This ad has driven a lot of questions to the Gumshoe doorstep — the pitch is from Zachary Scheidt for his Lifetime Income Report, and it implies that we can get extra “benefits” by “piggybacking” on the Social Security plan of Canada.
Really?
Well, no. Not in the way you’re thinking. But if you have a very open interpretation of the word “piggybacking” and are willing to accept an imaginative turn of phrase, there is a little something to the ad. Let me explain.
For those who are new to Stock Gumshoe, this is what we do — we look at the ridiculous ads sent out by investment newsletters and others, the ads (like this one) that promise huge returns and use misleading language to imply that there’s a secret stock or strategy that will finally get you that yacht and Maserati in time for retirement… and we tell you what the ad is really hinting or teasing us about, explain what it is as best we can, and let you think for yourself and do your own research once you’ve got a bit of the reality and can understand the logic (or lack thereof) of the investment.
We do this most every day — sometimes we find great ideas hiding behind the terrible ads, sometimes we just defuse the greed impulse and save people from themselves… you can use the links a the top of the page to sign up for either a free or paid membership, or just submit your email here to get our free daily newsletter with new teaser solutions.
And here I should note that this ad was originally sent around in May of 2015, and that’s when we covered it. I have lightly updated a few things here today, but the following article is essentially unchanged since 5/13/15 (the ad being sent around today still has a May 2015 signature line on it, so that presumably hasn’t really been updated either).
The only real change in the ad is that the hook is now not just that there’s a way to “piggyback” on “Canadian Social Security” with Scheidt’s special piggybackretirement.com website … but that this secret “rattles the cages” in Washington, and Zach Scheidt got a threatening letter from a government agency because he sent this ad around (he doesn’t share the text of the letter, but I would guess that the content was more along the lines of “stop misleading consumers” than it was “stop revealing these important secrets”).
Back to Zach Scheidt’s ad… the headline is what really gets peoples’ attention, I think, that notion that somehow “piggybacking” Canada’s retirement plan is going to get you some “benefit” checks…
“Americans Now Legally Piggybacking ‘Canadian Social Security’… And Collecting Extra Monthly “Benefit” Checks From $400 to $4,700”
And no, you’re not going to get that. You can’t get benefits from the Canada Pension Plan (that’s what they call their social security system) unless you pay into it while you’re working in Canada — in broad strokes, it’s not too different from the US Social Security program.
But you can, kinda, copy them. If you want to.
That’s a big difference, no? Imitating someone, versus collecting checks from them? I’ll explain a bit more in a moment, but first I have to share with you just a bit more of the misleading teaser pitch — here’s the part about why you’d want to “piggyback” on Canada’s scheme:
“I recently heard some fascinating claims about a potential loophole in the Canada Pension Plan…
“A loophole that allows Americans of any location, age or income level to begin collecting ‘work-free’ income checks running from $400 to $4,700 per month.
“The Canada Pension Plan — in case you didn’t already know — is the Canadian equivalent of the Social Security system we have here in the States…
“…except for a few key differences.
“Unlike American Social Security (which is run by overpaid government bureaucrats), the Canadian variety is managed by a highly skilled team of professional investors.
“Also, unlike American Social Security (which you and I both know is a system that’s running on fumes), the Canadians have managed to more than DOUBLE their reserves since 2004.
“In fact, from the projections I’ve seen… reserves for the Canada Pension Plan are set to QUADRUPLE by 2040 (which, ironically, is the same time when most experts believe American Social Security will be completely bankrupt).”
All that is pretty much true — the Canada Pension Plan does really include a distinct account, and it is managed as an investment account like most private sector pension funds, buying up equities and bonds and valuable assets around the world in order to meet their future income obligations. Canadians don’t get more retirement income when the pension plan does better, their benefits are set by law and regulatory guidelines in much the same way that US Social Security benefits are set, but they do enjoy a bit more security, perhaps, because they have what I consider a much more viable system.
The Canada Pension Plan has probably about a 75-year horizon of reasonably being able to pay expected benefits based on the current contributions and the value of (and returns from) the investment fund, so it’s not just a pay-as-you-go benefit like Social Security (though the fund only represents a small portion, 20-30%, of future liabilities, the rest is like Social Security and dependent on future contributions), and the government hasn’t been using all the cash flow from Canada Pension Plan contributions for other things — the Canada Pension Plan, unlike Social Security, is partly in a “lockbox”, at least for now, and it’s not just an IOU from the government.
