TFSA

Start early and work the tax system in your favour, says Gordon Pape

October 1, 2020

Gordon Pape is one of Canada’s best-known authors and commentators on investing, retirement and tax issues. Save with SPP reached out to him by email to ask a few questions about our favourite topic – saving for retirement.

Q. What are the three most important tips you can provide on saving for retirement?

A. Create a savings plan and stick to it. To do that, make sure it’s realistic. To maximize the odds of success, set up an automatic monthly withdrawal at your financial institution, with the proceeds going directly into a pension plan, Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA).

  • Start as early as possible. Let the magic of compounding work for you for as many years as you can. If you invest $1,000 for 20 years with a five per cent average annual return, it will be worth $2,653.30 at the end of that time. After 40 years, the value will be $7,039.99.
  • Use the tax system to your advantage. All RRSP and pension contributions within the legal limit will generate a deduction that will lower your tax bill. Contributions to Tax-Free Savings Accounts are not deductible, but no tax is assessed on withdrawals.

Q. Given today’s markets, are there any things you think people should be doing differently with their retirement investments?

A. This is a very difficult environment in which to invest because of the uncertainty related to the pandemic and the time it will take the economy to recover. In these circumstances, I advise caution, especially with retirement money. Aim for a balanced portfolio (typically 40 per cent bonds and cash, 60 per cent equities). Dollar-cost average your stock or equity fund investments over time. Always have some cash in reserve to deploy in market corrections.

Q. Given what seems to be a lack of workplace pension plans in many job categories, is saving for retirement more important than ever before?

A. It has always been important but it’s especially so if you do not have a pension plan (most people in the private sector do not). Few people want to scrape by on payments from the Canada Pension Plan (CPP) and Old Age Security (OAS). To enhance your retirement lifestyle, you’ll need your own personal retirement nest egg – and the larger, the better.

Q. Do you think we’ll see more people working beyond traditional retirement age – and if yes, why do you think that is?

A. Absolutely. We’re already seeing that trend. In some cases, the motivation is financial – people simply don’t have the savings needed to quit work. But in other cases, people keep working because they want to. I’m in my 80s and still work full-time. I enjoy what I do and don’t intend to stop until health forces me to. I know a lot of people that feel the same way.

We thank Gordon Pape for taking the time to answer our questions. Be sure to check out his website for more great information.

If you don’t have a workplace pension, or are looking for a way to top up what you are already saving, consider the Saskatchewan Pension Plan. It’s a one-shop, personal retirement plan that you can set up for yourself or your employer can offer it as part of a benefit package. Once you are a member, your contributions are grown via risk-controlled, low-cost investing, and when it’s time to receive the gold watch, you can choose from a variety of retirement income options including life annuities. Consider checking them out today.

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


About one-third of Canadians lack an emergency fund – here are some tips to get you started

August 20, 2020

According to a recent article in MoneySense nearly two-thirds of Canadians have built an emergency fund. That’s great, but means that one-third of us have not.

For those of us is in that bottom third, an emergency fund is designed to cover “unexpected expenses, such as urgent major repairs (not renovations) to your home or car, unexpected medical expenses not covered by universal healthcare or insurance, or lack of income due to job loss,” MoneySense explains.

As many of us are finding out during this bizarre year 2020, without an emergency fund, these unexpected expenses are being covered “with a credit card… payday loans, or heavily using your unsecured line of credit,” the article continues. All of these are high-interest options, and the interest piles up if you can’t pay the money back in full.

Some folks also raid their retirement savings to pay the bills, a strategy that can backfire at tax time or in the distant future when you’re trying to leave the workforce – more about that later.

MoneySense recommends we all set aside enough money to cover “three to six months’ worth of fixed expenses.” OK, so we know the what and the why – let’s turn to the how.

An emergency fund, the article suggests, should not be set up like a retirement savings account. “Saving for an emergency isn’t about long-term goals, increasing your wealth, or planning for retirement, it’s about having immediate access to cash,” the site advises.

MoneySense recommends that you first create a budget to see how much you can set aside each month. That amount should be invested in either a TFSA or a high-interest savings account, the article notes. “Disconnect the account from your debit card so you won’t spend it,” the article advises. Automate payments so you don’t “forget” to make them, MoneySense says. “Pay yourself first.”

