Moderate saving and debt avoidance are keys to a good retirement: Vettese

In The Essential Retirement Guide, noted actuary and financial writer Frederick Vettese offers a different, and decidedly non-alarmist approach to funding one’s golden years.

The book challenges some of the accepted “truths” about retirement planning, such as the possibility we will all live past 100 and that we should save (via all sources) enough money to replace 70 per cent of our pre-retirement income.

On longevity, Vettese notes that “the average person has little better than a 50-50 chance of making it from age 50 to 70 without dying or incurring a critical illness.” The book provides some interesting advice on how to determine your own, more realistic life expectancy target.

As for the 70 per cent target, Vettese produces ample evidence showing many of us can have a well-funded retirement with a much lower target. The income replacement target, he writes, can be “as low as 35 per cent for a couple that spent a considerable amount on housing and child-raising through their working years. The target can nudge above 50 per cent for a middle-income couple who paid off their mortgage earlier and then started to spend much more on themselves during their last few years of employment.”

Why does he feel you need less? He cites research showing that spending drops more than 50 per cent on many items – airline fares, admission fees, alcohol, cigarettes, clothing – once we reach age 80. And while many of us assume we will at some point face expensive long-term care costs, Vettese writes that “the probability of requiring long-term care is about 50 per cent for women and 40 per cent for men,” and it is unlikely that such care will be required for more than five years.

Other advice from Vettese includes paying attention to investment management fees. “Unless the firm that is managing your monies (if you have one) can demonstrate that they consistently achieve higher returns than the benchmark indices, you should expect your own returns will just match the benchmarks, less whatever fees you are paying.” Exchange-traded-funds have very low fees of 0.25 per cent, versus fees of up to three per cent for “some high-cost equity mutual funds,” he warns.

Vettese likes annuities as part of a retirement plan. “Buying an annuity is usually a better bet than managing your own investment portfolio after retirement and drawing an income from it,” he writes. “You lose a little upside potential but you also eliminate some major risks.” He suggests that people with a portfolio of fixed income and equity assets consider converting the fixed income portion to an annuity, which provides them with a set amount of income monthly for as long as they live.

Access to a workplace pension is a plus for those that have it, he notes. “Participating in almost any workplace pension plan is a good thing,” he writes. Nearly every kind of workplace savings arrangement is a group product, which gives individuals access to low-fee investments, Vettese notes. That leaves more money for retirement income, he writes.

Vettese provides a nice six-point retirement strategy, as follows:

  • “Save 10 per cent of your pay each year.
  • Invest it in low-cost pooled funds, weighted towards equities.
  • Keep the asset mix the same, through good times and bad.
  • Apart from the mortgage on your home, avoid going into debt.
  • Pay off your mortgage by the time you retire.
  • Buy a life annuity at retirement.”

This is a good reference book for anyone wanting to fine-tune (or develop) a retirement plan and it has been written to work with both Canadian and American audiences, a somewhat rare feat.

The Saskatchewan Pension Plan provides some of the tools you may need for your retirement plan, such as low-cost, professional investing in a pooled fund, and the ability to convert some or all of your savings to an annuity at retirement. Check it 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 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

Mar 18: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

The unempty nest: a new problem for retirement savers

We’ve heard all about the main obstacles to retirement saving – paying off debt, the lack of workplace pensions, and competing savings needs, like ponying up for a down payment.

A recent article in The Guardian from Charlottetown, PEI, points out another problem that can crop up, which we’ll call the unempty nest, or caring financially for kids age 30 and beyond.

The article notes the somewhat shocking statistic that “more than half of Atlantic Canadian parents are still supporting their adult children between the ages of 30 and 35,” and how that helping hand is “putting a damper on their retirement plans.” The article cites numbers from a recent survey by RBC.

A whopping 58 per cent of Atlantic Canadian parents are in this situation, the article reports; for the nation as a whole the figure is a lower but still noteworthy 48 per cent. The article states that while 88 per cent of parents “were happy to be able to help support their adult children,” more than a third of them – 36 per cent – “were worried about the impact on their retirement savings.”

How much support are we talking about? The article says that the average Canadian pays “$5,623 annually to support adult children age 18-35 and $3,729 annually for… adult children age 30-35.”

