Happy Retirement Sheryl!

Last week Sheryl Smolkin announced her retirement and talked about how SPP has changed her life.  If you missed the blog you can read it here. Sheryl has been part of our Social Media team for the last seven years, helping us write our original policy, getting us started with Facebook posts, hosting on our YouTube channel and of course has being the voice of savewithspp.com since 2011.

Sheryl lives in the Toronto area, however she writes content that is relevant across Canada. Her writing style makes the blogs easy to read and packs a lot of information into a few hundred words. We covered many topics over the years, mixing current events with general topics that everyone in Canada should know about everything financial.

Sheryl and I have worked closely together on the blogs since the beginning; I have gained so much knowledge not only from reading her posts, but also from asking questions and getting advice for the writing I do at SPP. We both like traveling and seem to travel close to the same time which makes it fun to hit our deadlines for our weekly best of posts and our regular weekly blogs.  But we always got our “act together” so we didn’t miss a week, even if our inboxes were full of emails saying “Are the blogs ready for review I am leaving on Wednesday?”.

As I said to Sheryl, I have mixed feeling about her departure from savewithspp.com. I am happy she will be able to spend more time with her family and traveling, but I will miss hearing from her and reading her blogs.

Thank for you for being a mentor to me and putting up with me as I moved from a mid-20 something to an early 30 something. Enjoy your retirement and remember those of us who are still working.

Happy retirement Sheryl!

Stephen Neiszner

May 28: Best from the blogosphere

Of the 500+ blogs I have written for savewithspp.com, monitoring the blogosphere to link you with the best of the personal finance world has been the most rewarding. While some personal finance bloggers generate money from google ads on their websites,  forge corporate relationships, sell courses or develop an enhanced reputation in their chosen field, the vast majority write for free, just because they have information they want to share with others.

Here is a completely unscientific list of some of my favourites who I have featured time and time again in this space. If you want to continue following them, sign up to receive emails notifying you when their latest blogs are posted.

Boomer&Echo: Rob Engen and his mother Marie Engen are the writing team that generate a consistent stream of always engaging blogs about everything to do with saving and spending money.

Cait Flanders: Cait Flanders has written about all the ways she continually challenges herself to change her habits, her mindset and her life. This includes paying off debt, completing a two-year shopping ban and doing a year of slow living experiments. And in January 2018, she published her first book, The Year of Less  (a memoir), which became a Wall Street Journal bestseller.

Canadian Dream: Free at 45: I have been reading Tim Stobbs since we blogged together on moneyville for the Toronto Star. He has beat his initial target, retiring recently at age 40, but his blogs about retirement are still a great read.

Jessica Moorhouse:  Jessica Moorhouse is a millennial personal finance expert, speaker, Accredited Financial Counsellor Canada® professional, award-winning blogger, host of the Mo’ Money Podcast, founder of the Millennial Money Meetup and co-founder of Rich & Fit. Don’t miss How I Survived a Trip Across America Using Only Chip & Pin.

Millenial Revolution: Firecracker and Wanderer are married computer engineers who retired in their early 30s. They blog on Millenial Revolution. They opted to not buy a home because they believe home ownership is a money pit. Instead they travel the world living on their investment income. Reader case studies where Wanderer “maths it up” are particularly fascinating.

Money After Graduation: Money After Graduation Inc. is an online financial literacy resource founded by Bridget Casey for young professionals who want to build long-term wealth. Whether readers are looking to pay off student loans, invest in the stock market, or save for retirement, this website has valuable resources and tools including eCourses and workshops.

Retire Happy Jim Yih and his team of writers publish top quality financial planning information. They believe there is a need for timeless information because too many financial and investing sites focus on minute-by-minute investment ideas, changing markets and fast paced trends.

Sean Cooper: Sean Cooper’s initial claim to fame was paying off his mortgage by age 30 which he has documented in his book “Burn Your Mortgage.” Since then much of his writing has focused on real estate-related subjects. He has recently qualified as a mortgage broker and will be leaving his day job as a pension administrator to launch a new career.

