When you think of retirement from a woman’s point of view, you see an array of challenges.

Writing in the National Post Christine Ibbotson observes that women “tend to live longer than men, and many divorced women or widows are simply choosing to remain single in retirement.”

This creates a “unique challenge” for them, she continues. “Many retired women receive much less than their male counterparts. Often, women have not worked the same amount of years as men, or have earned less income during their working careers, and therefore do not receive the same pension benefits.”

As well, Ibbotson continues, women may tend to be more “risk averse” with investing. Recent research from BMO found that “men were more likely to hold stocks and mutual funds in their investments whereas women were more likely to hold guaranteed investment certificates (GICs).”

An infographic from Eckler Partners provides more details on these factors.

In 2017, a woman could expect to live to age 83 on average — for men, the number is 79, the article notes. Sixty-two per cent of women were likely to take a break from work to care for their kids, compared to only 22 per cent of men, the Eckler research continues.

Scariest of all — 51 per cent of Canadian woman “haven’t even started to save for retirement or know how much they plan to save,” the article notes. A whopping 92 per cent of women surveyed say they have “minimal or no knowledge of investment.”

So, to sum it up, women — who live the longest — earn, on average, just 69 cents for every dollar men earn in Canada, Eckler reports. That means they have less money to save for a retirement that is almost bound to last longer than a man’s.

An article from the Wealthtender blog expands on the idea about women earning less than men, and its impact on retirement saving.

The article cites Merrill Lynch research in the U.S. as noting that “when a woman reaches retirement age, she may have earned a cumulative $1.05 million less than a man who has stayed continuously in the workforce.”

This necessarily means there is substantially less money to save for retirement by women, the article adds.

An article from Kiplinger suggests that women take a good look at annuities when they retire.

Noting that women earn less, and thus get lower government retirement benefits, the article underlines the idea that “women live longer, so their savings have to last longer.”

While the article is written for a U.S. audience, it makes the point that through an annuity, savings can be turned into “a guaranteed stream of lifetime income, paid monthly, no matter how long that is… in other words, a woman can use it to create a private pension.”

The article quotes University of Pennsylvania economist David Babbel as recommending that lifetime annuities should “comprise 40 to 80 per cent of their retirement assets.”

What can women do to close the retirement savings gap — apart from considering annuities?

Ibbotson recommends they “start by educating” themselves… “when we know more, we make better decisions and feel more empowered to improve our situation.”

“Start to know what your financial picture looks like. Buy a notebook and create a budget — your new financial plan,” she writes. Financial advisers and accountants are recommended, she writes, and your retirement savings portfolio needs to be designed “to grow with products that that offset inflation and taxes.”

The Wealthtender article adds a couple of other good points.

Focus on increasing financial literacy, the article suggests, by reading financial blogs, listening to related podcasts, and watching online videos on the topic of personal finance.

As well, the article concludes, women should focus on the future.

“Acknowledge early on that you may spend a big part of your life on your own, so always make saving one of your biggest priorities. Even if it’s just saving an extra $50 extra per month or increasing… your contribution by one to two per cent, the money can really add up over time.”

If you have a pension plan at work, be sure to join up, and participate to the max. Many plans will allow you to do “buybacks,” and make contributions after you are back at work for periods when you were away. This can really help fatten up your future pension cheque.

If you don’t have a pension plan at work, a great program to know about is the Saskatchewan Pension Plan. It’s open to any Canadian with registered retirement savings plan (RRSP) room. Your contributions are invested in a pooled fund, featuring low-cost expert management. When it’s time to retire, SPP will help you turn your savings into retirement income, including the possibility of a lifetime annuity.

And now, there are no limits from SPP on how much you can contribute each year, or transfer in from an RRSP. You can contribute any amount (up to your available RRSP room) and transfer in any amount from your RRSP. The possibilities are limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!

More Canadians need access to better pensions: Ambachtsheer

Writing in The Globe and Mail, noted pension expert Keith Ambachtsheer says our ever-growing senior population would be better served if they — and the rest of us — had access to better workplace pensions.

He notes that Canada’s retirement system is ranked 11^th out of 44 countries via the Mercer CFA Institute Global Pension Index. What’s needed to boost that ranking, Ambachtsheer contends, is to make the type of pension plans that public sector workers have widely available to the rest of the population.

“Canada,” he writes, already has “one of the best occupational pension systems in the world for its public-sector workers. Globally admired as `the Canadian pension-fund model,’ it efficiently converts regular contributions into lifetime retirement income streams for its public-sector members. At the same time, investment organizations using the model are at the leading edge of converting retirement savings into sustainable, wealth-producing capital. This system needs to be expanded to everyone else.”

