I have worked with the notion that articles in the personal finance section of the Globe and Mail newspaper were intended to provide readers with ideas for improving their financial management techniques.  A recent article had a rather ironic title – “Popular advice that might be best to ignore”.  Ignoring the article is probably the best solution I can offer in this particular instance.

The article has been taken from Reuters http://blogs.reuters.com/linda-stern/  and copied to the Globe site here:  http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/popular-financial-advice-that-might-be-best-to-ignore/article13531145/ .  Just to be clear, I am assuming that all the appropriate permissions, etc. were received and I am not implying anything by pointing to the two sites, other than to identify the U.S. source of the information.  The writer, Linda Stern, is an award winning journalist.

Blog updated with this identical article posted on the Financial Post:  http://business.financialpost.com/2013/08/01/financial-advice-that-is-popular-and-wrong/ .  Why would two Canadian newspapers post the same article from Reuters that is intended for a U.S. audience, not their Canadian readers?

Ageism

Ageism continues to appear in Canadian media.  It negatively generalizes about aging, creating stereotypes and increasing disregard for abilities of this growing of our population.  In this particular article the wording of concern is mentioned along with the need to maintain a home over the years.  Stern writes:

…If you think you want to stay in your house through your dotage…

Dotage as defined in the Oxford Dictionary is “feeble-minded senility” and in the Collins English Dictionary as “feebleness of mind, especially as a result of old age”.  Cognitive decline is not a normal part of aging.  It is a risk factor associated with aging.  Not everyone will experience cognitive decline in their later years, contrary to the suggestion in the article.  However, those receiving a diagnosis of dementia or some other health-related cognitive change will be facing substantial challenges.  Their ability to live independently will be increasingly compromised.  Disparaging terminology about some of the challenges of aging belittles the realities that some people will face and creates negative perceptions about older adults.

Misleading Financial Guidance

The article was written with an American audience in mind but copied into a Canadian publication.  It adds little value to those Canadian readers hoping to gain some additional financial knowledge from a respected source.  In a number of cases the article provides useless information.  Examples include:

 Invested prudently, it’s hard to believe that money wouldn’t earn you more than the 3 or 4 per cent you’re paying in mortgage interest – which is tax deductible, don’t forget.

Mortgage interest is not deductible in Canada.

…you’d have to keep it safe and invested in guaranteed instruments like bank certificates of deposit (issued in the U.S.).

No such instrument available in Canada so why mention it?

Instead of making extra payments to burn the mortgage early, stash those extra dollars in a retirement investment account.

Money cannot be “stashed” into RRSPs without available room requiring the right age and earned income.  TFSAs would be an ideal option to discuss.

Lost Opportunities to Assist Readers

Most Canadian readers of these types of articles are either trying to confirm their financial strategies or are hoping to gain insights on potential new strategies.  Why not discuss Canadian examples such as:

  1.  Wealth preservation, not long term investing, needs to be the priority of the average 90 year old.  Stern writes:

 Even if you’re 90, if you plan to leave money to heirs, you aren’t investing for the short term.

This person may live for a number of years or may require additional support ranging from basic housekeeping through to long term care institutionalization.  Many of these services are not insured by universal health care.  The money may be needed to fund their needs, not build an estate.  Long term may be unachievable.

 2.   Equities may need to be part of a portfolio throughout one’s lifetime but this is not limited to stocks.  Stern writes:

Large company stocks returned just a shade under 10 per cent a year between 1970 and 2012, a period that covers several market meltdowns

Individuals hoping to make up for any short falls in their portfolios may chase this high return by purchasing large company stocks.  Realistic equity return figures need to be provided.  Rebuilding assets if investment losses are large can be very challenging due to limited new income sources for older adults.

3.   Assuming that the home you are living in in your retirement years is your principle residence it provides tax sheltering (e.g. the money in the home is not taxed even when you sell it).  Cash is taxed.  Stern wrote:

Having the cash on hand, instead of the paid-up mortgage, could help with retirement expenses down the road when you’re not ready to sell your house but have unexpected expenses.

Why not have a line of credit (LOC), which is best obtained before retirement, and, if unexpected expenses occur, use the LOC.  Then concentrate on paying down the LOC with your monthly income.