At Manulife’s website, the advice is similar. An additional idea on how to build the emergency fund is to cut back on costs – “think about how much you spend on coffee, lunches out, and other impulse purchases. Give up one or two things and week and stash that money into your savings,” the site suggests.

They also reiterate the idea of making savings automatic – treat your emergency fund “like a bill… the sooner it’s saved, the less time you will have to spend it.” Manulife also warns against the dangers of analysis paralysis – start small, say $10 a week or so, and ratchet things up as you go along.

Sun Life covers much of the same ground, but warns against using debt as an emergency fund or tapping into retirement savings.

“All withdrawals from RRSPs (except for education and home purchases, under the Lifelong Learning Plan and the Home Buyers’ Plan, respectively) are subject to income tax and will result in the permanent loss of contribution room – that is, once you’ve taken it out, you can’t put it back in. Any withdrawals from your RRSP are immediately subject to withholding tax,” Sun Life explains.

“If you withdraw up to $5,000, the withholding tax rate is 10 per cent. If you withdraw between $5,001 and $15,000, the withholding tax rate is 20 per cent, and more than $15,000, the rate is 30 per cent. These tax rates apply in all provinces except Quebec, where provincial tax rates apply on top of the federal withholding tax,” the Sun Life article warns.

So to recap – create a savings account that isn’t hooked up to any of your cards, and automatically transfer money into it regularly. Keep the money in some sort of high-interest savings account so that it remains liquid, and ready to spend when an emergency arrives. You don’t want to risk losses here.

Think of it as an obligation, like a bill, that you have to pay each month. Then set it and forget it, until the next emergency comes along.

And if you’re busily automating your emergency fund savings, think about doing the same thing for your Saskatchewan Pension Plan retirement account. Have a pre-set amount earmarked for retirement automatically withdrawn from your bank account every payday. That way, just as is the case for a well-designed emergency fund, you’re paying your future self first.

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


May 4: Best from the blogosphere

May 4, 2020

Pandemic crisis challenges some of our long-held financial beliefs

There’s no question about it, the COVID-19 pandemic and its disastrous impact on employment, the economy, and world markets is something we’ve not seen before.

And, writes Globe and Mail columnist Rob Carrick, the crisis is challenging some long-held notions about personal finance.

People used to think that, since the interest rates paid are so low, there was “no point in keeping money in a savings account,” Carrick writes. Instead, he notes, conventional pre-pandemic wisdom was to “access money when you’re in need from your home equity line of credit.”

However, now – given the sharply rising unemployment numbers – “piling on more debt to weather a layoff is a last resort, not a go-to strategy,” Carrick writes.

His next point is that up until now, most long-term saving by Canadians was for retirement, not for building an emergency fund. But retirement savings can’t be accessed – at least not without a big tax hit – for emergencies, so Carrick’s new rule of thumb suggests 75 per cent of savings go to retirement and the rest to an emergency fund.

Echoing his earlier point on the low rates paid via savings accounts and GICs, Carrick notes that those who invested their TFSA savings in fixed-income products can no longer be “mocked for their timidity and unworldliness.” They still have all their savings, while those in riskier TFSA investments have losses to deal with.

Given the high cost of housing, Carrick writes that most of us are used to “pushing (our) finances to the max to buy a house,” and dealing with “crushing” and huge mortgage payments. “But taking as much money as the bank will let you have means you have almost no ability to cope with a loss of income, particularly if you have kids and car payments,” he notes.

The other beliefs he shatters include carrying high debt – easy to do when you are working, less so otherwise – and “spending big” on your vehicles, particularly if you are getting your new truck or car through a car loan.

The takeaway points here are quite clear: paying for everything with debt is easy when jobs are plentiful, but it’s a recipe for disaster when times suddenly – and without any prior warning – get hard. Save with SPP knows more than a few people who have always “poo-poohed” savings because the interest rates are so low. Even if the interest rate was zero, having savings is a lot better than having debt when times get tough.

So perhaps Rob Carrick is right when he suggests going 75/25 on your retirement savings, with some money going to an emergency fund. Now that we’re in an emergency, some of us have that extra bit of security, while the rest must scramble. Now may not be the best time for much saving, but when better times return, let’s all remember this solid advice.

