Our Very Own Canadian Fraud 18

What Did the “Average” Victim Look Like? 19

How Did Investors Become Involved in Eron? 20

What Steps Did They Take Before Investing? 20

Why Did They Invest? 21

Where Did They Get the Money? 21

The Lessons of Eron 21

Extraordinary Popular Delusions 22

Other Potential Disasters 23

Credit Card Disease 23

Taking Out a Mortgage on Your Home to Invest 24

The Latest Stock Chase 24

Trusting Your “Friends” 24

Mortgage Fraud 24

How to Prevent Personal Financial Disasters 24

Conclusion 25

Chapter 2--You Don’t Need the Stock Market or Mutual Funds 27

The Worldwide Economic Meltdown 27

The United States 29

The Recovery 31

What Caused the Meltdown 32

The Vicious Spiral 34

Who Wants to be Rich? 35

Why You Don’t Need Stocks 36

Why You Don’t Need Mutual Funds - Risk 37

Mutual Fund Risks 38

Those Darn Mutual Fund Fees! 43

1. Fees and Expenses Payable Directly by You 43

2. Fees and Expenses Payable by the Fund or Portfolio 45

We Won’t Get Fooled Again 49

The Canada Deposit Insurance Corporation 50

The Advantages of GICs 54

Why They Try to Make Even GICs Complicated 55

How and Why They Bash GICs 56

The Laddered GIC 57

Getting the Best GIC rates 60

Consider a Deposit Broker 61

Who Regulates Deposit Brokers? 63

Fiscal Agents 64

GIC Rates of the Future 68

Chapter 3--Buy a Home and Pay off the Mortgage 69

Gains in Value are Tax-Free 70

Source of Cash 70

Source of Retirement Funds 70

Should I Buy a House? 71

Can I Afford a House? 72

Gross Debt Service Ratio (GDS) 72

Total Debt Service Ratio (TDS) 72

Just How Much House Can You Afford? 72

Saving For the Down Payment 73

Buying With Less Than 20% Down 74

WARNING: Mortgage Companies Love Selling Mortgage Life Insurance! 74

Pre-Approved Mortgages 76

What if I don’t qualify? 77

Your Credit Report 77

What is in a Credit Report 78

How to Get a Free Copy of Your Credit Report 79

Getting Your Credit Report Online 79

What is a FICO Credit Score? 80

What Affects Your Credit Score? 80

An Important Warning: 80

How to Improve Your Credit Score 81

Your Home as an Investment 82

“The Best Investment I Ever Made” 84

Chapter 4--Reducing Expenses Doesn’t Have to Be Painful 85

Reducing the Interest You Pay 85

The Spending Years 86

Reducing the Amount of the Debt 86

Reducing the Interest Rate on the Debt 88

Debt and the Economy 90

Reducing Taxes 91

How to Calculate Your Tax Bill 91

Happy New Year - Here’s Your Reduced Paycheck 92

Marginal Tax Rates 94

Pension Income Splitting 96

What You Can’t Split 97

How to Split Pension Income 98

Benefits of Splitting Pension Income 99

How Much Pension Income to Transfer 100

How to Claim the Pension Income Amount 101

Spousal RRSPs: Still a Useful Tool 101

Self-Employment - King of the Income Splitters 103

But I Don’t Know Anything About Being Self-Employed 106

Self-Employment Does Not Have to Be Complicated 106

Conclusion 107

Chapter 5--Forget RRSPs Until Your Debt is Paid Off (The Opportunity Zone) 109

Pretend the Stock Market Does Not Exist 109

The RRSP Fallacy 110

Compound This 113

The Tax Turbo-Charged RRSP 113

A Word about Your RRSP Limit 113

Do You Trust the Stock Market? 114

Those Ugly Fees 115

Don’t Put All Your Eggs in One Basket 115

Conclusion 116

Chapter 6--You May Not Need an Investment Advisor 117

My Story 118

What I Did Next 120

What to Look for in an Investment Advisor 121

For Those Who Have a Lousy Advisor 121

No Advisor is Better than a Bad One 122

Henry’s Story 122

Conclusion 127


Chapter 7--The Canada Pension Plan 131

What is the Canada Pension Plan? 131

How they Calculate CPP premiums 132

How they Calculate the CPP Pension 132

How the CPP adjusts for Inflation: The YMPE 132

CPP Pension 133

The New CPP Rules 134

Early election penalty 134

Deferring election premium 135

Removal of work cessation test 135

Post-Retirement Benefit (PRB) 135

Drop-out Provision 136

How to Apply for your CPP Pension 136

My Service Canada Account 138

How to Register for My Service Canada Account 138

How to Calculate your CPP Retirement Pension 140

Money Saving Tip - CPP Pension Sharing 146

CPP Pension Sharing Example 146

When Should I Elect to Receive CPP? 148

Step 1 149

Step 2 149

Step 3 149

Step 4 149

Warnings 149

Catch #1 150

Catch #2 150

Catch #3 151

Conclusion 151

Chapter 8--The Money Maximizer 153

Why Work Against the Taxman? 153

The Value of Time 154

The Time Value of Money 155

The Money Maximizer Spreadsheet 155

Meet Pat and Jane 157

Pat and Jane: The Assumptions 161

Pat and Jane: The Results 162

Pat and Jane Try Income Splitting 163

Putting the RRSP “Start Late” Theory to the Test 164

Pat’s Turbo-Charged RRSP 166

Conclusion 167

Chapter 9--Retiring Without the Stock Market 169

The Devastating Effect of the Crash 170

Are You Going to Throw Good Money after Bad? 170

You Can Still Retire Well 171

1. CPP Pension Splitting 173

2. Electing CPP early 173

3. RRSP/RRIF Income Splitting 173

4. Extending Your Retirement Date 173

Other Ideas 174

Conclusion 174

Chapter 10--You May Not Need an RRSP 175

A Common Misconception 175

Alternatives to RRSPs 175

Investing Outside Versus Inside an RRSP 176

Investing in Real Estate 179

Investing in Your Own Business 180

Invest in a Tax Free Savings Account 180

The TFSA as an Income Splitter 182

Opportunity for Retirees 182

Does Anyone Have $5,500 Outside a Registered Account? 183

Why the TFSA is Better than an RRSP for Home Buyers 183

The RRSP Home Buyers’ Plan 184

Keeping Profits in a Corporation 185

Conclusion 185

Chapter 11--The Antidote Summary 187

1. Avoid Personal Financial Disasters 187

2. You Don’t Need the Stock Market or Mutual Funds 187

3. Buy a Home and Pay Off the Mortgage 188

4. Reducing Expenses Doesn’t have to be Painful 188

5. Forget RRSPs Until Your Debt is Paid Off (the Opportunity Zone) 188

6. Ask Yourself if You Really Need an Investment Advisor 188

Index 189