FidelityConnects: Retirement unplugged – Peter Drake on life after work

[00:04:21] Glen Davidson: Hello, and welcome to Fidelity Connects. I'm Glen Davidson. Today's topic is one that affects many Canadians and equally many of your clients, life after retirement. What exactly is shaping the retiree experience and how can you better support your clients as they approach this significant chapter in their lives? Joining me in studio today is one of the original members of Fidelity Canada's retirement research team, Peter Drake. Peter is the former vice president, retirement and economic research at Fidelity. From the depths of the global financial crisis to the start of the bull run on U.S. equities he travelled coast to coast speaking to many of you and your clients. Peter has more than 50 years of experience as an economist including working with the economics department of the TD Bank Financial Group, spending 11 years as vice president of the bank and deputy chief economist. It's been 10 years since Peter retired from Fidelity in 2015 and he's come back for a special sit-down interview to share his personal reflections and professional perspectives on life after work. Just a reminder, today's show is presented in English with live French audio interpretation. A warm welcome to you, Peter. It's an honour to be here with you.

[00:05:25] Peter Drake: Well, thank you so much. I'm delighted to be here.

[00:05:27] Glen Davidson: I spoke with a number of people in the industry last week and mentioned to them that I'm going to be speaking with you and they have fond memories of you and they send their regards. You've left a great legacy.

[00:05:36] Peter Drake: Well, thank you so much.

[00:05:37] Glen Davidson: Wonderful to have heard that. You are a self-proclaimed failed retiree. I don't expect that that's how you feel today but it was at one point in your life. Could you please talk to our audience about that?

[00:05:48] Peter Drake: No question, I was a failed retiree. I retired and I was quickly bored. I wasn't ready to do all leisure things. I didn't have any interest that you can get in retirement. Now I know what they are. I tried to do a little bit of work on my own, I hated doing that, so I went out looking for a job and I really fortunate to get one at Fidelity.

[00:06:13] Glen Davidson: This was after TD. You had TD and a year and a half of retirement.

[00:06:16] Peter Drake: That's right, a period in between when I was a failure and then I got to work and it was a thoroughly enjoyable job. It was a great company to work for.

[00:06:26] Glen Davidson: So now reflections on the 10 years that you've been retired at this point, plus the year and a half that you had after TD before Fidelity, what are some reflections you can share with the audience on retirement?

[00:06:36] Peter Drake: Well, one of the things I've begun thinking about, and I still haven't fleshed this all the way out, you'll run into people you haven't seen for a while and they'll say, so how is retirement treating you? What I've learned is that there should be a second question, how are you treating retirement? So my reflection is that you really have a relationship with retirement, and if you think about what a relationship is both sides have to give something, both sides have to get something. There's going to be the odd rocky period but if you contribute retirement will give you things whether you want them or not. Think about it as a relationship. If you're proactive in retirement you're likely to have a good time. I've been at it for 10 years now, a couple of pieces of rocky road, some health issues, but here I am, 10 years out, feeling great, physically active, mentally active. If you treat it right it's a great period.

[00:07:30] Glen Davidson: So what are you doing to fill the time? I think I recall you with a canoe on top of your car all the time when you worked at Fidelity.

[00:07:36] Peter Drake: That's true, that's true. Occasionally, I'd sneak the canoe along when I was going out of town to speak but don't tell my former boss that. Well, I'm a great believer in exercise, use it or lose it. I'm a great believer in mental exercise. I still do economic presentations for a small investment group. I've done some volunteer work. I've run a club for retired people. My wife has a long list for me to do of which not very much has been done. The problem that I have, and I've got two grandkids and that's a great way to spend time, the problem is not filling the days, the problem is trying to figure out what your priorities are. I'd like to turn the question on you because you were telling me you thought about retirement, I think, a year and a half, you're about a year and a half in so you're not as far along as I am. How are you finding it?