But can you piggyback on it? What the heck does that even mean? Scheidt goes through several examples of readers he has talked to who have, or at least so he implies, somehow invested in the “Canada Pension Plan” … here’s one example:
“As Anne explained, she first discovered about the Canada Pension Plan while living with her husband in Nashua, New Hampshire.
“Her house was, as she put it, ‘just a stone’s throw from the Canadian border’ … and her backyard actually ended at the provincial boundary.
“But make no mistake about it… Anne has never lived or worked in Canada. She barely even visited our “neighbor to the north.”
“So how was she able to piggyback the system?
“Well, according to Anne, it all has to do with a major change that took place with the Canada Pension Plan back in 1997.”
I guess “a stone’s throw” is a nice colloquialism you can use for any distance, but Nashua, NH is just about a Boston suburb — it’s about as far south as you can get and still be in New Hampshire, so it’s about a three hour interstate drive to the Canadian border. And apparently Anne has a helluva big yard.
But that’s not the real point, of course. Yes, 1997 was when Canada reformed the Pension Plan to make it more sustainable — basically, they increased the contribution rate by 50% and created that investment fund. The fund is indeed managed with some independence, it is overseen by the semi-independent CPP Investment Board, and it is basically a huge institutional investment fund with about $250 billion under management in the CPP Reserve Fund.
I admire the Canadians for doing this, it was an abrupt but probably much healthier solution than simply scooching out the retirement age and increasing contributions and adding taxes here and there as we’ve done in the US — as is typical, US politicians did what voters consistently tell them we want them to do: Put a coat of paint on the problem, and don’t make any hard choices. That’s probably not completely fair — we did increase Social Security taxes as part of the tax reform program in the early 1980s (not as dramatically as Canada did a decade later), and again very slightly in 1989… but that’s about it.
But that’s not the point, either — other than that Zach Scheidt certainly knows that talking about Social Security will get retirees hot and bothered, and getting people hot and bothered is a good way to get them to read your ad, and oh, by the way, the average person who subscribes to an investment newsletter is roughly 60 years old, exactly the person who gets most anxious about Social Security. And nothing about Canada’s Pension reform of 1997 had anything at all directly to do with this “Anne” person unless she was a Canadian citizen.
So what’s the real story? More from the ad:
“I began hearing wild rumors about a savvy group of Americans who’ve figured out a way to legally piggyback the Canada Pension Plan…
“And collect an additional $400 to $4,700 per month as a result.
“From what I could gather, these folks were able to do this without living… working… or even traveling to Canada.”
This, really, is the problem with the ad — folks are likely to read that and see words like “collect” and “benefit,” but a far more accurate word would be “earn.” Because all Scheidt is really talking about here is collecting dividends.
They don’t even have to be Canadian dividends, frankly. And probably most of them aren’t from Canadian companies.
The woman he uses as an example, Anne, provides a few more clues about exactly what’s going on underneath this charade of “Canadian Social Security Benefits”….
“Anne didn’t invent the loophole, or even discover it for herself. She simply heard about it from a close friend (sort of like how I’m telling you today).
“And since it seemed relatively risk-free and only required a few hundred dollars (and a couple hours of her time) to get started, she figured it was something worth trying.
“Anne continued to make ‘contributions’ to the account… which can be done in some cases for what amounts to as little as 50 cents per day. Less than the price of a cheap cup of coffee at the store.
“She didn’t have to ‘renounce’ her citizenship… or visit a Canadian embassy …or do anything drastic.
“Today, she collects enough in ‘benefits’ to do all the extra things she wants… without putting any additional strain on her budget.
“And the $407 she collects every month from ‘piggybacking’ — barring any unforeseen disaster — should continue to ‘roll in’ for the rest of her life.”
Whenever a word or phrase appears in quotes in these kinds of teaser ads, like “Canadian Social Security” or “Contributions” or “Benefits,” you can pretty much assume that the quotes mean, “look out, I’m making stuff up here.”
