Dave McGinn is a journalist with The Globe and Mail
Biography: Dave McGinn is a reporter with The Globe and Mail. A professional journalist since 2003, Mr. McGinn has written for the Ottawa Citizen, the National Post and MacLean’s, among other publications. For the February issue of Report On Business Magazine, Mr. McGinn set out to see what he would need to do to turn $50,000 in to $750,000 in order to secure his financial well-being in retirement.
In the article, Mr. McGinn explores what it would take for him to retire immediately with a bankroll of $50,000. After expressing his intention to his personal banker, an investment advisor with Canaccord Capital by the name of Wolfgang Klein (who I interviewed in 2007), a successful entrepreneur in Brett Wilson, Howard Atkinson, President of Horizons Exchange Traded Funds and Brad Lamb, a man oft described as Toronto’s condo king, Mr. McGinn, overwhelmed by the investment choices offered to him, ends up at a casino, hoping to strike lightning.
Having been graciously provided the opportunity to ask Mr. McGinn a few questions with regards to the article, I naturally jumped at the opportunity.
The following is a transcript of our exchange:
Q: Mr. McGinn, when coming to your nest egg figure of $750,000 what exactly did you factor into this number, why $750,000 and not a $1,000,000 or even 2,000,000 for that matter.
A: Various retirement calculators said having a nest egg of $750, 000 would generate an annual income of $40, 000. That figure seemed sufficient for my lifestyle-or at least what I imagine my lifestyle will be in retirement. Of course, just how much money a person will need to have saved for their retirement will depend on a whole range of factors. Some people may need $750, 000 in savings, while others may need $1 million, if not more. But since the underlying idea of my story was to look at what someone who hasn’t saved much for retirement would need to do in order to secure their financial well being in retirement, the $750, 000 figure seemed like a reasonable goal, considering many people will need an annual income of at least $40, 000 once they are no longer working.
Q: When you think of retire, what exactly do you envision retirement to be: is it being financially free, working at things you love to do whether its volunteering or cultivating a hobby or not working at all? In my case, Mr. McGinn, when I think of retiring, I mean being financially free so that I never HAVE to work again but working nonetheless at something I love to do whether it’s making movies or something else.
A: I’m with you on that. To me, retirement means never having to work in order to support myself financially. That said, there’s certainly plenty of things I plan on working on in retirement, most notably my golf game. And while I hope I never have to earn a paycheque in retirement (which would hardly qualify me as “retired”) I imagine when the day comes I’ll pursue a few volunteer opportunities. It’s hard to say what those opportunities will be. By the time I finally retire I’ll probably be volunteering at my local hoverboard store.
Q: With all the advice that you received Mr. McGinn from the plethora of guru’s with regards to investment opportunities, why didn’t any appeal to you? Did you consider a portfolio strategy of perhaps, investing in 1 natural gas company, I apartment etc.? Or perhaps the possibility exists to divvy up the $50,000 among a group of hedge funds that invest in totally uncorrelated asset classes, such equities, bonds, private equity, real estate etc. While the risks could be high, you will be distributing the risks over a variety of asset class. This process may involve having to do some due diligence in picking the specific hedge funds, picking the right ones can be very lucrative. For example, The Sprott managed accounts as of 2008 have had an annualized return of almost 25% a year!
A: All the investment opportunities I was presented with pretty much scared me equally. While the story I wrote was humorous, it was also meant to look at a very serious fact: Many Canadians haven’t saved anything for retirement. Those people who are in their 50s or 60s and haven’t tucked away anything for retirement are in a position where they can’t rely on low-risk investment strategies in order to secure their financial well being. They have to take huge risks in order to raise enough money to see them through retirement. In my case, having $50, 000, I wasn’t in a position to pursue a portfolio strategy. Spreading the money across several investments likely wouldn’t generate the kind of returns I was looking for. Which is what makes it so scary to be in this position. It’s of course possible to pick a stock that’s going to generate a 600 per cent return, but it’s not likely. Of all the advice I received, investing in real estate appealed to me most, because it seemed like the most simple and straightforward strategy. For a guy like me, buying an apartment and then selling it five years later is a lot easier to understand than more complicated financial products.
Q: With regards to your loss at the Casino, how is it that losing a notional $200 drove you to completely abandon having an investment strategy to help you plan for retirement? While there certain ways to cheat the Casino, I’m sure you are already aware of the saying ‘the house always wins’ whereas no such saying exists for investing in equities, real estate etc.
A: Going to the casino seemed like a perfect way to test the advice I received from Wolfgang Klein in regards to just how much risk someone in my position needs to take on: “You need to be able to put it all on red.” Once he told me that I thought, “Okay, let’s see what happens when I do that.” It only took two spins of a roulette wheel to show that if you have to put all your money into one high risk investment, chances are you’re going to be broke. I suppose I could have kept betting at the roulette table, but two spins seemed sufficient to prove the point.
Q: With regards to your conclusion Mr. McGinn, how is it that watching a group of senior citizens at a slot machine on a Monday night, prompted you to envision the same future for yourself? There are countless senior citizens running marathons or starting business an doing things the enjoy doing – does that not have an impact on your psyche?
A: I certainly don’t think the people at Casino Niagara are fully representative of what retirement looks like. But it definitely makes for a depressing sight. The retirees who are running marathons or climbing mountains or otherwise leading active, socially-rich lives provide a much better image of what I hope retirement eventually looks like for me.
Thank you Mr. McGinn!
Click here to read Mr. McGinn’s article entitled “How to retire early with no money”
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Report on Business February 2010
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