[00:08:29] Glen Davidson: Not as far along but I'm catching up. I like what you said, Peter, about managing retirement and controlling it. Certainly, what I wouldn't have expected is the fact that bills still come in. Life is expensive. Life also happens. But it's good to keep busy, it's good do do things that are meaningful, and I've tried to control that, be part of charitable foundations as well but also to be keeping the calendar busy even with things like this which I'm fortunate to be able to do. I've also found out that Costco's busy any day of the week. I thought that it would be wonderful going during the week. It's been wonderful but the time's gone very quickly and I have a lot of people booking lunches with me on a regular basis to pick my brain about a number of things but in particular about what's retirement all like. There's usually a fear from people that they may not have things to do, and I think they'll find lots.

[00:09:19] Peter Drake: You know, that is a fear and it's the unknown. If you ask me some questions later on about the retirement report, we've got something interesting to say about that.

[00:09:31] Glen Davidson: First, before we get there, I'd like to ask about one other thing that goes with the canoe, I think, which is the trombone. I read that you play the trom-, I don't think the crew has a trombone for us to bring in, we don't have space in here, but is that something that you've honed and should we...

[00:09:43] Peter Drake: I did spend a lot of time playing trombone. I actually got paid for it on occasion. I can't do it anymore because I have an eye issue called glaucoma. I can't do a downward dog in yoga and I can't play the trombone. That's a great example. I'm not a great singer but I turned to singing and I've been a member of a choir for a long time so I can still do music. The point about that is sometimes you've got to change the way you're doing it but you can still do it.

[00:10:11] Glen Davidson: Well, I hope we can have you back another time for a webcast where we can have you sing a little bit.

[00:10:15] Peter Drake: I'm not sure you want to do that.

[00:10:16] Glen Davidson: I'd love to ask you about the time that you spent at Fidelity. You went coast to coast constantly talking to advisors and their clients and answering questions that they had about retirement. What kind of questions? What were your maybe top three questions that came up and would you answer them differently today than you did back then?

[00:10:33] Peter Drake: I will give you the top three, and I'm not sure that I would. One of them was about interest rates and it didn't really have to do with retirement, it was my mortgage is coming up. It took me so long to figure out how to answer the question, and it wasn't to give the forecast, it was to explain to the investor how to protect themselves against change. Do I do a floating rate? Do I do a fixed rate? If you take a floating rate put aside a sum of money so that you're hedging against rates going against you. If you want certainty you pick a straight-up 5-year term. Once I learned how to answer the question then that was okay, and that certainly hasn't changed.

[00:11:16] One is, well, you know, I don't have to save for retirement because I'm never going to retire. I did work well through retirement but that was a bad idea, and I said so at the time, because so many things can prevent you from working forever. Your industry might change. Your skills might become outdated. You might have a health issue. You might just get sick of working. But the really important question is the one that I could never answer, and that was, look, save all the nonsense, just tell me how much money I need to retire. My answer was always the same, it would be the same today, I can't answer the question because I don't know how much you make now. I don't know how much you spend. I don't know what your lifestyle is. I don't know what you want to do in retirement. I don 't know other responsibilities financially you'll have in retirement, maybe helping your children and things like that. This is something that if you work with your advisor you can figure out but I can't answer. People would be very disappointed but I was telling them the truth.

[00:12:18] Glen Davidson: That'll probably always be the number one question. I think what people need to realize, as I said earlier, life's still expensive, there's lots that's happening. I think people need to realize they're going to have more time on their hands to buy more stuff.

[00:12:29] Peter Drake: True, true.

[00:12:30] Glen Davidson: But who knows how much they really need? Back in June, Peter Bowen, Michelle Munro and Jacqueline Power released the Fidelity Retirement Report. I'm sure you've had a chance to look at it because you pioneered that report back when you were early on at Fidelity, and it's continued to this day. I'm sure you're happy about that.

[00:12:46] Peter Drake: I am.

[00:12:46] Glen Davidson: What surprised you as you read through this most recent retirement report?