If you are looking for a good place to put away 75 cents of your savings dollar, be sure to check out the Saskatchewan Pension Plan. The SPP’s two major funds, the Balanced Fund and the Diversified Income Fund, are professionally managed, and when the markets are choppy, it’s good to know that there are experienced hands on deck, folks who know how to protect and preserve your savings for the long haul.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Leave your RRSP savings alone, and watch them grow, urges author Robert R. Brown

April 30, 2020

If a farmer brought 64 rabbits to a deserted island, and left them alone to multiply, 60 years later there would be an astonishing 10 billion rabbits living on the island.

That example is how Ajax author Robert R. Brown explains the need for all of us to save early in our RRSPs, and then leave the money alone to grow.

Brown’s book, Wealthing Like Rabbits, uses lots of great metaphors and examples to drive home key points about not only saving, but avoiding debt and overspending.

Retirement savings grow in importance as you age, he writes. Given that the Canada Pension Plan and Old Age Security deliver only a modest benefit, “it is better to be 65 years old with $750,000 saved than it is to be 65 years old with $750 saved.”

Canadians have two great options for retirement savings, “the RRSP – don’t pay tax now, grows tax-free inside, pay taxes later,” or the TFSA, “pay taxes now, grows tax-free inside, don’t pay tax later.” Either vehicle, he writes, “is an excellent way to save for your long-term future,” and ideally we should all contribute the maximum every year.

Yet, he writes, just as his beloved Maple Leafs “swear that next year they will do better,” Canadians all swear they will put more money away for retirement, yet don’t.

If you do save, explains Brown, pay attention to the cost of investing. Many mutual funds have high management expense ratios, or MERs, that “range from around two per cent to three per cent. That doesn’t sound like a lot, but it is,” he warns. It’s like the power of compound interest, but in reverse, Brown notes. Index funds and ETFs have far lower fees, allowing more of your money to grow, he points out.

Brown’s key takeaway with retirement saving is “start your RRSP early. Contribute to it regularly. Leave it alone.”

The book takes a look at the ins and outs of mortgages, and why it isn’t always the best idea to get the biggest house you possibly can. Watch out, he warns, when you go for a pre-approved mortgage at the bank – they may offer you an amount that is more than you want to afford. “You shouldn’t ask the bank to establish the amount you’ll be approved for. That needs to be your decision. After all, McDonald’s sells salads too. It’s up to you to order one,” he explains.

Credit cards are another way to pile up debt, he says. Not only are the posted interest rates high, “as much as 29.99 per cent,” but there are late payment fees, higher interest rates and extra fees for cash advances, annual fees just to have certain cards, and more. “Credit card companies are always looking for some sort of new and innovative way to jam you with a fee,” he advises. The 64 per cent of Canadians who pay off their credit cards in full each month enjoy an interest rate of zero, he writes – “think about that.”

He provides some great strategies for the 36 per cent of us who carry a balance on their cards, including leaving the cards at home, locking them up or freezing them to cut back on use, and cutting back on the overall number of cards.

Home equity lines of credit, which are easy to get, can backfire “if you have to sell your house during a soft market,” he warns.

Finally, Brown offers some sensible advice on spending – don’t eat out as often, and avoid alcohol when you’re out. Consider buying a used car over a brand new one. “If spending cuts alone won’t provide you with the cash flow you need to pay off your debt, you’re going to have to make more money,” he says. Get a raise, or get a little part-time job like dog walking, lawn mowing, or washing cars.

This is a great read – the analogies and stories help make the message much easier to understand. Once you’ve set the book down, you feel ready and energized to cure some of your worst financial habits.

If you are looking for a retirement savings vehicle that offers professional investing at a low MER, consider the Saskatchewan Pension Plan. SPP has a long track record of solid investment returns, and the fee is typically around one per cent. That means more of the money you contribute to SPP can be grown into future retirement income.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

What do millennials think about retirement?

April 9, 2020

It’s clear to most of us – especially older Canadians – that younger people have a very different way of doing things. So that said, what do they think about retirement?