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For me, retirement beckons. This is my last Best from the Blogosphere for savewithspp.com. My own blog RetirementRedux has been dormant for some time as I have focused on writing for clients but I plan to revive it now that I have more time. Feel free to subscribe if you are interested.

May all of your financial dreams come true, and when the right time comes, I wish you a long, healthy and prosperous retirement.

 

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

How SPP changed my life

Punta Cana: March 2018

After a long career as a pension lawyer with a consulting firm, I retired for the first time 13 years ago and became Editor of Employee Benefits News Canada. I resigned from that position four years later and embarked on an encore career as a freelance personal finance writer.

In December 2010 I wrote the article Is this small pension plan Canada’s best kept secret?  about the Saskatchewan Pension Plan for Adam Mayers, formerly the personal finance editor for the Toronto Star. The Star was starting a personal finance blogging site called moneyville and he was looking for someone to write about pensions and employee benefits. I was recommended by Ellen Roseman, the Star’s consumer columnist.

The article about SPP was my first big break. I was offered the position at moneyville and for 21/2 years I wrote three Eye on Benefits blogs each week. It was frightening, exhausting and exhilarating. And when moneyville began a new life as the personal finance section of the Toronto Star, my weekly column At Work was featured for another 18 months.

But that was only the beginning.

Soon after the “best kept secret” article appeared on moneyville, SPP’s General Manager Katherine Strutt asked me to help develop a social media strategy for the pension plan. Truth be told, I was an early social media user but there were and still are huge gaps in my knowledge. So I partnered with expert Leslie Hughes from PunchMedia, We did a remote, online presentation and were subsequently invited to Kindersley, Saskatchewan, the home of SPP to present in person. All of our recommendations were accepted.

By December 2011, I was blogging twice a week for SPP about everything and anything to do with spending money, saving money, retirement, insurance, financial literacy and personal finance. Since then I have authored over 500 articles for savewithspp.com. Along the way I also wrote hundreds of other articles for Employee Benefit News (U.S.), Sun Life, Tangerine Bank and other terrific clients. As a result, I have doubled my retirement savings.

All my clients have been wonderful but SPP is definitely at the top of the list. I am absolutely passionate about SPP and both my husband and I are members. Because I was receiving dividends and not salary from my company I could not make regular contributions. Instead, over the last seven years I have transferred $10,000 each year from another RRSP into SPP and I would contribute more if I could.

By the end of 2017 I started turning down work, but I was still reluctant to sever my relationship with SPP. However, as my days became increasingly full with travel, caring for my aged mother, visiting my daughter’s family in Ottawa, choir and taking classes at Ryerson’s Life Institute, I realized that I’m ready to let go at long last. After the end of May when people ask me what I do, I will finally be totally comfortable saying “I am retired.”

I will miss working with the gang at SPP. I will also miss the wonderful feedback from our readers. I very much look forward to seeing how both savewithspp.com and the plan evolve. My parting advice to all of you is maximize your SPP savings every year. SPP has changed my life. It can also change yours.

Au revoir. Until we meet again….

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Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Wedding Insurance: Why you need it and what’s covered

You have been planning a wedding for months. The venue has been booked, invitations sent and the flowers selected. Then an immediate family member becomes very ill and the event has to be postponed. Or the banquet hall goes belly up and a hefty deposit is lost. These unfortunate events happen rarely, but when they do the extra expense can put a strain on an already tight budget.

According to an unscientific survey by Weddingbells magazine, there were 162,056 weddings across Canada in 2014, each with an average price tag of $31,685. Furthermore, a survey conducted in the same year by a Bank of Montreal subsidiary suggested that people in Saskatchewan and Manitoba planned to spend, on average, $27,200 on a future wedding. That figure was the highest in the country.