[00:12:52] Peter Drake: I think there are a couple of things. One is that we talked back then about people working in retirement. It was a brand new concept. There was a lot of pushback. Older workers, they may not be able to work well and so on. I see from the retirement report that that's what's happening now, maybe for different reasons than we thought. We thought it would be mostly demographics, older population, shortage of workers. Now it's the financial market issues and the economic uncertainty that you're dealing with. The second thing was I saw when I was active at Fidelity a number of academic studies that said, well, you know, people die with big estates. They're saving too much money. I really wasn't very happy with that. What are we seeing now? There's more responsibility to help your children buy a house, replace the car. People want to leave a legacy. That's one that I thought was really important.

[00:13:51] The really big one, the really big one has not changed. Retirement is more difficult. There are more things to consider, financial market volatility, inflation, economic uncertainty, all sorts of things. How do you best prepare? We know that more people are using do-it-yourself retirement planning, and I know there are a lot of tools out there, but if you look at that report the same thing is true now, or more so than it was then. People who use an advisor, people who have a financial plan, a retirement plan, people who have a written plan, are better prepared for retirement, physically, mentally, socially, financially. But then in retirement they worry way less about their savings running out than people who don't have that sort of plan. Remember, we did a huge amount of work on withdrawal rates but there's still uncertainty. The importance of working with an advisor is more so now than it was when we started it 20 years ago, and that leapt off the page.

[00:14:56] Glen Davidson: Interesting that you mentioned about costs, parents wanting to perhaps contribute to and/or buy a house for their children. That wasn't the case 20 years ago. Now that could leave those retirees without a lot of money, and it's gone to the children instead of it growing still with the retiree. That's a risk today, too.

[00:15:15] Peter Drake: Well, it is a risk and the thing is you've got to find a balance. You want to help out your kids, or I think most people want to help out their kids, but you've got to have a life yourselves. As you get older there may be more care expenses, things like that so you've got to think about that and figure out the balance, and you need help to do it.

[00:15:32] Glen Davidson: How should advisors format some questions for, and work with their clients today based on those retirement needs and discussions that they should be having?

[00:15:43] Peter Drake: I think the most important question, and I think the most difficult question to get their clients to deal with, is what do you want your retirement to be like? What do you want to do? How much do you want to spend? Have you had a passion to do something that you've never had the time to do that maybe is going to cost you some money? You've really got to think about that and it's not going to be, I don't think it's going to be a simple conversation but if you can get people thinking about that. When I was working for Fidelity I used to say some people view retirement as something that's behind a wall. I said, I don't think that's the way it is, and it's not, it's absolutely not. You have challenges when you're working, you have challenges in retirement. So it's to envision that and once you've begun to do that then the advisor will find it, I think, relatively easy to help you do the plan that will get there. Now, there's going to be pushback. Somebody is going to say, well, forecasts go wrong. Of course, they go wrong I've done a lot of forecasting, I don't want to tell you how many of mine went wrong.

[00:16:57] Glen Davidson: Yours were always right, though.

[00:16:58] Peter Drake: Well, I wish, I wish. The point is even if a forecast doesn't come exactly to you've got a benchmark. You might decide that that thing that you always wanted to do, that's really not so much fun after all but you've got a benchmark to work off to change course. So doing the forecast, working with your advisor, that's really important.

[00:17:17] Glen Davidson: When you retired I recall you talking about your investment mix and I recall you saying, you know, I'd still like to keep a bias towards equities. Fixed income wasn't as attractive to you. Now you fast forward to today, how do you feel about your investment mix and perhaps something advisors should be thinking about?

[00:17:34] Peter Drake: Well, I'm still of the same mind. I was in a fortunate position when I was working for a Fidelity because I'd done quite a bit of saving for retirement so I felt at that point I could afford to be more aggressive on the equity side than many are. But what has happened since, of course, is that bonds have — how can we put this politely — not always given us the return that we would like so equity markets, I think, are very important. Again, there are a lot of equities out there and getting advice as to how to not only the asset liability mix, or the asset mix, but what you're actually going to invest in. I have found — first of all, I was fairly modest in my expectations. I figured let's be realistic about this.