The number of senior citizens, he observes, is on the rise. Citing Peter Drucker’s 1976 book The Unseen Revolution, Ambachtsheer notes that the author foresaw “the young, outsized baby boomer generation of the 1970s eventually becoming an outsized generation of retirees, and advocated creating pension organizations with two key features: legitimacy and effectiveness.”

Ambachtsheer lists governance as an important attribute of the most effective pension plans. “Pension arrangements must be structured to always act in the best interests of the plan risk-bearers,” he explains.

The plans should ideally “have an accumulation pool that focuses on investment return generation, and a separate decumulation pool that provides lifetime income.” You contribute to the investment pool during your working life and receive benefits from the decumulation side when you retire, he explains.

The Canadian model pension plans also feature cost-effective management and “value-adding investment programs that turn retirement savings into wealth-producing capital,” writes Ambachtsheer. Another feature is the ability to provide lifetime pensions to plan members, he adds.

So how do we go from what we have now — a situation where there are many workers without any sort of retirement program at work — to one where most of us are in a Canadian model plan? Ambachtsheer sees three ways to achieve this change.

First, “existing Canadian pension-fund model organizations” could “offer their pension management infrastructure to private sector employers,” he notes. This is already being done by a few larger pension funds, such as Ontario’s Colleges of Applied Arts & Technology Pension Plan (CAAT).

Save with SPP interviewed CAAT’s Derek Dobson on this topic a few years ago.

Another approach would be to have “a government entity decide to create a Canadian pension-fund model organization for private-sector workers and retirees,” an idea that has worked in some U.S. states and in Great Britain, he writes.

Finally, he suggests that the private sector create “one or more new Canadian model offerings,” making better pension plans available to the private sector. He writes that Common Wealth and Purpose Investments offer programs that provide end-to-end coverage, including lifetime pensions.

Our own Saskatchewan Pension Plan, which is open to any Canadian with available registered retirement savings plan (RRSP) room, already has some of the Canadian model features — investments are pooled, professionally managed and governed at a low cost. SPP offers, through its annuity features, a lifetime pension for its members. If you don’t have a pension plan at work, you can join SPP as an individual — or, if you are an employer, you can look into offering it as a pension for your employees. Check out SPP today!

Great news — the savings opportunities with SPP are now limitless! You can transfer any amount you want into SPP from an RRSP, and you can make contributions based on your entire available RRSP room. It’s a great way to build your SPP retirement nest egg more quickly!

Join the Wealthcare Revolution – follow SPP on Facebook!

A recent poll by CIBC found that while most Canadians hope to retire by age 61, more than half (57 per cent) worry whether “they’ll actually be able to achieve that ambition.”

As well, a very high percentage — 66 per cent — of pre-retirees surveyed worry “about running out of money in retirement.”

Save with SPP reached out to CIBC to follow up on these results, and got some comments from Carissa Lucreziano, Vice-President, Financial and Investment Advice, CIBC.

Q. Quite an eye-opener to see that two-thirds of people worry they might run out of money in retirement. We wondered if you got any information on the causes of this worry – maybe more people are drawing down a lump sum of money in a registered retirement income fund (RRIF) versus receiving monthly workplace pension cheques? Or is it worry they’ll lose money in the markets? 

A. The rising cost of living is increasing faster than people expected which in turn is impacting many Canadians’ ability to save for retirement and other goals, which has them feeling less prepared for the future and worried about their retirement savings. A recent CIBC poll found that inflation is the top financial concern for 65 per cent of Canadians right now. While inflation is cyclical, many people are thinking, if inflation keeps going up at this rate, it’s going to affect my retirement plan. 

Another reason people may be worried is because they don’t know how much they will need in retirement. One third of Canadians simply hope they have enough to retire, 20 per cent have sat down to run the numbers on their own and only 14 per cent have enlisted the help of an advisor. It’s like going on a road trip without planning a route, of course you’ll be worried about getting lost. 

Given all the factors you need to consider in a retirement plan, it’s best to sit down with an experienced advisor who can map out a strategy that aligns with your goals, your current situation and how you expect your circumstances to change in the future. 

Q. We were interested in the quote in the release about the importance of having a financial plan. Wondered if you could expand (briefly) on what sorts of things should be in a plan – probably it is looking at what future retirement income will be versus expected expenses, and then including the great things listed in the release like travelling? 

A. A financial plan is your big picture, giving you a detailed look at your current financial situation to help you prioritize and manage your short- and long-term goals – like travel, renovations, and retirement. 

The key items that should be included in every financial plan are your income, expenses, net worth, investment strategy, retirement, and estate plan.  