You insure your car, your home, your life and your health. But you may not be aware that you can also insure your wedding. Coverage may range from a wedding guest’s slip and fall to stolen wedding gifts to extreme weather on the day of the event that causes 50% of the guests to be unable to attend the wedding or reception. But there is a specific exclusion if a bride or groom gets cold feet and does not show at the last minute.

Pal Insurance Brokers Canada Ltd. is one company that offers Weddinguard insurance online. This insurance provides financial protection against many of those things that can go wrong with your wedding plans, subject to policy wording. You are eligible if you are getting married within 1 year and the reception date is at least three days in the future. You can see a pdf of the full policy and what it does and does not cover here.

You can get an online quote here. While researching this article I completed the online questionnaire for the four different levels of coverage and got the following pricing information, including up to $1 million of liability coverage.

Weddinguard Insurance

Potential reimbursement up to stated amount + premiums
Silver package Gold Package Diamond Package Platinum Package
Cancellation expenses $4,000 $10,000 $30,000 $50,000
Honeymoon cancellation $2,000 $2,500 $5,000 $5,000
Loss of Deposit $2,000 $3,000 $5,000 $6,000
Wedding photos and video $2,500 $5,000 $7,000 $7,500
Loss or damage to bridal attire $2,500 $2,500 $5,000 $7,000
Wedding presents $5,000 $5,000 $7,000 $8,000
Rings $1,000 $1,500 $3,000 $5,000
Cake and flowers $2,000 $2,500 $5,000 $6,000
Wedding stationery $1,000 $1,500 $3,000 $4,000
Rented property $1,000 $10,000 $15,000 $20,000
PREMIUM $250 $400 $650 $950

For destination weddings, PAL says underwriters must manually review the request for coverage which can take three or four days. There is also a special exclusion for Florida, Georgia and Caribbean weddings due to hurricane force winds in August, September and October.

Matt Taylor, general manager for PAL Insurance company recently told The Canadian Press that PAL sells between 1,500 to 2,000 wedding policies each year. Front Row Insurance also offers wedding insurance with policies starting at $105 and up to $5,000,000 in General Liability Coverage to cover damage to the wedding venue and injury to third parties.

Lacie Glover who blogs at  nerdwallet offers the following tips for buying the right policy for your wedding:

  • Look over your existing homeowners and renters insurance policies — or those of any relatives hosting or paying for the wedding — to see whether existing liability insurance will cover you.
  • Check the deductible, which is the amount deducted from a claims check. If one vendor doesn’t show up, and the deductible is higher than the deposit for that vendor, you’ll swallow the cost for that lost deposit.
  • Look at coverage limits. For cancellation coverage, you’ll want the limit to be close to your wedding budget, including the honeymoon.

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Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Interview with Randy Bauslaugh: The one fund solution*

 

Click here to listen
Click here to listen

Hi. My name is Sheryl Smolkin, and today I’m interviewing Randy Bauslaugh for a savewithspp.com podcast. Randy is a partner at the McCarthy Tétrault law firm, where he leads the national pensions, benefits, and executive compensation practice. He has been involved with many of the leading pensions and benefits cases over the last 30 years, and he is also a member of the Saskatchewan Pension Plan.

Welcome, Randy. I’m so glad you could make time for us in your busy schedule.

Thanks. I’m happy to give back to the SPP.

That’s terrific. Randy has recently written an article titled Dumb and Dumber: Individual Investment Choice in DC Plans. That’s what we’re going to talk about today. 

Q: Randy, that’s a very provocative title for an article. Tell me about the independent research supporting your thesis that giving investment choice to plan members in defined contribution RPPs is riskier from a legal perspective and a bad idea from a financial performance perspective.
A: Sure. The research comes from various sources – research institutions, academics, news articles and a lot of that relates to the financial performance side. Also, on the legal side, I had a student a few years ago take a look, and there were 3,500 class actions relating to defined contribution plans particularly in the US and those were just relating to DC plan fees.