Sixty-nine per cent of parents are helping adult children with education costs, 65 per cent help with living expenses (rent, cable and mortgages) and 58 per cent help with cell phone costs, the article notes.

There is no question that younger people are facing higher education, housing, cable and phone costs than their parents ever did, so these statistics aren’t all that shocking. It’s clear that today’s wages don’t align with living costs like they did decades ago. So what can one do?

The cost of higher education for your children can be addressed by signing up for a RESP when they are very young. According to the Canada Education Savings Program’s 2017 Statistical Review, the average tuition cost in Canada was $6,373, and there may be additional costs for “administration fees, books, tools and accommodation and living expenses.”

The publication shows how various programs can help people save up to $21,000 per child if they start at the child’s birth. Many people are taking advantage of this program, the publication notes – there was $55.9 billion in RESP assets in 2017, compared to just $23.4 billion 10 years earlier, benefitting more than 622,000 students.

Save with SPP can attest to the benefit of a RESP; the great thing about it is that your successfully educated child graduates with less student debt thanks to the RESP saving.

So what’s the takeaway? Even if you can only put a little money away for the kid’s education and your own retirement, that action will be far more beneficial than doing nothing at all. Slow and steady wins the race, and as far as retirement savings are concerned, the Saskatchewan Pension Plan  lets you contribute as little or as much (up to $6,200 a year) as you want.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Is senior poverty linked to a lack of retirement saving or workplace plans?

An interview with Chris Roberts of the Canadian Labour Congress 

These days, it’s pretty common knowledge that many of us don’t save enough for retirement, and/or don’t have a savings plan at work. Save with SPP reached out to Chris Roberts, Director of Social and Economic Policy for the Canadian Labour Congress, to see how this lack of retirement preparedness may connect to seniors having debt and poverty problems.

Is the shortage of workplace pension plans (and the move away from defined benefit plans) in part responsible for higher levels of senior poverty/senior debt?

“Certainly old-age poverty rates and indebtedness among seniors have risen over the past two decades, while pension coverage has fallen (and DB coverage in the private sector has collapsed). Seniors’ labour-market participation has also doubled over those time period.

“It’s clear (from research by the Broadbent Institute) that falling pension coverage and inadequate retirement savings more broadly will deepen the financial insecurity and even poverty of many seniors. But while there’s been considerable research linking stagnant wages and rising household indebtedness, studies linking falling pension coverage with rising poverty and indebtedness among seniors are relatively scarce.

“Both rising poverty rates and growing indebtedness among seniors have several causes. Canada’s public pensions, especially Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), provide a minimum level of income in retirement for individuals without private pensions or other sources of income. Part of the rise in the low-income measure of old-age poverty has been due to the fact that OAS is indexed to the consumer price index rather than the average industrial wage, causing seniors’ incomes to lag behind median incomes. Unattached seniors, especially women, are at particularly high risk of poverty, but so are recent newcomers to Canada who are eligible for only a partial OAS benefit.

“With respect to rising indebtedness, a declining number (according to Stats Can data) of senior-led households are debt-free. More Canadians are taking debt (especially mortgage debt) into retirement, and they’re shouldering more debt in retirement as well. At the same time, the total assets of senior-led families have also risen, and their net worth has grown even as debt levels rose. Indebtedness and net worth seems to have grown fastest (again according to Stats Can data) among the top 20 per cent of families ranked by income.

“So I think we have to be somewhat careful to avoid seeing rising senior household debt levels as driven solely or even primarily by financial hardship caused by declining pension coverage. There is certainly ample evidence (according to research by Hoyes Michalos) of a significant and growing segment of seniors that are struggling with debt and financial pressure. But rising debt levels among higher-income senior households likely have other causes besides financial hardship.”

Is a related problem the lack of personal retirement savings by those without pension plans?

“Richard Shillington’s study for the Broadbent Institute demonstrated that a retirement savings shortfall for those without significant private pension income will be a major problem for many current and future retirees. This shortfall has also been documented in the United States (see a study by the Center for Retirement Research at Boston College). While retirement contributions as a share of earnings have been rising (even as the household saving rate fell), these additional contributions have gone toward workplace pension plans; contributions to individual saving plans have declined, suggesting that those without a pension have not been able to save independently to compensate for not having an actual pension (see this article from Union Research for an explanation).”