Many advisors use a goal planning tool to build a personalized plan that addresses all your needs, while taking into consideration any “what if” scenarios to see how any major changes might affect your overall plan. What if you buy a cottage at age 55 or gift money to your children at age 75? It is important to understand the financial implications of any big moves before you make them.  

The most important thing to remember though, is that your plan should grow and change as you do. Ideally, you should be reviewing it every year or whenever there is a material change like employment, divorce, marriage or having a child. 
 

Q. It’s interesting that many people are saving for retirement more via Tax-Free Savings Accounts (TFSAs) than by traditional registered retirement savings plans (RRSPs). Wondered if you learned any of the reasons why they preferred the TFSA – tax free income when you withdraw the money? Accessible for emergency spending en route to retirement? Maybe it is not impactful on one’s Old Age Security (OAS) qualification? 

A. Right now, Canadians are prioritizing day-to-day needs over long-term planning. This means, for many, that they are saving more in their TFSA over their RRSP.   

Contributing to a TFSA is a terrific way to save for both short- and long-term goals. A TFSA gives you the flexibility to access money easily and any interest, dividends, and capital gains earned are tax-free. The funds you withdraw from your TFSA also do not count as income, so it will not affect the amount of OAS you qualify for when you are over the age of 65.  

You don’t have to choose between an RRSP or a TFSA.  However, one could give you more benefits than the other depending on your situation. An advisor can help you understand your options and how it fits into your plan.

Q. Finally, what was the one thing that surprised you the most about these results? 

What stood out to me is that most Canadians polled are relying on their best guess for how much they will need to fund their retirement. Only 14 per cent have met with an advisor to run the numbers.  

An advisor can help you get a better understanding of your big picture and put an actionable plan in place, setting you up for success! It may seem overwhelming, but you can get there with the right support. Plus, you will be able to enjoy your next chapter, knowing that you are in a good place financially. Financial wellbeing is so important. 

Our thanks to Carissa Lucreziano and CIBC for taking the time to respond to us!

The Saskatchewan Pension Plan has been helping Canadians save for retirement for more than 35 years. Now, saving for retirement is simpler than ever before. There’s no longer a dollar limit on how much you can contribute to SPP during the limit — you can contribute any amount up to the total of your available RRSP room. And if you are making a transfer into SPP from another RRSP, you can transfer any or all of it — no limit applies. It’s a limitless opportunity for retirement saving! Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Canada, unlike France and the U.S., is not dealing with a pension crisis: Keller

In an opinion column for The Globe and Mail, Tony Keller explains why Canada isn’t having a crisis with its pension system like France and the United States are.

In France, he writes, there are protests in the streets and strikes over plans to raise the national retirement age to 64 from 62. In the U.S., he writes, there’s a “quiet… slow motion” crisis as Democrats and Republicans fail to agree on steps to stabilize the U.S. Social Security system.

“The Congressional Budget Office says that unless premiums are raised, the deficit is increased or taxpayers kick in cash, pension benefits will have to shrink 23 per cent by 2033,” Keller writes, noting that the Social Security system “continues to wend its gentle way toward the iceberg.”

There’s no crisis here, he says.

“Canada is not having a pension crisis. You may not have noticed. ‘`Absence of Crisis Expected to Continue Indefinitely, Experts Say’ is not a headline we tend to put on the front page,” he writes.

That’s because actions taken decades ago stabilized our system, Keller explains.

“Back in the 1990s, Canada was headed for a crisis. The Canada Pension Plan (CPP) (and the parallel Quebec Pension Plan (QPP)) had been created three decades earlier, and like most public pensions they were built on a pay-as-you-go model. CPP premiums deducted from workers’ paycheques paid retirees’ pensions, and once you retired, the next generation of workers would pay your pension. The CPP was a chain of intergenerational IOUs,” he writes.

The French and American systems also operate under the “pay-as-you-go” model. But such systems run into problems when there are fewer workers than retirees. Here in Canada, 19 per cent of us were seniors as of 2021; in France it is 21 per cent, Keller explains.

You have to change things up when demographics change, Keller contends.

“In the 1990s, then-Finance Minister Paul Martin and his provincial counterparts chose to face the arithmetic. They gradually doubled CPP premiums, to ensure that promised pensions would be paid, today and tomorrow. To make that possible, a large chunk of premiums now go into a savings account. The Canada Pension Plan Investment Board (CPPIB) manages the growing pile, which at the start of this year stood at $536-billion. Your premiums today partly fund your retirement tomorrow.”

This is a somewhat complex concept, but what it means is that we are still operating a “pay-as-you-go” system, but when we get to the point when there are not enough workers to pay for the pensions of retirees, money in the CPPIB cookie jar will be tapped into until the ratio returns to a sustainable level.