What Anne really did, in all likelihood, was set up either a simple brokerage account or a direct stock investment plan (DSPP or DRIP are usually the terms used now, and their primary benefit is that they allow small monthly investments in individual stocks and free dividend reinvestment — something that used to be almost impossible before discount brokerages took over a couple decades ago). She either collected the dividends or reinvested them, and she kept buying a bit each month, and she reports those dividends on her taxes just like anyone else, and they provide a nice supplemental bit of income to add to her pension and her (US) Social Security checks. Scheidt says that she reports this “Canada Pension Plan” benefit on line 9a of her 1040, which is, of course, right where you report your dividend income.
What is she earning that dividend income from? That I can’t tell you, Scheidt doesn’t hint at all about which income investments he suggests, or which ones Anne bought, or what might be the best buys now — line 9a is actually for ordinary dividends, not qualified dividends, so it might even be that he’s suggesting slightly more traditional income investments like real estate investment trusts (REITs) or bonds, or funds that invest in such assets and which pay fully taxable dividends (as opposed to the qualified dividends that are paid by most “normal” corporations that aren’t tax-advantaged entities).
Scheidt does go on to get a little bit more clear about this, after talking about the huge asset base managed by the Canada Pension Plan, including investments in hundreds of companies and funds around the world — here’s how he gets us back to reality — at least, for the few intrepid souls who could stand to read this far in the ad:
“… they strategically invest in companies that are highly profitable… companies that gush large amounts of cash.
“Like one of my favorite businesses… a company you’ve probably never heard of before… a company called Realty Income Corp.
“Realty Income Corp. specializes in commercial real estate. It owns 4,300 properties in 49 states and rents out these properties to businesses like Walgreens, Taco Bell and Fed-Ex.
“And here’s why I like it so much: Its main goal is to make ever-increasing dividend payments to shareholders.
“In fact, its mission statement reads, “Since 1969 our mission has been the same… to generate dependable monthly dividends.”
“And that’s the key: dependable monthly dividends.
“It’s now paid out 535 consecutive monthly dividends. And it’s increased those payments 79 times.
“And when you begin piggybacking the Canada Pension Plan — in the way I’ll show you in just a minute — you essentially become a part-owner in incredible income-producing assets like Realty Income Corp.”
So yes, “piggybacking on the Canada Pension Plan” really just means “buy good, income-producing stocks.”
Dang.
You actually have to buy them. And wait for your dividends to come in, and to compound over time. And you don’t get free money from the Canadian government.
This is terribly disappointing. But, of course, reality often disappoints — especially when it comes to investing.
Do you really want to “piggyback” on the Canada Pension Plan? Their goal is 4% annual real returns (after inflation), which is the number they need to hit to pull their weight in backing pension benefits for the next 75 years. To do that, they keep costs low and have lots of investments in real estate, private equity, and public equities — you can review their website and see some of the specifics about what they own if you like, but other than a few overweight positions in Canadian banks and assorted other international investments it’s going to end up looking a lot like the performance of a global stock market index. They own 2,500 individual equities, and their largest weighting is less than 0.5% in any one stock. A conservative, extremely diversified equity portfolio.
And yes, they do have a mandate to invest with an eye on future inflation prospects, and to try to get some “alpha” by investing with other private equity and hedge fund managers, and buying individual income-producing assets like office buildings — but that’s really no different from any big pension fund or insurance company. There’s nothing magical about the Canada Pension Fund, and it certainly doesn’t have shockingly magical returns — just like there’s nothing magical about buying a bunch of dividend-producing stocks, investing continuously into those stocks, letting your dividends compound, and creating a big of a supplemental income stream from those dividends over a lifetime of investing.
That’s really pretty much all she wrote — or all he wrote, in this case. Scheidt says he has a private website that will help with some future income planning, and help you “piggyback” on the Canada Pension Plan, but I would imagine that probably what he’s really doing is picking a couple dozen income stocks, probably including REITs like Realty Income (O), which was the only individual idea he mentioned or hinted at in the ad, and throwing in a few personal finance calculators so you can see how much you have to invest in these kinds of stocks in order to earn some future hypothetical “piggyback” income.