Is debt itself a key problem (i.e., idea of people taking debt into retirement and having to pay it off with reduced income)?

“I think rising debt levels in retirement do pose risks, even if the challenges vary significantly with income. For low- and modest-income seniors, some forms of debt (e.g. consumer credit, payday lending) can be onerous and even unconscionable. For home-owners, even if mortgage debt is accompanied by rising home values and rising net worth, servicing debts while managing health-related and other costs on fixed incomes can be challenging for seniors. Debts acquired at earlier stages of the life-cycle will likely become a mounting problem in Canada, as, for instance, the student debt of family members (see article from Politico) and seniors themselves (see coverage from CNBC) is becoming an urgent problem in the United States.”

Apart from things like CPP expansion, which seems a good thing for younger people, can anything be done today to help retirees to have better outcomes?

“Increasing GIS but especially improving OAS will be important to improving financial security for seniors. For the reason discussed above, OAS will have to be expanded or indexed differently in order to stabilize relative old-age poverty. But in my view, there are also good reasons to expand it. Current as well as future seniors would benefit. OAS is a virtually-universal seniors’ benefit (about seven per cent of seniors have high enough incomes that their OAS benefit is clawed back by the recovery tax), and it’s particularly important to low- and modest earners, women, Indigenous Canadians, and workers with disabilities. It isn’t geared to employment history or earnings, so it’s purpose-built for a labour-market increasingly characterized by precarity, and atypical employment relationships (e.g. “self-employment,” independent contractors, etc). Modest income-earners with pensions would benefit from a higher OAS; these workers earn only a small workplace pension benefit, and unlike increases to CPP, their employers would be unlikely to try to offset the costs of a higher (tax-funded) OAS benefit. While growing along with the retirement of the baby-boom cohort, the cost of OAS (as a share of GDP) is projected to peak around 2033 before declining. And at a time when workplace pension plans, individual savings plans, and even the CPP increasingly depend on uncertain and sometimes volatile investment returns, the OAS is funded through our mostly progressive income tax system.”

We thank Chris Roberts for taking the time to talk to Save with SPP.

Given the scarcity of workplace pensions, more and more Canadians must be self-reliant and must save on their own for retirement. An option worth consideration is opening a Saskatchewan Pension Plan account; your money is invested professionally at a very low-cost by a not-for-profit, government-sponsored pension plan, and at retirement, you have the option of converting your savings to a lifetime income stream. Check it out today at saskpension.com.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Mar 11: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

House as bank machine – or, how to pay your mortgage forever

Our parents bought houses, paid off their mortgages (and had a mortgage-burning ceremony), and then retired.

Those of us who are not yet retired, on the other hand, seem to want to continue paying for our houses long into retirement. What’s going on?

An article by Bloomberg printed in the Financial Post lets us in on the dirty little secret most of us share – we are using the equity in our homes to pay for our lives.

The article warns that Canadians “are ramping up borrowing against their homes even as the real estate market slumps,” a practice that could put our financial system at risk.

According to rating company DBRS, the article notes, home equity lines of credit, or HELOCs, “reached a record $243 billion as of Oct. 31,” an astounding 11.3 per cent of all household debt.

“In the event of a correction, borrowers could find themselves with a debt load that exceeds the value of their home, which is often referred to as negative equity,” the article notes.

An obvious reason for this particular problem is the high cost of owning a home. Houses today can be 10 or 20 times more expensive that what our parents and grandparents paid back in the 1950s and 1960s.

So getting into the housing market is a difficult yet high priority for younger Canadians, reports Yahoo! Finance Canada. One in five younger Canucks admits to not saving for retirement, and instead saving “to afford their property,” the article reports, citing research by Sotheby’s International Realty Canada.

Another eye-opening stat from this story is that 31 per cent of those surveyed dipped into RRSPs for their down payments. That move, possible via the Home Buyers’ Plan, allows one to withdraw up to $25,000 to put towards a down payment if they are a first-time home buyer; the HBP expects the money to be repaid within 15 years. If the money withdrawn is not repaid, the borrower has to pay income tax on it – and the RRSP doesn’t grow back to where it was.

