Retiree Interview #2: Doug The Retired Government Research Scientist

by: Dividend Growth Investing & Retirement

This is the second in a series of interviews with retirees from all walks of life. The goal of the series is to hear from a broad range of retirees about their mistakes and successes to help better prepare mentally and financially for retirement.

It's good to learn from your mistakes. It's better to learn from other people's mistakes."

Warren Buffett

I'm never sure where these interviews will go at the outset, but they always seem to lead somewhere unexpected and interesting. Today's interview with Doug, a retired government research scientist, was no different as we discussed whether or not early retirement increases life expectancy.

After a little research of my own, I found an interesting article on the topic here. It turns out there are conflicting studies, but there is a large 2009 German study that took into account people's health beforehand and discovered that if you were healthy beforehand, then

early retirement in fact lowers mortality risks significantly by 12% for men and by 23% for women."

Source: Time to retire-time to die? A prospective cohort study of the effects of early retirement on long-term survival. - Brockmann H, Müller R, Helmert U.

It wasn't all life and death, though, as we covered a number of topics in Doug's interview. Here are just some of the highlights:

  • The effects of early retirement on mortality,
  • Warning signs you have a bad financial advisor,
  • The impact your upbringing has on your financial future,
  • Doug's path to a blue-chip dividend stock investment strategy and some resources he uses, and
  • Advice to his younger self at different stages in life (From age 20 to 5 years past retirement).

OK let's jump into the interview…

Retiree Interview: Doug the Retired Government Research Scientist

DGI&R: What's your story?

In brief, I grew up in the UK, went to university, got the job of a lifetime that did not work out, and emigrated to Canada over 50 years ago. I worked with the federal government my entire career in Canada before retiring. I am 78, been retired 22 years, and never ever regretted that.

DGI&R: I'm curious, what was the job of a lifetime and why didn't it work out?

As a boy, I had nurtured the idea of becoming a naturalist. But being practical I trained as a biologist, which could lead to many different careers. But a rare opportunity came up to work on birds, I went for it, got it, but found I was suited to neither the job nor the people I was to work with.

DGI&R: What brought you to Canada?

Within 18 months I was thinking New Zealand or Australia, but a headhunter found me, I had what he was looking for, and offered me a job that tripled my UK salary. By the time I got here the following summer, it had quadrupled. I stayed.

DGI&R: What kind of work did you do for the federal government?

I was a research scientist.

DGI&R: In preparing for retirement (Financially and mentally), what did you do right and what did you do wrong? What would you have done differently? What is your biggest regret?

Sticking with the government position from start to finish. I invested poorly at first, had a poor adviser. I should have got into dividend blue chips at the outset. I wish I had invested in the US market earlier.

DGI&R: Can you tell me more about your experience with the poor advisor? Do you recommend getting an advisor? If so, any tips on picking a good one?

He was aggressive and cunningly left an invitation with everyone at the office who was about to retire. I thought, here was a go-getter; I was right, but he was go-getting for himself. After a brief dalliance with puts, making some quick money, he put me in a reasonably good portfolio of stocks, but then we got into dot-com mutual funds with massive loads, Nortel, a big, lousy convertible bond, and finally a "guaranteed" gold mine, Bre-X. My fishing buddy urged me repeatedly to get a self-administered account, which I did. I have never looked back, have made plenty of mistakes by reading promotional nonsense by people who know how to write but don't know what they are talking about, but they are my mistakes. Investing is more of an intellectual exercise for me which I practice almost every day. By guiding my grandchildren's RESP investments, I have become cautious, but remain fully invested. I trust absolutely no one. Picking a good advisor? Don't.

DGI&R: How did you eventually decide on dividend blue chip stocks as the way to go? Why do you like this investment strategy?

I have always held the banks and BCE, and it took me a while to realize how important dividends are in the long run. I pursued higher and higher rates, but of course, they are not to be trusted. I hang on to a few disasters, notably TPH, just to remind me continually to remain skeptical of anything over 6% although I still have one or two. Canadian Money Saver taught me how to select good reliable dividends with their Beat-the-TSX scheme published in their February issue. I also use dividendyields, which is always up to date.

DGI&R: When did you start investing in the US market? What are your thoughts on diversifying outside of Canada?

About five years ago. What troubles me about the Canadian market is that virtually no big stocks beat the S&P 500 index over 1,2,3,4, and 5 years. If you look at the NASDAQ, the difference is even greater. I have left reminders to myself to stop buying Canadian and invest in the US. Of course, I ignore my own advice! But I have made a habit of reinvesting all dividends in a fee-free S&P 500 fund, TD's TDB902; I have started buying the TD NASDAQ fund, TDB908. You can keep the rest of the world. I don't even know the US market well enough to select US stocks. I think those who advise global diversification are merely spouting off what others have said and write for a fee. Same goes for bonds. But this is just me talking, and I don't do brilliantly.