[00:18:25] Glen Davidson: Wise.

[00:18:26] Peter Drake: My expectations have been more than met. Again, equity markets are really important to doing well in retirement  but you need help.

[00:18:37] Glen Davidson: Did you ever find that people asked you should I go to cash the day I retire because all bets are off at that point and I've got to be ultra, ultra conservative. Was there a feeling of that in the marketplace?

[00:18:49] Peter Drake: There was at times, particularly when we hit the great financial crisis back 2008 through 2011. Interestingly, I looked at the stats in the retirement report about people saying, you now, I'm only going to buy very safe things. I said, yeah, but maybe that's not the way to go. We understand the need for safety. I will say that in my career explaining risk to people was one of the hardest things I ever did. It's very difficult to explain risk and people only really learn when maybe something goes down a bit. I think you really have to work with the markets and don't be greedy and you'll be okay.

[00:19:37] Glen Davidson: It's a nice way to sum it up. A couple of years ago you put together the seven paths to peak retirement. Let's go through those seven paths, the first one being exercise, and you talked about it. It's something you took near and dear to your heart a long time ago.

[00:19:52] Peter Drake: I am a firm believer in use it or lose it. The problem is if you don't do physical exercise, if you don't do mental exercise you won't realize it's slipping away until you try and do something and say, oh, dear. That's why I do these 10 economic things each year. Sometimes my wife says, why are you working so hard? I said, well, look, if you're going to do it you've got to do right and I need the mental exercise. I work really hard for about three days to get ready for this half-hour presentation. The same thing, you exercise for a couple of reasons. One, to feel better but the other thing is ageing. Balance becomes an issue so I do balance exercises every day. You're going to help the ageing process, and if you happen to run into some health issues it's going to help you recover better.

[00:20:45] Glen Davidson: Another point is friendships.

[00:20:50] Peter Drake: There are very few people who lead good lives being hermits. You need company. I used to say when I was working for Fidelity, you probably don't realize how much of a social life you have at work. Now, that doesn't mean that you love all your workers but it is part of your social life and when you retire that goes awa so you need to deal with that. My way, I lucked into something, I was walking by a neighbour's house, I think the weekend after I retired from Fidelity, and I told him I'd done that and he said, I've got the thing for you.  He got me involved in a very active Probus club. It's one where I think they have 25 different activity groups but there's one common thread. Everything involves some sort of social interaction. Now, I happened to be president of this club when COVID hit. We had to shut things down but we gradually got back up electronically and got the thing going until we could get back together.

[00:21:44] It might not be organized like that, it might be having coffee with people once or twice a week, which I also do. If you happen to sing in a choir you're in a social activity as well as a physical and mental activity. You've got to get out and see people. I remember going and talking to a group at a church one time. They were all retired and they'd all kind of come in, they all had great jobs and they would come into this and you could see, you could just imagine their wives saying, look, you guys, get out, go to that lunch. Then they got together and they started talking and they started comparing notes, whether having a problem or having a great time and all of a sudden they're having a terrific time. It wouldn't have mattered whether I'd spoken to them or not. It demonstrated how important it is to get out with people.

[00:22:32] Glen Davidson: Unexpected expenses is another one of those paths.

[00:22:35] Peter Drake: I've been there and done that. We just had all the windows in our house replaced. We should have done it long ago but we didn't get around to it. Then there was the day that the furnace quit, kind of had to replace that. It was January and minus 25. Cars wear out. Your kid's cars wear out and they need transportation. This is where, thinking about that relationship with retirement you prepay that because you know it's going to happen and if it doesn't you'll find something to do with the money. Expect the unexpected, sure.

[00:23:09] Glen Davidson: Earlier, Peter, you mentioned some health issues that you dealt with, and obviously dealt with very well because you're the epitome of fitness sitting here [crosstalk].