I think you can pick up any standard textbook on pensions and it will tell you that defined benefit plans have a low legal risk but potentially fatal financial risk. That’s because they guarantee the retirement payments. However, they always say DC plans have low financial risk, because the employer just contributes a fixed amount, but very high legal risk, because there are so many different ways of getting sued.

Q: Then why do DC plan sponsors typically provide a broad range of investment options for plan members?
A: Well, I don’t really know. I have some theories. Before the mid-1980s, most plans did not provide choice, and then it sort of became trendy. I think a lot of employers just believe that choice empowers their employees, or maybe it’s just because after all, who wants just one TV channel.

I also know for a fact that aside from individual empowerment or incentives for the financial industry, there are a lot of plan sponsors out there who think either they have a legal obligation to provide choice or they are somehow reducing their legal exposure if they do provide choice when exactly the opposite is true.

Q: What legal risks does offering multiple investment options raise for DC plan sponsors?
A: Well, one thing a client once said to me is, “Well, what about the (Capital Accumulation Plan) CAP guidelines? I need to provide choice to comply with the CAP guidelines.”  Financial market regulators put out something called Guidelines for Capital Accumulation Plans. Take a look at the table of contents and you’ll find a whole lot of ways of being sued under a DC plan that offers choice. I’ve got a slide presentation that just identifies 48 different ways in which plan members have sued their employers only over fees.

The other thing people should do is read the second paragraph of those guidelines. It says it applies where you’re giving two or more choices, so it doesn’t apply if you’re not giving any choice.

Q: Is providing only one investment option, such as a balanced fund, a set-and-forget strategy for plan sponsors, or do they still have active management and monitoring responsibilities?
A: They still have the active management and monitoring responsibilities. It’s definitely not just “let’s turn it on and forget about it.” Ideally, a DC plan should be managed like a defined-benefit fund. You may do a profile of what your current particular employee group looks like and then the investments can be shaped to that group’s profile, but you still need to manage it on a regular basis.

One of the advantages of a single fund is that you get professional management of the whole fund, not members making their own investment choices for their own little pots. Once you set it up, you should still review it every month or at least every quarter just to make sure that that fund has got an appropriate mix for your group.

Q: Why is a one-fund approach less expensive from a fees perspective for both plan sponsors and plan members?
A: Well, usually you can get economies of scale that will keep the fees down, because you’ve just got one big pot and not multiple little pots. I know that recently a lot of DC fund providers have dramatically reduced their fees for, say, balanced funds and other investment vehicles but some of the other esoteric funds are still pretty expensive. When you’ve got all these little individual accounts, you still have lots of transaction and other fees that are tied to those accounts. That tends to make them a bit more expensive than a pooled arrangement.

Q: Doesn’t having one or more investments managed by several investment managers better diversify a DC plan member’s portfolio and promote better overall returns?
A: Well, you can get that in a no-choice plan, as well, because you could have many managers that are managing different parts of the bigger pool. But the difference is you now have scale, and you’ve got professional management of the money.

Most plan members are not good at investing. In fact, only 7% or so of DC members can actually beat the rate of return of the average DB plan. One of the more interesting statistics that came up in the research was that only 3% of their professional advisors can beat the average rate of return of the average DB plan.

Q: What is a default fund, and what percentage of DC plan members typically invest in the default fund?
A: About 85% of the members in DC plans don’t make any choice at all. If they don’t make a choice, they end up in the “so-called” default fund. It’s a fund that you get into in default of making an election. Employers have to keep track of who is in the default fund because it’s not really clear whether it is just as a result of a decision or simply putting off investment of their money. It may actually be the plan member’s choice to go into the default fund.

In some surveys many members have said  that they thought the default fund must be the best fund because that’s the one the sponsor set up for people who don’t make decisions. Increasingly, what we’re seeing out there today, though, is people defaulting into what’s called a target date fund.