Save with SPP spoke recently to David Coletto, founding partner and CEO of research firm Abacus Data. His firm has carried out a lot of research on millennials – indeed, he has a book in the works – and he has noticed quite a few things about how younger people approach money and saving.

“No one young Canadian is going to be the same,” he says. As well, he adds, the current COVID-19 situation was not yet a factor when he carried out his research. However, he notes that the data suggests that some millennials are “as well off as the previous generation,” but others, less so. It really comes down to whether or not they live somewhere where they can afford a home, he explains.

There are reasons why housing affordability is an issue for millennials, he notes. For starters, housing prices in Canada’s major cities are near all-time highs. As a group, millennials do tend to have debt, and “the debt levels are much higher” than those of older generations, he explains. Dealing with heavy debt from student days, or the cost of raising kids, tends to “delay key milestones” for millennials.

“So much of their experience is different,” he says, “that it is difficult for them (millennials) to think of retirement when they are still focused on today. About one-third of this generation is struggling more than their parents did, and they will be less well off as a result.”

Abacus recently did some research with the Healthcare of Ontario Pension Plan that found, among other things, that 80 per cent of respondents would take a job that paid less money if it offered a pension.

Job security isn’t what it once was, Coletto explains. “There’s more freelance work, more part-time work – what we call precarious work, and less pensions available.”

When there’s no workplace pension, the onus for retirement saving falls on the individual. “It’s lower on the list for them, and saving (for retirement) is difficult to do,” he explains. “They are having to manage a lot of other expenses. And we are talking about the pre-COVID era, here.”

“It’s a big chunk that has to go to savings for a down payment, or to pay for a mortgage,” he says.

And it’s not just the workplace that has changed. Millennials are dealing with “a climate change crisis that is existential.” Some “are putting off having a family” over climate concerns, he says.

Millennials therefore tend to want to do things now, while they still can, instead of deferring life experiences and grand trips until they are older. “If the experiences won’t be there, or are not possible, what’s the point of trying to save? Especially when you can’t afford to,” asks Coletto.

Statistics show that only “one in four millennials put any money into an RRSP, and even those that do don’t have a lot of equity in them,” Coletto explains. And while Tax Free Savings Accounts are more attractive to younger people (due to the fact they aren’t locked in) take-up is pretty low there as well.

Absent personal savings, Coletto is concerned that the gap between those with pensions – such as their parents – and those without will create a real split. “There’s an inequality there which will continue to grow,” he predicts.

A way to avoid that scenario might be for Canada to adopt the Australian model for retirement savings, he explains. There, a percentage of every worker’s salary is automatically placed into retirement savings, no matter where you work. The money is then invested by large funds offering pooling and low-cost investing. Moving to an Australian model is “something that needs to be seriously discussed,” he says.

A final piece of advice from Coletto for millennials is this – look at what your parents did for their retirement, and see what you can learn from them.

We thank David Coletto for taking the time to speak with us.

There’s no question that access to a workplace pension is a great benefit for an employer to offer. The Saskatchewan Pension Plan can help. Please contact us for more details.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Save for retirement, sure – but think of your loved ones also

March 19, 2020

We spend most of our annual allocation of pixels talking about saving for retirement. But there’s an equally important consideration for all of us to think about – what happens to our retirement savings when we die?

Naming a beneficiary is a very important thing, but it is also an incredibly complex topic.

Writing in the Globe and Mail, Rob Carrick says that TFSAs, RRSPs and RRIFs all have a place for you to designate a beneficiary “buried in the boilerplate of the application form.” Don’t “blow it” by rushing past beneficiary designation without “considering the implications,” he writes.

Carrick notes that single people can name anyone as their RRSP beneficiary. If they don’t name a beneficiary, any leftover balance in the RRSP will go to the individual’s estate. Where there is a spouse, Carrick writes, a spouse who is the beneficiary can receive the RRSP balance in a tax-deferred way, it can be “rolled over” to the spouse’s registered retirement vehicle, and taxes are deferred “until the surviving spouse removes money from the plan,” the article notes.

Similar rules are in place for RRIFs.

Jim Yih, blogger for Retire Happy also stresses the importance of a beneficiary choice.