DGI&R: What is the biggest mistake people make leading up to retirement?

Not thinking about it from the start of employment.

DGI&R: What resources did you find the most helpful when planning your retirement? (Websites, Books, People, etc.) What resource had the most profound effect on your life?

Probably my father, who always espoused planning for retirement. The government's seminars were worse than useless.

DGI&R: Your father sounds like a smart man who had a positive effect on your retirement strategy. Can you elaborate a bit more on him and what he did to instill the importance of retirement planning in you?

Yes, he was smart, and a self-made man at that, studying hard to get ahead with a young family around his feet. Intentionally or otherwise, he taught us by example, not by word, and my brothers and I still reflect on that. In this way, he taught us the value of money, how to achieve goals despite limited resources by not spending frivolously, to enjoy physical and mental work, and to stay fit (no jogging in those days, but plenty of walking and cycling).

DGI&R: In my other retiree interview with Angela the retired flight attendant her parents and upbringing had a big influence on her retirement plan and spending/saving philosophy. Obviously, parents have an effect on their children's lives, but I'm curious to hear your thoughts on how much they affect their kids financial future. Were the lessons learned from your dad taught when you were young or later on in life? I guess I'm trying to get your thoughts on how much of an impact your upbringing has on your financial future.

The important lessons we learned would have been from age 6 to 18, and especially around 10-14. I saved every penny I got, from modest pocket money (weekly allowance, very important) and small presents, and with my life savings in a post-office account that paid 2 1/2% (here we go!) bought a brand-new bicycle when I was eleven. I had two part-time jobs when I was 16, bought a motorcycle at 17, and worked on building sites during winter and summer vacations from University. All of this and more happened without pressure or even advice from my father. My mother went to work too when we were quite young and continued to do so until I left home. There was no such thing as investing for them, although my father spent a lot of time on playing with life insurances that actually paid off rather poorly. But he did manage to buy our first and only house through a with-profits life policy that in effect paid for the house and all the interest owing, when it matured, and still had money left over for a car. Premiums were tax-deductible too. I never attempted this tactic; the point is, it was another lesson in financial management, to look for efficient ways to deploy limited resources, with an eye to the future. I bought my first house - a very modest cottage - while at university, sold it at a small profit, bought another during my first job in the UK, and had enough money to put down on a house when I arrived in Canada. I thought it very odd that only one of my Canadian colleagues was living in his own house. Saving for a purpose did not seem to be the way things were done here!

DGI&R: How did you decide it was time to retire and what were you most excited for?

I decided to retire at 55 because of a c.1968 Treasury Board memo (I wish I had kept it!) that told its employees that life expectancy of retirees was reduced by a year for every year retirement was delayed after age 55. I retired at 56 so I may die a year earlier, though I am enjoying extra income because of it.

DGI&R: I would have loved to see that memo! From your own experience and watching friends retire, do you feel like it proves true regarding health/life expectancy?

Yes, I think it has been born out. But lifestyle is vitally important too. No good sitting back, reading, smoking and drinking Scotch. You have to eat well (I am a firm believer in organic food, and try to grow my own vegetables), have a decent relationship, don't smoke, keep alcohol intake in check, take certain vitamins regularly (especially omega-3), maintain fitness, cultivate friends, and have interests, especially some that you can share. You don't need a big income to do all this.

DGI&R: What were you most excited for when you retired?

The freedom to just go out and walk, or fish, cycle whenever I wanted. It was intoxicating. And no one to please, other than my wife.

DGI&R: What were you most worried about (Financially and personally) before retirement and were those worries justified in retirement?

No worries.

DGI&R: It sounds like leading up to retirement was relatively stress-free, what did you do right that prepared you so well mentally for this time in your life?

Keeping my interests going. I wish I had kept fitter when I was working.

DGI&R: What strategies (Financial or otherwise) did you use to make retirement or early retirement happen?

Mainly sticking with my Defined Benefit Plan employment pension scheme. I had paid off my mortgage at least 10 years before retiring. I learned about the value of Multiple Income Streams and set to work preparing for these (RRSPs, Life insurance policies etc.)

DGI&R: How did you and different family members deal with the transition financially and personally to retirement? (Money or relationship issues/changes, anxiety/happiness, loss of identity or personal value, depression, etc.) What did you struggle with and what went well? Any tips for readers to help with the transition to retirement?