“The dream of home ownership remains compelling for today’s young families, but the reality is that many are facing serious obstacles to achieving this given rising costs of living, rising costs of housing, and other financial needs, such as saving for retirement,” states Brad Henderson, president and CEO of Sotheby’s International Realty Canada, in the article. The piece goes on to report that the number of RRSP contributors “between 25 and 54 years old fell 16 per cent between 2000 and 2013.”

So, let’s arrange these three thoughts together. Those with homes are using them as bank machines. Those without them are making ownership a high priority, over paying off debt and saving for retirement. As a result, retirement savings rates are dipping, and the new home owners may also decide to dip into their home equity to help with cashflow.

Our grandparents succeeded because they kept the concepts of home ownership, debt repayment, and retirement savings separate. They paid off the mortgages, they paid down their debts, and they used the proceeds to save towards retirement.

If, as they say, everything old is new again, it is time these old school concepts were re-introduced.

If you lack a retirement plan at work, and are looking for a way to set aside some of your hard-earned dollars for your retirement future, the Saskatchewan Pension Plan offers all the tools you need to get the job done. Check them out today at www.saskpension.com.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Saving easier if you use a “small steps” approach

Like everything good for us – losing weight, eating right, managing debt – saving money seems like a daunting, overwhelming task. In fact, like other resolutions, it’s something that seems so difficult and impossible to stick with that we have given it up by Groundhog Day.

However, the experts tell us that great things can be accomplished by moving one small step at a time. Save with SPP today looks at tips on getting your savings effort fired up and back on the road forward.

At The Simple Dollar blog there are over 100 savings tips on offer. Among them are these ideas – to “stop collecting and start selling” any of “your collections that you thought would bring you riches,” as well as turning off the TV and signing up for “every free rewards program that you can.” The latter is self-explanatory, the thinking behind the “no TV” idea is “less exposure to spending-inducing ads,” and the possibility of a lower cable bill if you downgrade your package.

Interviewed in the Globe and Mail, Scotiabank’s Mike Henry says “to take small steps to save money, you’ve really got to understand… what’s important to you and what you’re trying to balance in your life, and you’ve got to understand how much money is coming in and how much money is going out.”  The article suggests automatic savings via payroll deduction or automatic transfers between accounts, and to examine any expenses that can be cut or reduced, like “gym memberships, Internet bills and groceries.” Getting rid of the daily latte is also advised, the article reports.

A key strategy – “living below your means” – is recommended by the Creating My Happiness blog. “If you earn $1,500 a month and you spend $1,500 a month, you have nothing left to save!  You have to start living on less than you’re making so that you can put money away for the future,” the blog advises.

Other tips for those wanting to reduce spending including “starting small – don’t try to cut your budget by 50 per cent right away,” and making saving a priority. On this last point, the blog says spending “temptation is everywhere. We are bombarded with images of people who appear to be happy because they got the new iPhone/Xbox/gadgety thing-ma-bob.” Tell yourself that having the latest thing is “nice, but not a priority,” and walk away, the blog recommends.

The Better Money Habits blog stresses the importance of recording all expenses, making a budget, and then planning to save some of your money. “Try to spend 10-15 per cent of your income,” the blog suggests. “If your expenses are so high you can’t save that much, it might be time to cut back.” Focus on the expenses you can trim, such as non-essentials like dining out and entertainment, the blog advises.

There are many ways to turn your financial ship around, and all of them involve living within your means and not spending more than you make. We can all get there by making little improvements which will add up over time. And when you’ve creating a regular budget for retirement saving, a great destination for those funds is a Saskatchewan Pension Plan. Check it out today!

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Mar 4: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

RRSP to RRIF conversion “can be traumatic” for some; annuities help

A recent Canadian Press story by Dan Healing notes that for those of us who have carefully saved money in an RRSP for retirement, “converting it to a RRIF (registered retirement income fund) can seem a terrifying milestone.”

“Overnight, your nest egg that has steadily grown for decades becomes a declining asset, with a government-mandated, taxable annual minimum withdrawal to ensure its gradual depletion,” Healing writes.