“The designation of the beneficiary in your RRSPs and RRIFs is one of the most important factors in how much taxes you are going to have to pay at the time of death,” he writes. “Yet, it is astonishing how many people make this decision without regard to the overall estate plan or simply forget to designate a beneficiary.”

The Boomer & Echo blog also underlines the importance of this choice.

“Naming a beneficiary is a very important part of tax and estate planning.  The RRSP (or RRIF) will not form part of the estate assets, which may require probate.  The assets will transfer directly to the beneficiary, which may result in significant savings,” the blog notes.

The Saskatchewan Pension Plan, a specified pension plan, has similar rules.

In the SPP Member Guide we learn that “if you name your spouse as beneficiary of your SPP account… death benefits (can) be transferred, directly, to his or her SPP account, RRSP, RRIF or guaranteed life annuity contract.”

As well, a variety of annuities are available through SPP which allow you to provide for your surviving spouse or other beneficiary. The Retirement Guide explains that you can choose a “life only” annuity, where only you receive monthly payments, a “refund life annuity” that provides a lump sum benefit for your beneficiary, and a “joint and last survivor” annuity that provides “your surviving spouse or common law partner… a monthly payment for the rest of his or her life.”

Let’s end with an important warning, here. The rules for beneficiary designation vary from province to province, and for the type of savings vehicle you have. It’s important to understand the consequences of making, or not making, a beneficiary choice. Be sure to talk to your retirement savings provider about this, be it a workplace pension, an RRSP, or the SPP. You might want to get some professional advice before making your choice.

Survivor benefits can be a huge help to the folks we leave behind when we pass away, so be sure to make an informed choice.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Well-written book identifies – and help fixes – retirement mistakes

December 19, 2019

A recent headline shouted out the fact that an eye-popping 40 per cent of Canadians “think they’ll be in debt forever.”

The article by Anne Gaviola, posted on the Vice website, cites data from Manulife. The article goes on to note that the average Canuck has $71,979 in debt – up from $57,000 five years ago. These figures, the article says, come via Equifax.

It wasn’t always like this, was it? Why are we all willing to live with debt levels that are approaching record highs?

Save with SPP had a look around for answers – why are we so comfy carrying heavy debt loads?

According to the Advisor, it may simply be that paying the way with debt has become so common that no one gets worked up about it anymore.

“Living with debt has become a way of life for both Generation X… and baby boomers as the stigma of owing money is gradually disappearing,” the publication reports, citing Allianz Life research originally published by Generations Apart.

The research found that “nearly half (48 per cent) of both generations agree that credit cards now function as a survival tool and 43 per cent agree that ‘lots of smart, hardworking people who are careful with spending also have a lot of credit card debt,’” the article reports. Having debt is making people plan to work indefinitely – the article notes that 27 per cent of Gen Xers, and 11 per cent of boomers “say they are either unsure about when they plan to retire or don’t plan to retire at all.”

Why the comfort with debt? The Gen Xers got credit cards earlier than their boomer parents, and half of Gen Xers (and nearly a third of boomers) never plan to pay anything more than the minimum payments on them, the article notes.

“Over the last three decades, there has been a collective shift in how people view debt – it’s now perceived as a normal part of one’s financial experience and that has fundamentally altered the way people spend and save,” states Allianz executive Katie Libbe in the article. “If Gen Xers continue to delay saving for retirement until they are completely out of debt, their nest egg is clearly going to suffer. For Gen Xers who are behind on saving, better debt management, with a focus on credit card spending, should be the first issue they address to get back on track,” she states.

To recap, it almost sounds like there’s a couple of generations out there who have never worried about debt.

What should people do to get out of debt?

According to the folks at Manulife, there’s a five-step process that will get you debt-free.

Manulife cites the fact that Canadians owe about $1.65 for every dollar they make. That suggests they aren’t ready to “make a budget and stick with it,” and always spending more than they earn, the article says.

In addition to getting real about budgeting, the other tips are paying off credit cards by targeting those with the highest interest rate first, considering debt consolidation, earning extra money, and negotiating with creditors.

Tips that Save with SPP can personally vouch for in managing debt include giving your credit cards to a loved one, and instructing that person not to hand them over even if you beg; paying more than the minimum on your credit cards and lines of credit; and trying to live on less than 100 per cent of what you earn, so that you are paying the rest to yourself.