[00:23:18] Peter Drake: Yeah, I had quite aggressive prostate cancer. I had surgery, then I had radiation. Took a little bit to recover though I think the fact that I was in good shape going in helped.

[00:23:30] Glen Davidson: That's wise.

[00:23:31] Peter Drake: Everything's fine. I mean, I've been cancer-free now for several years. Okay, I can't do everything I could 15 years ago but I can still do all of it so...

[00:23:43] Glen Davidson: Well, that's wonderful to hear. Congratulations. How about taking some risks in life?

[00:23:51] Peter Drake: Life has risks. You get out and walk across the street you're taking a risk. I think we tend to think that we should be more risk-averse as we get older, and that's fair. But the thing about retirement is that there's a lot of change involved and sometimes we're reluctant to make changes. Now, I've made two changes in my life. I changed gyms, and gyms are very important to me, a place to exercise. I was at a gym where there was going to be too much chatter and not enough workout and so I said, okay, I've got to do something about this because the workout's really important. I've cut ties with an organization I was with for a very long time. I took on an assignment, I had a great group of people, we did a great job but at the end of that I said, you know, I think I need a change. It was a fairly big decision but you say, look, change is what it is. So I cut the ties and I'll be looking for something else to do. I really believe that you've got to be prepared to change. Things are going to change, you have to change with them.

[00:24:54] Glen Davidson: I'm fascinated about what you said about the gym. There's too much chatter so you've changed to one that's just silent? What was it all about?

[00:25:02] Peter Drake: I think it was just getting ... we got to know each other maybe a little too well, and it was also a small gym. The one I go to now we say hello and then maybe comment on something. Gyms are great because you see other people doing things that inspires you. You maybe learn an exercise that you should be doing. I just think it's a great idea, a great way to exercise but you've got to remember why you're there.

[00:25:30] Glen Davidson: Well, make sure at this new gym that you don't tell anybody where you used to work or they'll be picking your brain all the time about the market.

[00:25:35] Peter Drake: I'll keep it quiet.

[00:25:38] Glen Davidson: The seventh point, this has to do with titles. From what you've told me you were not defined by the title that you had at TD or Fidelity. I feel the same way. You said, though, that you need to be the CEO of your life. Talk about that, please.

[00:25:53] Peter Drake: That's one title that is really important. Being the CEO of your life really captures some of the things we've already talked about. You are in charge in a way that you've never been in charge before. When you were a kid your parents were telling you what to do. You went to school the teachers told you what do. You're in a job, you've got a boss telling you what to, your customers, whatever. All of a sudden you're a grown up, there isn't anybody telling you what to do. You may have a partner who does give you a few instructions but basically you have to do that, and you're not used to doing it. The thing about freedom, one of the things retirement gives you is freedom, freedom to do things, but if you don't take that freedom and make use of it it's no good to you. It's harder than it sounds.

[00:26:46] Okay, I've got a day, I don't have any meetings I have to go to, how am I going to spend my day? My answer to that is put a little bit of a schedule in. Exercise for me is the first thing in the morning and that gets you going. Once you're going you'll look around, I keep a list of things to do, it's that long, you will find things. If you're involved with people there will be people that you want to meet. There will be organizations whose meeting you want to go to. There'll be volunteer work, and that's something we haven't talked much about but there are all kinds of opportunities, very fulfilling jobs being a volunteer.

[00:27:27] Glen Davidson: It's true, there's a lot of charity boards that need the tenure that you have in your mind to contribute to that. I found that as well and I think it's very fulfilling.

[00:27:36] Peter Drake: Well, one of the great advantages, I mean, getting old isn't all advantage, there are costs involved, but one of great advantages of getting older is you've got perspective, you've got experience. You've been through that before. That can be incredibly valuable to a group of people who haven't that experience.

[00:27:54] Glen Davidson: Indeed. You must meet with a number of ex-colleagues from TD, Fidelity, wherever, that you've crossed paths with in your life. You must meet regularly and have discussions about retirement and what it's working out to be for people. Have you found that people have said, you know, I kind of wish I didn't retire when I did?