He does also briefly mention “juicing” those dividends, which means he’s very likely also suggesting some options income — selling covered calls or cash-covered puts along the way on your stock holdings to improve the returns (with some significant tax consequences sometimes, so be careful), but that’s about it as far as this ad goes.
Anticlimactic, no? Well, at least I warned you up front — no, the Canadians aren’t going to send you a benefit check unless you earned it, and you can’t “buy in” to the Canada Pension Plan (nor would you probably want to, since you’re probably aiming for returns of more than 4% — or can get similar returns with either a large basket of dividend stocks or a few index funds), and unfortunately I can’t tell you which specific investments Scheidt is suggesting for income because he doesn’t hint at those at all. If you’ve suggestions for income stocks you think are worth consideration, whether they’re Canadian banks or REITs or “blue chips” or whatever else, please feel free to toss ’em on the pile with a comment below.
What do you think of Martin Armstrong ,Armstrong Economics & the movie FORECASTER ?I read his BLOG every day very interesting let me know what you Think.
Up to now I thought Stansberry Research to be reliable and above board. Now I’m beginning to get a bit leery with that CPP piggybacking bit.
Stansberry has a history with the SEC. Read up and beware!
http://articles.baltimoresun.com/2007-08-10/business/0708100274_1_pirate-investor-llc-special-report
I came across the ‘piggybacking’ add accidentally. I thought if ‘free lunching Americans’ , are trying to get their grubby paws on the Canadian pensions, they could also be eyeing up my Australian pension. But after reading the above I’m sleeping again.
My mother said, always be aware of a man handing out goodies
John,
I lived in Australia & worked there long enough (10+ years) to be eligible for an Australian pension. Is it worth trying to claim one? I’m eligible for US Social Security.
Penny
I’m Canadian and I knew Scheidt’s claims were fishy because I can only collect from the Canadian Pension Plan (CPP) if I’ve put money into it. And you have to be a Canadian citizen to do that and living in Canada.
Thanks for writing this article Travis! I almost bought it for $49 and then probably never would have been received a refund! What a scam!
Here’s a novel idea . If you want more cash for your “retirement “, QUIT spending so much on useless crap and the quest to aquire more things !
Thank-you so much for the comments on this page. I was ready to buy into this but it sounded too good to be true. It just had to be a scam of some sort…… Dodged the bullet on that one. thanks everyone!
Agree. I stumbled on the ad re piggyback into the CPP (that headlined in today’s NYTimes, giving it a veneer of respectability.) I wondered about it and, checking around, found your website. I would _never_ buy into something without checking and I thank you very much for doing the research.
I always try to research before I do something this stupid. I saw “mail check” , and that was it…though I would like to get into stocks, being poor limits that. I do work, but always broke from paying bills. Paycheck is always JUST enough to cover them.
As usual, I should’ve checked into GumShoe Travis’s site here before jumping in and ordering the Lifetime Income Program, also recently touted by Schaeffer Research. But as Travis has already described, the closest you get to the Canadian Social Security or their Pension Fund is five stocks “cherry picked” out of CPP’s portfolio of 1000’s of stocks, which are all public knowledge via their website at cppib.com. Plus the CPP has their investment fingers in many pies, so the returns and solvency of their Fund does not rest entirely on their stock portfolio.
The five stocks are HCP, PM, CSCO, MSFT. COP — I need to spend $79 for those recommendations ?
Their presentation was so hurriedly put together they dropped the 000’s after the reported CPP stock holdings in each of those. For instance, per the report the CPP owns 560 shares of HCP — ‘should read 560,000 — the same typo was made for the other stock recs.
At least I was refunded my money promptly.
Welcome Wolfgang- If you any interest in biotech you may join us on the current Dr. KSS thread here: http://www.stockgumshoe.com/2015/06/need-to-know-frontline-dispatch-from-the-cholesterol-wars/ The education and opportunities are amazing. Best2Ya-Ben
Thanks Wolfgang — and not even a Canadian stock among them, eh? I’ll go out on a limb and predict that list of five stocks will be within 10% of the S&P’s performance ten years from now. Which would beat most investment managers, so maybe not terrible, but your perception of the value of something depends a lot on how much lying the salesman did to get you to buy it.