But the RRIF conversion of an RRSP “is a small portion of the overall planning for retirement,” states David Popowich in the article. Popowich is a Calgary-based financial adviser, the article notes.

The RRIF, the article points out, is really just a different type of RRSP – one that you can’t add money to, and that is used for slowly drawing down your savings as retirement income. You can convert an RRSP to a RRIF at any time, but must convert your RRSP to a RRIF, an annuity, or a lump sum payout by the end of the calendar year in which you turn age 71, the article notes.

A simple way to deal with the issue of the age 71 limit for RRSPs is “to cash some or all of the investments and buy an annuity, usually from an insurance company,” the article suggests. “The annuity is then held inside the RRIF account and pays a guaranteed income for life or another set period of time to the investor, who pays taxes on the amounts received.”

It’s a big decision, and it depends on how your personal comfort level. Are you comfortable continuing to invest your money, getting (potentially) a variable level of retirement income based on market ups and downs, and hoping there’s some at the end for your heirs – and that you don’t run out of money while alive?

Or does the idea of a steady, lifetime income appeal to you more? You’ll get the exact same amount each month for the rest of your life, which makes it easier to plan, and you won’t have to spend your mornings worriedly watching the markets. Annuities come in many varieties and some include lifetime pensions for your surviving spouse.

Members of the Saskatchewan Pension Plan are lucky in that they have a variety of annuity options to choose from when they convert their savings into retirement income through the plan. Check the retirement guide for full details.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan, Phoebe and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Reality check – working past age 65 may not be the best solution

When you ask people when they plan to retire, many say that they’ll keep working, even past age 65. None seem to be concerned about things like their health, or whether or not their employer will still provide benefits, or if it might be a good idea to yield the job to a younger person.

A poll out recently by CIBC suggests that a surprising one quarter of Canadians who are retired regret that choice. “Twenty-seven per cent of retired Canadians regret having left their jobs and 23 per cent of retirees have tried to re-enter the labour market,” CIBC’s research notes. “When asked why they chose to return to work, 59 per cent said it was for intellectual stimulation and 50 per cent said it was because of financial concerns.”

Certainly, leaving a full-time job means leaving colleagues and friends behind. But the financial concerns are perhaps more telling.

Recent Bank of Canada figures cited by Better Dwelling show household debt is an eye-popping $2.16 trillion, with most of the debt on mortgages. Even if you were planning to retire at 65, that debt is a factor that could throw a wrench in your plans.

An article in The Province suggests that carrying debt into retirement may be a reason people are thinking of going back to work. “When you need more of your retirement income to service debt, there is less left over to enjoy your golden years,” the newspaper points out. “Some think that they’ve got savings to help them top up what they’re short on after they retire, but that’s not necessarily the best strategy. If you need your savings to generate enough income, depleting your savings multiplies the negative impact on your financial situation at a time when you’re least able to manage through it.”

So what options do seniors have to deal with post-retirement debt? Going back to work is one, and another is a reverse mortgage. “On a national basis, reverse mortgage debt stood at $3.425 billion outstanding as of October 2018, marking its highest point in 8 years,” reports Real Estate Professional magazine.

The Money Ning blog says that while there are pros for employers in keeping older workers on the job, such as retaining their experience, and reducing government program spending, there are also cons.

“For workers who are either not passionate about their work, or who are working in a job that is physically demanding or extremely stressful, the idea of keeping that job for longer is not a pleasant one,” the blog notes. “In some cases, working past the mid-60s may not even be entirely safe,” the article continues.

Will employers still offer the same benefits to those age 65 and older? It’s certainly worth checking before you decide to stay put.

Other negatives are preventing younger workers from advancement, which affects their own ability to grow their income and save for retirement. These kids often can’t afford to buy and end up back home with their retiring parents.

So let’s recap. Boomers are carrying record debt levels as they approach retirement. Once retired, they must use their pensions or personal savings to pay down debt, leaving less money for fun and travel. That makes many crave the workplace once again, or have to do reverse mortgages to make ends meet.

Sure, it would be great to retire without debt, but it seems less possible than a generation or two ago. The takeaway here is that notwithstanding debt payments, we all need to put as much as we can away for retirement. Those savings give us options and more wiggle room at age 65, and maybe the ability to enjoy life without meetings, commuting, performance reviews and other workplace drama.