While a country can perpetually run deficits and spend more than it earns – and most do – the math doesn’t work out as well for individuals. The piper eventually has to be paid. And if you only pay the minimums, that piper will get paid for many, many years.

Getting debt under control and paid off will help you in many ways, including saving for retirement. Perhaps as you gradually save on interest payments, you can direct the savings to a Saskatchewan Pension Plan retirement account, and watch your savings grow.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Dec 16: Best from the blogosphere

December 16, 2019

First wave of retiring boomers finding retirement disappointing

Retirement has always seemed like the light at the end of the tunnel for hard-working Canucks. But new research suggests that retiring boomers are finding it a little disappointing.

Writing in the Ottawa Citizen, noted financial journalist Jonathan Chevreau reports that new research from Sun Life finds “almost three in four retirees – 72 per cent – say retirement is not what they were expecting, and not in a good way.”

The 2019 Sun Life Barometer, he notes, found 23 per cent of retirees reported life after work was a tight money environment, where they were “following a strict budget and refraining from spending money on non-essential items.”

And those not yet retired are delaying their plans, Chevreau notes. A whopping 44 per cent of Canadians “expect they’ll still be employed full time at age 66,” and it’s because they “need to work for the money, rather than because they enjoy it.”

Why the strict budgeting? Chevreau notes that about half – 47 per cent – of those still working believe “there’s a serious risk they could outlive their retirement savings.”

The article says the lack of defined benefit pensions – the type where the retiree receives a pension equal to a percentage of what they were making at work – is one of the reasons for these concerns. Everyone without such plans is either saving in RRSPs or in defined contribution plans. In both these types of savings plans, you save as much as you can, and then turn that lump sum into retirement income, normally on your own.

This tendency for retirement plans to be savings plans designed to build a lump sum is, the article says “devolving responsibility onto the shoulders of individuals,” making the RRSP unit holder or DC plan member the person handling the risk of outliving the savings, known as longevity risk in the industry.

The article offers a couple of ways people can improve their retirement security.

Be sure, the article warns, that you are fully taking part in any retirement program your work offers. “Canadians are leaving up to $4 billion on the table,” the article notes, by not taking full advantage of plans where the employer matches some or all of any extra money they put in.

There’s also a worryingly large group of people who don’t have a workplace pension and aren’t saving on their own via RRSPs or TFSAs, the article reports. That group, the article says, will probably have to work well beyond age 65, but at least they will get more income from CPP and OAS if they take them at a later age.

The article concludes by noting that running day-to-day finances is “hard enough” for Canadians, which may explain the savings shortfall.

If you have a pension plan or retirement savings benefit through your work, consider yourself lucky, and be sure you are getting the most you can out of it. Can you consolidate pension benefits from other workplaces into the plan you’re in now, rather than retiring with several small chunks of savings? Are you eligible for a match, and if so, are you signed up for it?

If you are saving on your own, the Saskatchewan Pension Plan may be of help. You can save on your own through SPP, much like an RRSP, except SPP has the added advantage of offering a variety of annuity products when you retire – these turn your savings into a lifetime income stream that never runs out. As well, you can often transfer pension funds from past periods of employment into your SPP account – contact SPP to find out how.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Dec 9: Best from the blogosphere

December 9, 2019

Year end – time to make sure you’re taking full advantage of employer retirement programs

The end of the year is always a highlight – the festive season, the New Year, family and friends; it’s an endless list.

But, according to a report from the Toronto Star, there’s another little item that should be on your growing year-end list – retirement, and particularly, any program you’re in at work.

“Many medium-to-large-sized employers offer some form of savings program for their staff; some with a matching component, such as the employer matches 50 per cent of the contribution that the employee makes up to a certain maximum value, while other programs are simply to facilitate savings exclusively from the employee. The draw for employees is that the funds are typically deducted right off one’s paycheque, and of course, the free money if a match is offered,” the Star notes.

You could be leaving that free money on the table if you haven’t signed up, the article warns.

Be sure, the article advises, to find out which employer-sponsored program you’ve signed up for.