So they want you to buy these 5 stocks and hold them forever. CSCO has a 15 year track record of negative 4.64% annualized. That doesn’t sound like a stock I would want to hold long term. MSFT has a 15 year annualized return of 2.46%. No wonder they said that your portfolio will only grow 4% a year.
Did you notice that the article on “piggybacking Canadian Social Security” stated the system currently served 18 million Canadians? That’s a miniscule amount of recipients (if it’s true) compared to a system serving many millions more, such as the US system.
Isn’t the real problem for young people seeking reliable retirement plans the risky nature of investing, the corruption of American financial services, inflation and the lack of expendable income for investing because of wage stagnation? The best retirement plans are still the defined benefit plans run by people who are exclusively accountable to and paid by the people who are the beneficiaries with rigorous controls over risky investing. Protecting investment efforts from predatory bilking and legalized swindling is what Americans really need to demand. Otherwise, like a very wealthy man has said more than once, “Investing is a crap shoot.”
“18 million Canadians” is just over half the country. In the US, the estimate is that about 165 million workers are paying into Social Security out of a population of 320 million. Similar ratios — and at that scale, the difference in performance should be negligible if they pursue similar strategies (which they do not).
In many ways I agree with you that defined benefit plans are far better for many workers than are 401(k) plans, but that era of paternalistic companies who rewarded employees after 30 or 40 years of service is largely over — we do need a better solution for a flexible workforce. I’ve had about ten different employers and younger workers will have many more before they’re done, the huge failure of pension plans, beyond any structural or performance issues of the actual companies, was that they don’t give you a chance to build a strong retirement pension if you work for six years each at five different corporations. 401(k) plans were supposed to do that, but they were launched without a clear national push for the fact that this means you have to put 10-20% of your salary into this fund, and employers should treat matching funds or contributions as a big part of compensation and not as a way to get out of funding a pension.
Some companies and workers have done very well with 401(k)s, but there isn’t enough incentive or education for them to get to where they need to be, and a matching fund for savings is not as hard to tinker with as a pension. I think we’re going to have that sandwich generation, the tail end of the baby boom and the beginning of my generation, that gets the short end of the stick because the “new reality” wasn’t clear yet, but the next group through should start out saving more. Hopefully the current push to lower unemployment, and growing competition for labor, will create a baseline for better retirement benefits, and education will improve — we have a huge number of people who are financially illiterate to a substantial degree and either don’t plan at all or fall prey to nefarious “helpers” in the financial system — not people in abject poverty, who have little opportunity save, but those in the middle class who don’t realize how important it is to prioritize saving and to know really what their financial future might hold.
Thanks for exposing” the piggyback of Canadian soc. sec.” article as a probable scam. I never knew about your Stock Gumshoe site and will happily sign up. Thanks again.
Louise (90 years old and still kicking)
Thanks Louise, welcome aboard!
Thanks for the info. I almost fell for that scam. Glad I found your site. Saved me!
And here I just thought it was a virus/malware link..
I laughed when I read the headline but curiosity got my interest. I laughed a bit more but began to research what he was talking about. Thank you for having this website to explain in plain english.
Thanks for hosting this site and removing the fog created by the Stansberry Group. A few days ago I called them to request a refund on another issue and they had to set up a special website to handle the refund requests overload. I can imagine much of which came from the Canadian piggyback program. The thing that tipped me off that this was suspicious was their claim that the CPP would not affect your U.S. Social Security. I live in Germany and have earned the U.S. Social Security and also the German equivalent. The U.S.SS has a rule called Windfall Elemination Prog. and in short reduced my German pension by about a half. I enter this to give someone that is thinking about working outside the U.S. hoping to bolster their retirement a heads-up.
Good for you Jason, Given the deceptiveness of the ad I hope that everyone that got taken in by this scam asks for a refund.