Keller’s article goes on to note that the Old Age Security (OAS) system, which is paid entirely out of tax dollars rather than employer and member contributions, has the potential for problems in the future; its costs keep rising as the senior population grows. One way to save money on OAS would be to increase the so-called “clawback” so only those seniors needing OAS the most would get it.

CPP was intended to supplement the workplace pensions Canadians were supposed to have; increasingly, workplace pensions are becoming less common. And OAS was designed for those who did not work (and contribute to CPP) during their careers. For a lot of people, CPP, OAS and even the Guaranteed Income Supplement are all they have to live on in retirement, and it’s a pretty modest living.

If you don’t have a workplace pension, there’s a great made-in-Saskatchewan solution out there for you — the Saskatchewan Pension Plan. SPP is a voluntary defined contribution pension plan that any Canadian with registered retirement savings plan (RRSP) room can join. Employers can also offer it as a workplace benefit. Contributions made to SPP are professionally invested in a pooled fund at a low fee. SPP grows the savings until retirement time, when options for turning savings into income include a stable of annuities. Check out SPP today!

And there’s more good news! Now, you can contribute any amount to SPP each year up to your RRSP limit. And if you are transferring money into SPP from your RRSP, there’s no longer an annual limit! Saving with SPP for retirement is now limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!

Boomers will recall what happened where our parents retired. It was literally, in most cases, getting the gold watch at 65 and leaving the workforce entirely for a leisurely life of golf, visiting relatives, the bridge club, and so on.

Turn the clock forward from the 1980s to the present, and it’s a very different story.

According to Statistics Canada, the percentage of Canadians of senior age is growing. In 2020, the agency reports, “18 per cent of the Canadian population were aged 65 and older,” a percentage expected to grow to 24 per cent by the end of the 2030s.

Our older folks “are living longer and healthier than previous generations,” and that’s one reason why more of them than ever are working or volunteering, the article notes. Stats Canada reports that 13.8 per cent of Canadian seniors were working or volunteering in 2020, up from just six per cent 20 years earlier.

Is it just health and vitality that’s keeping older folks working?

A recent H&R Block Canada survey found that 50 per cent of those surveyed planned “to have a side gig when they retire.”

That may be driven by the reality that they can’t afford to fully retire at 65, notes the media release setting out the survey results. “Fifty-two per cent don’t feel they have enough money left at the end of the month to save for their retirement,” the release notes. And only 46 per cent “feel good about their retirement strategy,” the release notes.

“Not so long ago, the traditional vision of retirement was that at around 65 years old, Canadians ‘hung up their hats’ and celebrated the end of full-time employment. Enjoying the steady income of their company/government pension, they were ready to embrace new life ventures in pursuit of the things they never previously had time for,” states Peter Bruno, President of H&R Block Canada, in the release. “What we’re seeing now is that the vision for retirement has evolved dramatically – fuelled by shifts in tax-friendly savings plan options, evolving workforce realities, the gig economy, and the prevailing economic environment.”  

An article in Business Insider suggests the rising cost of living is also a factor.

“Seniors are re-entering the workforce in growing numbers,” the article reports, citing a report from USA Today. “As inflation squeezes them out of retirement, many are taking jobs as cashiers, retail associates, and hosts at local restaurants, among other service industry jobs,” Business Insider reports.

Steve Weeks, 69, says he went back to work at a Florida restaurant because “the extra money is helpful.” The article goes on to say that older workers are seen by many as being “more dependable, displaying higher levels of punctuality, lower absenteeism, and less inclination towards job-hopping.”

There can be other, non-monetary benefits derived from working into your senior years, reports Harvard Health Publishing.

“There’s increasing evidence that the payoff of working past age 65 may go beyond income. Some studies have linked working past retirement with better health and longevity,” the article notes.

“A 2016 study of about 3,000 people, published in the Journal of Epidemiology and Community Health, suggested that working even one more year beyond retirement age was associated with a nine per cent to 11 per cent lower risk of dying during the 18-year study period, regardless of health,” the article continues.

Another study found that “people who worked past age 65 were about three times more likely to report being in good health and about half as likely to have serious health problems, such as cancer or heart disease,” the article notes. Research has also established a link between working past retirement age and “a reduced risk of dementia and heart attack.”

Most of the folks we know still working at part-time or volunteer jobs cite the benefit of being part of a time, and having a purpose and sense of belonging. You do miss social interaction with workplace friends after you hang up the ID badge.

If you’re a member of the Saskatchewan Pension Plan (SPP), and plan to work beyond age 65, be aware that the plan allows you to start turning savings into income as late as late as age 71. So if you work after turning 65, you can still contribute to your SPP pension nest egg for another six years. It’s another helpful feature of SPP, which has helped deliver retirement security since 1986.