A target date fund is based on your age when you go into it, and as you start getting close to your retirement age, it will move your portfolio from largely stocks to largely bonds. That’s not a bad idea, because once you retire, the theory is you don’t have the capacity to make more income, so a loss just before retirement is undesirable.

One of my clients actually allows employees to choose their target date funds, and  they found that a number of people were choosing three of these target date funds because they weren’t sure if they were going to retire at age 55, 60 or 65. So they put a third of their money in each in case they retire early or later, which is probably the absolute worst thing they could do.

Q: How long have you been a member of Saskatchewan Pension Plan, Randy?
A: Probably about 10 years. I was at another firm some years ago, and they had a pension arrangement, and then when I came to this firm and they don’t. I just think SPP is a great idea.

I  know a lot of people … Even my own professional financial advisor questioned how I got into the SPP and asked whether I was born in the province. No, I wasn’t. It’s open to anybody, and it works just like an RRSP. Anyway, every year I just keep moving the maximum amount from my RRSP to the SPP, and I make the maximum contribution every year. I’m glad to see it’s gone up.

*This is the edited transcript of a podcast recorded in April 2018.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

May 7:Best from the blogosphere

I comb the blogosphere every week to come up with interesting links for this weekly column. I continue to be fascinated by bloggers who document “early retirement extreme,” (ERE) often in their 30s and 40s. It is important however to recognize that for many people, this does not mean completely leaving paid work behind. It simply means that they have accumulated a financial cushion which gives them the freedom to work less or do something different.

For example, last month Tim Stobbs wrote I Don’t Have Enough Money, But I Retired at 40 Anyway.  He says, “What I’m doing really isn’t a full on ‘I never plan to work again retirement’ but rather an ‘I plan on doing some fun work during a semi-retirement.’  And that little shift of wording regarding what I planned to do made a huge difference between being able to leave now and being able to leave two to five more years in the future.” Stobbs is going to take a stab at writing fiction first for some income and if that doesn’t work out he will consider other options.

Firecracker and Wanderer are married computer engineers who retired in their early 30s. They blog on Millenial Revolution. The built a seven-figure portfolio and live off the passive income which allows them to travel the world and work on projects they are passionate about. They offer a free 53-part series of investment workshops on their blog and they have been widely quoted in the media. But they also write children’s books, develop apps for non-profits and teach children how to code.

In a recent blog, Firecracker interviewed Derek Foster: Canada’s Other Youngest Retiree. Foster, who is well-known to savewithspp.com readers retired at age 34 and he and his wife had eight children since then. He supports his family primarily with dividends generated by his stock portfolio. However, the self-identified “Idiot Millionaire” wrote six investor books and offers portfolio picks for a fee on stopworking.ca. He also accepts paid speaking engagements.

Some people who retire extremely early go back to work a few years into their retirement and take on short-term consulting assignments for a limited period. For example, Retired Syd who packed it in at age 44 in 2007 took on an assignment for several years and returned to full-time retirement in August 2012.

Can or should you aim for ERE? It really depends on your personality and your priorities. I freely confess that I’m very far from a minimalist and I was never prepared to forgo a really significant component of current consumption to fund a frugal very extended retirement.

As Ben Carlson writes in Some Thoughts on the Extreme Early Retirement Movement, “I have a ton of respect for these people. There are so many people out there today who have a hard time saving any money at all. The fact that these people are willing and able to save enough money to become financially independent so early in their years requires a combination of discipline, hard work and planning that is rare these days.”

But like me, Carlson doesn’t see the ERE lifestyle working for him. He says,” To me, financial independence means not having to stress about money all the time; it means having enough money saved so a one-off expenditure won’t be a huge issue; it means having enough money to pamper myself every once and a while without feeling guilty; it means living life in a way that is rich to me personally.”

What does financial independence mean to you? Are you contemplating extreme early retirement?

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.