Expenses naturally decline as soon as you retire. I did a few small contracts at first, which helped to cushion the impact of identity loss. I still write (for pleasure, not profit).

DGI&R: Do you recommend taking on a reduced role at your work or doing some sort of contracting as you transition into retirement in order to cushion the impact of identity loss? Any tips for readers on how to deal with identity loss?

I feel doing reduced work at work would be demoralizing. I actually had a promotion for my last year (hence retiring a year late) and that was OK. The thought of retirement kept me going. I have urged friends and family alike to work at getting out early. The workplace for most is not nearly as good as it was in my time. Political agendas in the workplace are killing people.

DGI&R: What kind of writing do you do?

I wrote a book when I retired but now write for magazines on any topic that takes my fancy. One of my early ventures was one on English sports cars; I am working on one about float planes. But they are usually about fishing or natural history. The world is full of fascinating things, and so few people appreciate them. I try vainly to get them out of their iPads and cell phones. It is a sad story waiting to be written.

DGI&R: What did your financial situation and investment portfolio look like at different stages of your life? Was there a big change before and after retirement? Any tips for readers?

Before retirement, my investments were a scratchy bunch of stocks that went downhill mostly. I did not realize what a complex business it was, and how many fraudulent offers were made by promoters, including banks. After retirement, I was still making mistakes, mainly under an "adviser" with a large bank. Never found anyone who was not in it for themselves. For some years now, I have been following timingthemarket and learned a great deal from selfless folk. I have become an adherent of quality stocks with reasonable dividends (3.5-5.5%) especially those with growing dividends.

DGI&R: I'm not too familiar with that website. What have you learned from the website and what do you like best about it? Any specific web pages from "Timing the Market" that would be good to know about or benefit my readers?

Yes, that's right. It is a great place to learn the basics of technical analysis, which I use every time I buy or sell. The best part is the blog at the end of every issue (daily) where you quickly realize that there are some very wise and knowledgeable people out there and give their time freely.

DGI&R: Any stocks on your radar these days that meet your requirements [Quality and reasonable (3.5 to 5.5%) dividend yield]?

Not really. I buy them too quickly perhaps, so nothing is left on my radar. I tend to keep losers too long, but of course, their dividends keep going up. BCE, ENB, and ENF are examples, but they are great stocks all the same, so I keep them.

DGI&R: What is the one piece of advice you would give yourself and what advice would you give to your younger self at:

Age 20: Stay on at University or college if you can and get a post-graduate degree.

Age 30: Focus on maintaining and building family values.

Age 40: Check your standing for retirement, and take steps to rectify gaps (I bought back time in previous employment…costly, but not if done early).

Age 50: Check your health, maintain physical fitness.

Age 60: If you are not retired, ask yourself why when it is probably going to cost you years of retirement.

Just prior to retiring: Don't take Canada Pension Plan early unless imperative; if you need extra income, start drawing down your RRSP or TFSA.

3 months into retirement: Join a fitness club and embrace the outdoors; hike, cycle swim, ski, what-have-you.

1 year into retirement: Work on a new interest that will keep mind and body active.

5 years into retirement: Stay fit.

Anything else? (Wisdom or otherwise…) Start a TFSA as early as possible and plug away at it. This is the greatest gift the government has given to Canadians in recent years. I manage my TFSA, RRIF and Margin accounts as a single unit, spreading my stocks among them, allowing for the different tax impacts on their returns. I tend to go high on the best stocks e.g. banks, perhaps 7-8%, and low on others, 2-4%, with about 20 stocks and ETFs in all.

DGI&R: Thank You, Doug, for answering all those questions!

Interview Structure

The interviews are conducted with real people by email, and I'll often change their name to help keep them anonymous. Some of the retiree responses have been edited for grammar and flow, but beyond this, it is in their own words.

Summary

Leading up to retirement is a particularly stressful time as large life changes are contemplated. Hopefully, you learned something from the interview that will reduce this stress and help you on your own retirement journey.

I wish Doug still had a copy of the work memo that explained that the life expectancy of retirees was reduced by a year for every year retirement was delayed after age 55. Sounds like it was a substantial deciding factor in his early retirement at 56.

None the less, it led to an interesting conversation on early retirement and mortality. After a little more research it turns out there are conflicting studies on the topic, but I did find a large 2009 German study that supports the memo.

Some other highlights from Doug's interview were:

  • Warning signs you have a bad financial advisor,
  • The impact your upbringing has on your financial future,
  • Doug's path to a blue-chip dividend stock investment strategy and some resources he uses, and
  • Advice to his younger self at different stages in life (From age 20 to 5 years past retirement).