Another great bit of news — SPP members can now make annual contributions equal to their available registered retirement savings plan (RRSP) room! There is no longer an annual limit on how much you can contribute to SPP, and as well, there is no limit on how much you can transfer into SPP from your registered retirement savings plan (RRSP). SPP retirement saving is now limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!

`”Hyperbolic discounting,” other mental factors block us from saving

Writing for MSNBC, Jasmin Suknanan asks why it’s so easy for most of us to think hard about tomorrow, but less so about the weeks and years that come after that.

“Psychology is often just as important in personal finance as the numbers — the way we save, spend and invest are all influenced by the way we think and feel, especially when it comes to preparing for future events like retirement,” she writes.

We know, she continues, that saving for retirement is important “because you’ll need a nest egg when you’re no longer working. The best way to guarantee an income when you’re in your golden years is to save and invest as much as you can now while you are still working.”

So, we all get it — why don’t we all get going on it? Suknanan points to a number of causes.

First, she writes, we tend not to make too many decisions with the distant future in mind.  “It’s easy to feel like retirement is so far into the future and that we have plenty of time before we need to start preparing for it. As a result, many would rather treat themselves to things they can enjoy right now instead of stocking away money for a future that’s decades away,” she notes. This process is called “hyperbolic discounting.”

Simply put, we’d rather spend $5 today than save $10 for next week. Living in the now.

Next, she explains, “it’s easier to do nothing than it is to make a change.”

Even when you know you have to start your retirement savings program (this article is written for a U.S. audience, but here, let’s talk about starting a registered retirement savings plan or Tax Free Savings Account), it is easy to put off actually doing anything, the article tells us.

“’I’ll do it tomorrow’ becomes `I’ll do it this weekend,’ which then becomes `I’ll do it next weekend.’ Before you know it, you’ve gone a month or more and still haven’t opened up your… account. And this doesn’t just occur when it comes to saving for retirement; we’re certainly guilty of repeating this thought process for just about any task — returning a package for a refund, cleaning our room or even cancelling subscriptions and memberships,” she writes.

She notes that opening up a retirement savings account is not some big event that takes days — it can take minutes. As an example, here’s how to sign up for the Saskatchewan Pension Plan (SPP).

The final problem — also a perception-based one — is where we “underestimate how long it will take for us to achieve our desired savings,” Suknanan writes.

“Many people put off saving for retirement until their 30s or 40s thinking that they should be able to amass as much as they’ll need for their golden years in just two decades. But once they factor in their current expenses and financial obligations, they find that it’ll actually take a lot longer than they initially believed to build a comfortable retirement fund,” she explains.

“Saving for retirement is one of the most crucial financial steps you’ll need to take. Taking steps to save today can guarantee you an income in retirement when you’re no longer working,” she concludes.

This is a great article on many levels. Given the fact that the majority of Canadians don’t have a workplace pension plan, the onus for saving for retirement tends to be solely on your own shoulders. Fortunately, the SPP can equip you with all the tools you need to get the job done. Signing up is easy, and you decide how much to contribute. You can automate your contributions via pre-authorized payments, or set up SPP as a bill via online banking. You can even contribute via credit card.

SPP takes those contributions, invests them professionally in a pooled fund at a low cost, grows your nest egg, and helps you convert it to income in those faraway days of retirement. Check out SPP today!

Have you heard the news? Contributing to SPP is now easier than ever. You can now contribute any amount per year up to your available registered retirement savings plan (RRSP) room. And if you are transferring funds in from an RRSP to SPP, there is no longer an annual limit — you can transfer any amount into your SPP nest egg. Saving with SPP is now limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!

We should eat healthy. We should exercise. And we should save for the future.

Our parents drilled these ideas into our heads, yet — apart from a massive burst of saving when pandemic restrictions prevented us from spending — we are no longer, as Canadians, a nation of savers.

The highly-regarded Retire Happy blog, authored by Jim Yih, offers up some thoughts on the subject.

First, he posits, “the statistics are alarming when it comes to debt, savings and fiscal responsibility. One of the reasons for this is the lack of formal financial education.”

Next, writes Yih, is the problem of a culture of overspending.

“We live in a society that loves to spend. It starts with a government that believes spending drives the economy and for the past few decades, governments have encouraged spending even if it means spending money we do not have,” he explains. “We live in a world of delayed consequence over delayed gratification and unfortunately we are facing those consequences today.”

A third reason is that our levels of debt make saving next to impossible, Yih states.