If you don’t have a pension plan at work, or if you do and want to supplement it, the Saskatchewan Pension Plan is a great place to start, with low fees, a strong investment track record, and flexible ways to turn savings into income at retirement. Check them out today at saskpension.com.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Feb 25: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

What if they threw a retirement party, but no one came?

If 70 is the new 60, then it’s possible that the new retirement may be not retiring.

According to Statistics Canada figures quoted in the Globe and Mail, more than half of senior-age men (that’s age 65) were working in 2015, a whopping 53.5 per cent. What’s more, 22.9 per cent of 65-year-old men were working full time.

For women, 38.8 per cent were working after age 65 in 2015, “almost twice the level in 1995,” the Globe reports.

What’s going on?

The story quotes Nora Spinks of the Vanier Institute as saying retirees working into their 70s and 80s “are rewriting what is retirement, and we now refer to it as `career redefinement,’” she explains. She notes that when baby boomers were born, life expectancy was only about age 63. “Fast forward to 2018 and your life expectancy is another 15-20 years,” she says.

Is “career redefinement” simply code for not having enough savings?

Well, maybe. Bill VanGorder, a retired non-profit executive who is back at work after 90 days of retirement, says that his savings, along with those of his wife (neither, the Globe says, had pensions) were negatively affected by the market downturn of 2008. But his new career with a pole-walking venture was made possible, he tells the Globe, due to “the couple’s good health and his desire to build a business based on strong consumer demand for pole walking as a form of low-impact exercise.”

VanGorder calls the retirement at 60-65 idea “an old-fashioned myth,” and asks “why would you want to spend the last quarter of your life doing nothing?”

So it wasn’t about the money. The Globe article, citing data from the Canadian Longitudinal Study on Aging, notes that “only 37 per cent of women and 41 per cent of men said that financial considerations were a factor in their decision” to keep working after age 65.

Perhaps working after age 65 is more about “a person’s state of health and a desire to feel useful and connected to others,” the article muses.

Maybe in 10 years or so, the Globe will run an article about the trend of people retiring in their 80s. One assumes that even those working late into their lives will eventually stop. Save with SPP’s grandfather worked until 75, as did our father-in-law.

If you are planning to keep working until your 70s or 80s, the SPP can be a great resource. You can delay your SPP pension until December of the year you turn 71, rather than collecting it at an earlier age. And starting your pension later normally means you will receive a larger pension than if you had started it early.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan, Phoebe and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Now that you’ve saved for retirement, it’s time to spend wisely: Warren MacKenzie

If we save diligently, or inherit wealth, or otherwise get to retirement with money, that’s half the battle, says Warren MacKenzie, head of financial planning at Optimize Wealth and the author of three books on retirement planning.

More important, he told a recent meeting of the Ottawa Share Club, is spending your money wisely.

MacKenzie told the story of three siblings who each inherited multi-millions. After a few years, he says, “one is broke, and living in a trailer with his girlfriend.” A second has burned through three quarters of the money already on “cars, clubs and (the high life),” while the third sibling, an accountant, has most of her share left, is overwhelmed by it, and feels it was “the worst thing that ever happened to her,” he told the audience.  All three, he explains, lacked a strategy to use their wealth wisely.

MacKenzie says that many people fail to accurately estimate their retirement costs. “You need to calculate your expected expenses, and exaggerate them” to build in some room for the unexpected, he says. You “should assume you will live to age 100,” he adds, and estimate what your future medical costs might be for things like long-term care.

If you do that, and you find that there’s still a surplus, you may be wasting the opportunity to use some of your savings for other purposes, he says.

Most in the financial industry “don’t encourage people to think about a surplus,” he says. That’s because the financial sector makes money from managing your investments, but don’t want you to take the money out and spend it.

But caution about the future, fears of being “hit by lightning or a tornado,” compel many of us to hang on to our savings, even if we have more than enough to cover our needs.

Research, he noted, shows that there is a relationship between money and happiness, but it is different than one might think. Those making only $10,000 a year tend to be less happy than those making $50,000,” he says. But there is “no difference in happiness” for those making any amount that is more than $50,000.