Since I receive about 100 E-mails per day on average, I inevitably fall behind every month and today I was working on catching up on stuff I missed in mid-May when an Agora publication I regularly read 5 min forecast edited by Dave Gronigan popped up and he was responding to readers who had complained about the ad concerning “piggybacking Canadian pensions” and while quite dismissive and defensive, he did nothing to really clarify the real issues. I immediately wrote him the following;
I as a Canadian think David Gronigan is over reacting to the criticism of readers in respect to piggybacking on the Canada Pension Plan. My first reaction on reading it was similar, why should Americans be able to benefit from our superior program? The way the copywriters have worded it, it makes it SOUND like Americans can get paid from the Canada Pension plan without living, working or even visiting, which WOULD be a ripoff of Canadian taxpayers,
Since the article is heavily slanted that way, WHY should he be surprised at the negative reaction? IF you told the simple truth there would be no confusion, not everyone is mentally equipped to decipher the simple truth that the key word “piggybacking” simply means checking out the successful investments of professionals and making the same ones yourself. Instead of coming clean, Dave simply extends the apparently deliberate, deceptive and misleading slant of the copywriter without clarifying the issue. To add insult to injury, these ads use a great deal of hyperbole with promises of huge profits that are totally out of sync with the average investors available capital, NEVER are any of these and similar ones offering any guidance as to HOW MUCH has to be invested to achieve the bloated projections. So what does any right thinking and honest person conclude? It would appear that AGORA as a company believes that they can not sell newsletters with honest straightforward explanations of ideas and programs, that it takes subterfuge, deception and obfuscation, and I say that as a long time RESERVE member. You can fool some of the people some of the time, but you can’t fool all of the people forever, your reputation and perception of integrity by readers hangs in the balance.”
Ironically the very next E-mail I had missed was the Gumshoe column by Travis responding to this very ad, which is WHY I have added the above because i believe the issue needs more publicity. These fat cats get so isolated from reality that they really don’t get enough feedback to make them sit-up and take notice how readers are reacting. One could only hope they apologize for their insensitivity and ultimately change their ways, but probably that would be too much to hope for. Incidentally Travis was right on Zack’s focus. Since as a Lifetime Reserve member” I get all of Agora’s publications I had been reading his writings and the recommends a “Puts and Calls” strategy, which I concluded is only for millionaires or at least close to it as the up front money required is simply out of reach for rather meagre returns. I would rather put $500. to $1000. into a well researched penny stock that has the potential to double or triple than putting out tens of thousands to earn a few hundred on risky options.
I need more info send me more detailed at my email ltorres353@gmail.com or give a call at 7879487753. Thank you. Well I need some body to contact me thank you.
Travis , I had 63 wonderfull years of married life with Nancy Johnson who had a cousin named Travis ; couldn”t find the heritage , but love your stuff…. HOW ABOUT THIS; Those good Canuk investment expert were trying to figure a way to siphon off some of that USA investment money, so near so far into THEIR coffers not via Canadian brokers. ” Lets get the USA to help with our investment leverage. SO lets add a clause 724X that permits them to invest cash wrthout the handicap of citizen ship or residency…. just like they are doing now , but with CPP. Sooves the problem with a few caveats so the flow wouldn’t the wrong way. Scheidt says he has the forms and the phone numbers for contacts . I think its a cool way to get our hands on their expertese tending our money… Anne puts it in the right line for the IRS so whats the commotion. Keep doin it.
I too, fell for this companies misleading advert. I knew things were not quite right when they required you to fill out all kinds of investment and net worth information. Then at the bottom of the page, they inform you that you have to have an online broker account and list several if you do not have one.
I do wonder how many stocks that Ann has invested in that allows her to receive a dividend check every month.
Thank you for writing this article, I just wished I had seen it before giving this company my money.
It’s scary, as well as funny, how fast people believe what they read or hear before they do any research on their own. Do research and ask questions to determine weather or not this is a good investment option for you. I would bet my retirement on it that 99.9% of the comments were made by those that didn’t do any research on their own our critical thinking. AMERICANS.
And now they are advertising on Sirius radio!
I admit I was curious. I worked in Canada for 2 years and had no idea how it all worked since I never contributed to Canada’s system. Plainly, there is no free lunch.
@ Michelle
Exactly how I got here. I’m in Canada but have a U.S. subscription to Sirius. I heard the ad and thought wtf?
As a Canadian I know we can actually piggyback another pension fund (provincial) in our province of Saskatchewan. if you want a little extra monthly income. That’s actually a real way to do what this BS commercial states it can do.