We owe, he notes, more than $1.5 trillion in household debt, and the ratio of debt to disposable income was 155 per cent at the time he wrote his blog post (higher now). How, he asks, “can you save money when Canadians have this much debt?”

OK — we don’t know how to be responsible with money, we love to spend, and we clearly love to max out credit cards, lines of credit, and other sources of spendable debt. What else is holding us back from saving?

The Kinda Frugal blog explores a few other factors.

Citing figures from Bankrate, the blog reports that “56 per cent of American adults don’t have enough savings to cover a $1,000 expense.”

The blog contends that not having a budget is a key reason for a lack of saving. Without a budget, people end up “living beyond your means” and “deep in debt,” and can be “wiped out by an unexpected expense.”

Instead, the blog suggests, we should try to live “below our means,” and spend less than we earn.

“Creating a budget is an excellent first step toward curbing overspending. Sticking to it is the part that will free up extra cash to put toward your savings,” the blog advises.

Another concept the blog explores is the ideas of separating your needs from your wants. “A need is something you can’t live without,” the blog explains. “Food, shelter, clothing, and medicines are necessities and examples of needs.” Wants, on the other hand, aren’t needed for living — examples include “expensive jewellery, high-end cars and luxury vacations.”

Writing for The Balance, Matt Reiner suggests a few other contributing factors in the “not-saving” file.

As mentioned by other bloggers, not having any savings when an emergency arises — like a major auto repair bill — can wipe you out. Reiner notes that it is important to have an emergency fund in place equal to about three to six months’ worth of income.

“If that sounds intimidating, start with socking away enough for one month. From there, you can continue building your emergency savings with regular monthly contributions,” Reiner suggests.

Reiner also advises those of us with retirement savings arrangements at work to take full advantage of them. Here in Canada, this would mean joining any company pension plan or retirement savings arrangement and taking part to the maximum. A lot of times, he writes, employers match all or some of the amount contributed. “A company match is essentially free money, and it’s best not to leave it on the table, especially if you’re behind on retirement saving,” Reiner explains.

He concludes with one piece of advice. “Regardless of where you decide to start, the important thing is to start. Even putting a little in savings out of each paycheque can add up over the long term,” writes Reiner.

Our late Uncle Joe religiously endorsed the so-called 10 per cent rule. When you get paid, put 10 per cent of the total away, and live on the rest. “You’ll never run into troubles if you can do this,” he told us.

Another idea that really works is to automate your savings, even if you are starting small. Choose an amount you’d like to save, and have it diverted automatically from your bank account to savings. It’s a “set it and forget it” approach, and you’ll be surprised how well it works.

It’s an approach that works well with the Saskatchewan Pension Plan (SPP). SPP members can make pre-authorized contributions to their accounts. You can pick dates that align with your payday, and boom — you are building your future retirement income without even noticing. Check out SPP today!

And there’s some great news for SPP members — the rules on making contributions have changed, and for the better. You can now make an annual contribution to SPP that is equal to your available registered retirement savings plan (RRSP) room! And if you are transferring money into SPP from an RRSP, there is no longer an annual limit on how much you can transfer in! It’s a change that makes contributing to SPP limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!

More than half of us fear our retirement plans are in trouble: Scotiabank survey

A new survey from Scotiabank finds that 59 per cent of us are feeling “negative” about our investments, up from just 33 per cent in a similar survey carried out last fall.

Highlights from the Scotiabank Global Asset Management Investor Sentiment Survey were reported upon in a recent Windsor Star article.

“Investors’ top five perceived risks to their portfolios over the next couple of years were an economic recession (61 per cent), rising inflation (58 per cent), stock-market volatility (46 per cent), rising interest rates (40 per cent) and global geopolitical risk (37 per cent),” reports the Star.

The article says the lack of a written financial plan may also be a source of “angst.”

“These results indicate that investors have current concerns about meeting their retirement goals, however, regular meetings with financial advisers and having a written financial plan diminish those concerns,” Neal Kerr, head of Scotia Global Asset Management, states in the article.

The article then creates a link between having a financial plan, and being confident about retirement.

A different survey from the Bank of Montreal found that “52 per cent of women are confident about retiring at their target age compared to 68 per cent of men,” the Star reports.

That same survey found that 73 per cent of women surveyed don’t have a financial plan, compared to 64 per cent of men, the newspaper reports.

As well, the Star report notes, 87 per cent of women surveyed “reported having a fear of unknown expenses,” and 63 per cent “had anxiety about keeping up with their monthly bills.”

“Financial planning and financial literacy are imperative when navigating finances to ensure customers are making real financial progress,” states BMO’s Gayle Ramsay in the article. “With most women reporting they have no financial plan in place, they can start to alleviate their anxiety and take control of their finances by evaluating their budgets, adjusting spending habits accordingly and committing to a savings and retirement plan,” she tells the Star.