“Money is a lot like food – too little is bad for you, but too much is bad for you too,” he explained.

In his view, those with more than sufficient wealth to cover their retirement expenses have options.

  • Do nothing, like most people, and hang on to the money for life (you’ll face income taxes and the stress of managing it)
  • Live richer and treat themselves more (spend the surplus on yourself)
  • Pass money on to the kids, but in stages (communicating with them about when they need it)
  • Give the money away (and let the kids figure things out on their own)
  • Create a multi-generational legacy (such as a foundation)

He says that communication about money between the generations is critically important; the kids should know if there is money coming, but should also know if there isn’t. A surprising 70 per cent of attempts to transfer wealth between generations fail, he pointed out. “Perhaps it is better to give money away while you are living – there are few legal disputes about smaller estates,” he says.

It’s a good thing, he says, to leave your kids no money but to pass on good values. It’s also good to leave money and values. But, he says, it is not a good idea to leave money “without passing on good values.”

Philanthropy is a positive thing that helps out the charity “but benefits the donor even more,” he said. He concluded his talk by noting that “he who knows he has enough is rich.”

Warren MacKenzie’s latest book, is The Philanthropic Family, subtitle – 5 Keys To Maximizing Your Family’s Happiness And Leaving A Lasting Legacy.  We thank the Ottawa Share Club for inviting us along to hear Warren MacKenzie’s talk.

Before you think about what to do with any retirement surplus, you need to be saving for that first day after work. An option for your saving strategy is a Saskatchewan Pension Plan account. Check out the SPP today.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan, Phoebe and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Why some Canadians choose to retire to other countries

Let’s face it – it’s hard to find good things to say about winter in Canada when it’s 40 below with the windchill and the snow is piling up in your laneway.

Save with SPP knows a number of people who head south for the winter every year. And there are others who leave Canada for good and live out their golden years abroad. We took a look around to find out some of the reasons why some of us take this step.

Well, one reason might be finding not only warmer weather, but a lower cost of living, reports MoneySenseRetiring in North America, the site advises, means you’ll need an average of about $625,000 in the bank at age 65 (or an equivalent pension), or “annual retirement income of $55,000.”

But this amount, the site notes, is enough to let you “live in luxury” in a variety of other countries, including Colombia, Ecuador, Mexico and Malaysia, all modern countries with much lower living costs. You can, the article says, get a three-course meal at a restaurant for about $10 in some of these countries, and rents are in the low hundreds, rather than the low thousands.

The Roam New Roads site also cites lower living costs and a better climate in France, Panama, Thailand or Belize. Some offer low-cost national healthcare, the article notes, as well as lively culture, history, and wonderful culinary expertise.

However, there are other factors to bear in mind if you are moving away from your home country, notes the Escape From America blog. You can be homesick, which “leads to many expatriates returning home every single year,” often a costly process. Retirement abroad means little or no time with family and friends, a “forced loneliness,” the blog reports. Culture, language, accessibility (driving a car) are all other potential downsides in a faraway land, the article says.

The government of Canada’s website notes that living outside Canada will have an impact on your taxes, and may change how you are able to receive your Canada Pension Plan and Old Age Security benefits. If you are living outside the country for part of the year, there may be provincial or territorial requirements for your healthcare – a set amount of time you must reside in your homeland in order to keep your benefits. Or, you may have to try and arrange health coverage for the foreign country. It’s certainly a cost to be aware of.

So putting it all together, you can live on less money by moving to another country, where your retirement savings will allow you to trade middle-of-the-road living here for luxury and new adventures there. You’ll be free of snow shovelling and dark winter afternoons. But, if you get homesick, the cost of travelling back will put a dent in your now-lowered cost of living. You may find yourself isolated by language and culture. And you’ll have to figure out how to keep your healthcare or find an alternative.

It’s a big commitment, and not for everyone, but on a cold winter day, it’s nice to imagine heading down to the beach.  Any sort of retirement, be it here in the good old northland or off in some exotic sunny country, will require income. If you’re dreaming about retirement, take some time to put away a few dollars now for that eventual future. You’ll be happy you did. And a great destination for retirement savings is a Saskatchewan Pension Plan account.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22