[00:28:10] Peter Drake: The odd one. When you take that discussion a little bit deeper you find out that they really hadn't given the kind of thought that you and I are discussing today. The other thing is I was incredibly fortunate. I had two jobs and I loved both of them. Not everybody is that lucky. If you really liked your job and if you were good at it, yeah, you're going to miss it. One of the things then you think about is, well, are there some parts of my job that I can still do? Now, I'm really lucky that I'm an economist and not a brain surgeon because economists can keep going, brain surgeons have mandatory retirement, and for very good reason. Some people have to make more of an adjustment than I did.

[00:29:00] Glen Davidson: Let's pick up on the economist side of what you just said. Once an economist, always an economist. We've got a few minutes left. You've got to have a take on what's going on in the markets today. Love to hear it.

[00:29:11] Peter Drake: Well, one of the fun things about being an economist is that you never get tired of it because there's so much change that every time you think you understand what's going on you discover that you don't. That describes where we are now. We didn't know that COVID ... I mean, people would say, you know, what if there were a worldwide problem, a medical problem? We had to learn how to deal with that. Before that, we had learned how to deal with the financial situation when we had the big crisis. Now we've got ... I'm trying to think of how to put this politely ... U.S. policies that are a bit disruptive. Uncertainty is not a good thing. We are going through a difficult period but I am convinced that if we hang in there this will turn out very well for us. Now, that's easy to say.

[00:30:04] Canada made a mistake. It made a mistake that we as investors, hopefully, would never mistake. It put something like 60% of its investments in one equity. In other words, it concentrated on trade with the United States. There were good reasons for doing it, and I understand that, but I worried about this. I worried about this for several decades. We finally have figured out that we need to diversify. It doesn't look like the U.S. is doing us any kind of a favour at the moment but I think we can come out of this. Inflation is potentially a problem. We just got numbers out today, the numbers were pretty good and sufficiently that the Bank of Canada may do a near term interest rate reduction, so that's good. I think we have to be prepared for some very slow economic growth in some quarters. We've actually had a quarter of decline. We are in a period of readjustment.

[00:31:04] Now, readjustment is something that takes time. It's difficult but you can do it, the economy can do. I think I'm seeing a spirit in Canada that says we will do it. I think we are in a period of slow economic growth. I think that, as you know, equity markets have been doing very well, I think sufficiently well that we want to be maybe a little bit cautious. We're dealing with this uncertainty but we've dealt with uncertainty before. If we can do some restructuring in this Canadian economy I think we will come out of this much better than we have been for a long time.

[00:31:45] Glen Davidson: That's very interesting and very insightful. Thank you for that. Peter Lynch many, many years ago said if you spend 13 minutes a year on economics you've wasted 10 minutes. He obviously hadn't met you. Thank you so much, Peter. It was wonderful and an honour to speak to you today. I know all of our viewers wish you good luck and happiness and health in your life as well.

[00:32:04] Peter Drake: It's been a pleasure, Glen. Thank you so much.

[00:32:06] Glen Davidson: Thank you very much, and thank you. Here's what's coming up on Fidelity Connects later this week. Tomorrow, Étienne Joncas-Bouchard, Director of ETFs and Alternative Strategy, will present in French at 10:30 a.m. followed by Fidelity Connects in English at 11:30 a.m. Étienne will reflect on Canada's ETF banner year and how the current ETF landscape is evolving. Plus, he'll provide an update on Fidelity's All-in-One ETFs.

[00:32:29] On Thursday portfolio manager, Lee Ormiston, will unpack what this week's rate decisions may mean for your clients in fixed income markets. Thursday's webcast will be presented in English with live French audio interpretation.

[00:32:41] To wrap up the week we'll look at what's shaping health care globally with portfolio manager, Alex Gold. He'll expand on innovations, policy shifts and demographics that are shaping this sector. Thanks very much for watching. Take care.