So let’s tally up what we’ve learned here. Canadians worry about how their investments are going in this volatile era, but as well, they haven’t planned out what life in retirement will be like so they are worried about that as well. In short, they don’t know how much they’ll have to spend in retirement, and aren’t sure how much it will cost.

The advice we received from an actuary friend as we rolled into retirement was not to fixate on the difference between our gross work pay and gross pension amount, but to do a net-to-net comparison. This was good advice; our income dropped by more than half but our tax bill was far lower. Other deductions we faced while working disappeared in retirement, such as pension contributions, EI, and so on, and our commuting bill for trains and parking fell to zero.

The article is correct in underlining the importance of a financial plan. That plan should take into account what all your sources of income will provide you in retirement, including government benefits, workplace pensions and personal savings.

That’s one side of the balance sheet. You should then take an honest look at the costs you will be facing in your life after work. If your income is more than enough to cover your costs, hooray! If not, you may need to tweak a few things to get yourself there, such as going to one car, or working part-time in retirement, or even downsizing to a smaller home or community.

It’s still all about living within your means.

According to Statistics Canada, 6.6 million Canadians have are covered by registered pension plans as of January 2021. That sounds good until you realize that the country’s population is approaching 40 million.

So the majority of us don’t have a pension at work. Fortunately, there’s a solution for any Canadian with available registered retirement savings plan (RRSP) room — the Saskatchewan Pension Plan. SPP is a one-stop shop for investing and growing your savings, and helping you convert it to income when you retire. Find out how SPP has been delivering retirement security for more than 35 years, and check them out today!

Breaking news — contributing to your SPP account is easier than ever. You can now contribute any amount per year up to your available RRSP room. And if you are transferring funds into SPP from an RRSP, there is no longer an annual limit — you can contribute any amount! The retirement future with SPP is now limitless.

Join the Wealthcare Revolution – follow SPP on Facebook!

Morgan Housel’s The Psychology of Money makes an interesting, anecdote-filled case that financial success is more about patience, and even luck, than the “technical side of money.”

It’s not, he writes, that the technical how-to advice and education about money is “bad or wrong,” but that “knowing what to do tells you nothing about what happens in your head when you try to do it.”

As an example, he notes that a big factor in success with stocks is when you were born — something we all have no control over. “If you were born in 1970, the S&P 500 increased almost 10-fold, adjusted for inflation, during your teens and 20s. That’s an amazing return. If you were born in 1950, the market went literally nowhere in your teens and 20s, adjusted for inflation.” So people in those two groups will have a different personal history with stock investing, and different levels of willingness to enter the market, he explains.

It’s the same story for inflation, he notes. Those born in the 1960s remember it, those born in the 1990s are experiencing it for the first time.

Next, he notes that those with lower incomes have more faith and hope in lottery winnings than those with higher incomes.

“The lowest-income households in the U.S. on average spend $412 a year on lotto tickets, four times the amount of those in the highest income groups,” he notes. Does that factor correlate with another stat, that 40 per cent of Americans say “they couldn’t come up with $400 in an emergency.” They are, he writes, “blowing their safety nets on something with a one-in-millions chance of hitting it big.”

Looking at retirement, he writes that since the 1980s, “the idea that everyone deserves, and should have, a dignified retirement took hold. And the way to get that dignified retirement has been an expectation that everyone will save and invest their own money.” But, he continues, it is not happening. “It should surprise no one that many of us are bad at saving and investing for retirement.”

In a chapter titled Luck & Risk, Housel notes that Nobel Prize-winning economist Robert Shiller was once asked what he would like to know about investing “that we can’t know.”

“The exact role of luck in successful outcomes,” replied Shiller.

On risk, Housel stresses the concept of having “enough,” and not necessarily needing more.

“There is no reason to risk what you have and need for what you don’t have and don’t need,” he explains. Watch out if “the taste of having more — more money, more power, more prestige — increases ambition faster than satisfaction,” he warns.

A long-term approach to investing can work well, he writes. He notes that famed investor Warren Buffett “began serious investing when he was 10 years old,” and by 30, had a net worth of one million. That has grown to $84.5 billion at the time the book was written, Housel notes.

But if Buffett had been “a more normal person, spending his teens and 20s exploring the world and finding his passion,” and had $25,000 as his net worth at age 30, he would have — everything else being the same — just $11.9 million today.

“His skill is investing, but his secret is time,” explains Housel.

Getting money is one thing, he writes, but keeping it is another.