“Have you enrolled in a defined benefit or defined contribution pension? Do you contribute to an RRSP or TFSA? Are you funding an RESP for your children? Is your company offering non-registered plans? Which accounts offer a company match, as these should be your priority to fund,” the Star notes.

You may have options to choose from if you are in a company retirement program – often mutual funds, ETFs, or target-date funds (or a combination of each).

Know what you’re paying into, the Star suggests. “Grab a list of what your fund options are and compare historical rate of return, risk level, the composition of the fund and read up on the fund’s objectives. In most cases, your company will be covering a large portion of the fees associated with these investments,” the article notes.

Finally, the article notes, be sure that if there is a company matching option, that you are signed up for it. The Star recommends that you “find out how to get the maximum matching dollars. For example, sometimes they scale the match up (or down) depending on how much you contribute. Simply take advantage of all the free money that’s available to you. It’s the easiest ‘return’ on your investment you’ll ever make,” the article advises.

Those without retirement programs at work must do the job on their own, the article concludes. If you are in this situation, “it’s then up to you to save independently.”

An option for that self-managed saving is the Saskatchewan Pension Plan . With SPP, your contributions are invested professionally and at a low fee. As of the end of September, 2019, the SPP’s balanced fund is up more than 10 per cent. In addition to growing your savings, SPP is equipped to offer you a multitude of ways to turn savings into lifetime income via annuities – SPP’s Retirement Guide provides full details.

There’s still time to sign up and join SPP prior to the RRSP deadline in 2020, so check them out today and make them part of your year-end to-do list.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Nov 4: Best from the blogosphere

November 4, 2019

Figuring out how much is enough to save for retirement

The idea that saving for retirement is a good thing – a must, even – is repeatedly drilled into our collective heads.

But how much is enough, when it comes to retirement savings?

A recent article in the Toronto Star estimates that a Canadian making $65,000 a year would need to save “a nest egg of between $1 and $2 million for retirement, not including one’s house.”

That’s a big number!

The number, the article explains, “is higher than a few decades ago because we’re living longer in a more expensive Canada.” The article then goes on to provide some savings benchmarks – a list of what you should have saved at various age points in your life.

Those of us in our 20s “live paycheque to paycheque” and are unlikely to have any savings.

By your 30s, you should be putting away 15 per cent of what you make, the article explains. “You’ll need to bump that up by one per cent each year,” the article advises. The article advises signing up for any retirement program your workplace offers, whether it’s a pension plan, a group RRSP, or a TFSA. A couple should end their 30s with $250,000 as their retirement savings target, “not including their house,” the article warns.

By your 40s, “you and your partner are saving between 15 and 20 per cent of your gross earnings by making sure you follow healthy budgeting principles,” the article continues. This is the decade when many people have bought a home and are paying it down, the Star notes. You should have $500,000 in savings by the end of your 40s, the article proclaims.

The 50s is said to be the “burn your mortgage” era, but the cost of kids going off to university because a new stressor, the Star reports. You ought to have $700,000 in savings by the end of this decade.

Once you are in your 60s and mortgage free, the article suggests you put away half of your money (what you paid on the mortgage) towards your retirement savings, which will get you to $1 million by age 65. The article recommends that you make your investments less risky at this point, moving to “lower-risk, often ‘fixed income securities,’ which are investments that kick off a regular stream of income that you can use in retirement. You’ll also want to understand your pension, CPP, and OAS benefits.”

If you haven’t hit the million dollar plateau, the article concludes, “no problem – you can typically make up the shortfall by working a bit longer or downsizing your home.”

It’s interesting that this article makes no mention at all of any restrictors on savings, such as high personal debt. The implication is that, like when you are trying to lose weight and get fit, that you shouldn’t be coming up with excuses as to why you can’t do it.

The article gives a good guideline for savings. Many people choose not to join pension arrangements through work, a decision that saves them a bit of dough today but costs them a lot of money down the line. Be sure to take full advantage of what’s out there – don’t leave money on the table.

If you don’t have a workplace pension plan to join, or you are self-employed, you should set up your own savings plan. A great place to begin your savings journey is the Saskatchewan Pension Plan, open to all Canadians. They have a great track record of turning savings into retirement income – check them out today!

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22