Buffett, writes Housel, avoided debt, panic selling “during the 14 recessions he’s lived through,” kept his reputation intact and “didn’t burn himself out or quit or retire.”

“He survived. Survival gave him longevity. And longevity — investing consistently from age 10 to at least age 89 — is what made compounding work wonders,” Housel writes.

So, he explains, while planning is important, “the most important part of every plan is to plan on the plan not going according to the plan.”

Rather than focusing on getting big returns, think about survival, and being “financially unbreakable… if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.”

Unlike flying an airplane, you don’t have to be right all the time in investing. “If you’re a good investor most years will be just OK, and plenty will be bad,” he explains.

Being a saver is critical, he adds.

“Building wealth has little to do with your income or investment returns, and lots to do with your savings rate,” he writes. “Personal savings and frugality — finance’s conservation and efficiency — are parts of the money equation that are more in your control and have a 100 per cent chance of being as effective in the future as they are today.”

He spends time on the of “leaving room for error” with investments. “The person with enough room for error in part of their strategy (cash) has an edge over the person who gets wiped out, game over, insert more tokens, when they’re wrong.”

Some concluding thoughts from Housel are that “saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future.”

Manage money in a way that lets you sleep at night, increase your investing time horizon, and “become OK with a lot of things going wrong. You could be wrong half the time and still make a fortune.”

It’s hard to do justice to such a thought-provoking book in a short interview, so consider adding The Psychology of Money to your personal finance library.

The idea of starting retirement savings early is a good one, and as the author notes, not everyone has access to a workplace pension or retirement program. If you’re in that boat, take a look at the Saskatchewan Pension Plan (SPP). Under SPP’s new rules, you can contribute any amount to the plan each year, up to your available registered retirement savings plan (RRSP) limit! And if you are transferring money into SPP from an RRSP, there is no longer an annual limit — you can transfer any amount into your SPP nest egg. Contributing to SPP is now limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!

Experts call for higher RRSP limits, and a later date for RRIFs

Writing in the Regina Leader-Post, a trio of financial experts is calling on Ottawa to make it easier for Canadians to save more for retirement — and then, on the back end, starting turning savings into income at a later date.

The opinion piece in the Leader-Post was authored by William Robson and Alexandre Laurin of the C.D. Howe Institute, and Don Drummond, a respected economist who now teaches at the School of Policy Studies at Queen’s University in Kingston, Ont.

Their article makes the point that our current registered retirement savings plan (RRSP) limits need to be changed.

“The current limit on saving in defined-contribution pension plans and RRSPs — 18 per cent of a person’s earned income — dates from 1992,” their article notes. While that 18 per cent figure may have been appropriate 30 years ago, “now, with people living longer and with yields on safe investments having fallen, it is badly out of line with reality,” the authors contend.

They recommend gradually raising the limit to 30 per cent of earned income through a four-year series of three per cent increases, the Leader-Post article notes.

While an RRSP is for saving, its close cousin, the registered retirement income fund (RRIF) is the registered vehicle designed for drawing down savings as retirement income. The trio of experts have some thoughts about RRIF rules as well.

The current RRIF rules compel us to “stop contributing to, and start drawing down, tax deferred savings in the year (Canadians) turn 71,” the authors note. This rule was also established in the early 1990s, they note.

“As returns on safe assets fell and longevity increased, these minimum withdrawals exposed ever more Canadians to a risk of outliving their savings,” the authors explain. They are calling for a reduction of the minimum withdrawal amount by “one percentage point, beginning with the 2023 taxation years, and further reduce them in future years until the risk of the average retiree depleting tax-deferred savings is negligible.”

OK, so we would raise RRSP contribution limits, and lower RRIF withdrawal amounts. What else do the three experts recommend?

They’d like to see it made possible for Tax Free Savings Account (TFSA) holders to buy annuities within their TFSAs.

“When an RRSP-holder buys an annuity with savings in an RRSP, the investment-income portion of the annuity continues to benefit from the tax-deferred accumulation that applied to the RRSP. But TFSA-holders cannot buy annuities inside their TFSAs, which means they end up paying tax on money that is intended to be tax-free. This difference disadvantages people who would be better off saving in TFSAs and discourages a much-needed expansion of the market for annuities in Canada,” they write.

Save with SPP has had the opportunity to hear all three of these gentlemen speak out on retirement-related issues over the years. They’ve put some thought into providing possible approaches to encouraging people to save more, making the savings last, and to make the TFSA into a better long-term income provider. Under new rules, you can now make an annual contribution to SPP up to the amount of your available RRSP room! And if you are transferring funds into SPP from an RRSP, there is no longer a limit on how much you can transfer! Check out SPP today — your retirement future with the plan is now limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!