As interest rates rise, is it time to look anew at fixed income investments?

November 25, 2021

Interest rates have been so low for so long it is hard to remember the long-ago days when everyone had Canada Savings Bonds and/or guaranteed investment certificates (GICs) in their portfolios.

Save with SPP decided to look around to see what the expected rise in interest rates (and inflation) may do with Canadians’ saving plans.

Writing in the Globe and Mail, columnist Rita Trachur explains that one fear that’s out there right now is that Canadians may risk “aggravating inflation by blowing through their savings” as the pandemic (apparently) winds to a close.

She proposes that Ottawa consider bringing back – temporarily – the old Canada Savings Bond program.

“Many of us who are on the wrong side of 40 fondly remember a time when we could make juicy returns by investing in Canada Savings Bonds. Not only were they easy to purchase and risk-free, those paper certificates were oh so cool. Most importantly, though, they taught generations of Canadians how to save,” she writes.

Back in the 1970s and 1980s, when interest rates reached double-digits, Canadians held $55 billion in savings bonds. But they began to wane in popularity, Trachur writes, due to competing products like “GICs, mutual funds, and low-fee trading accounts.”

But with rising interest rates on the horizon, maybe a modern version of the Canada Savings Bond could be relaunched, writes Trachur.

“The bonds should be tax-free and have short investment terms – perhaps one year and 18 months, as examples – to give consumers real incentives to keep stashing their cash over the near term. That kind of flexibility would also give people the ability to reassess their options once interest rates start to rise,” she writes. This type of product would be a safe investment for regular people, she concludes.

Another reason to look at interest-paying investments may be the link between higher rates and lower stock prices, reports US News & World Report.

“When interest rates are low, companies and consumers can borrower cheaply and tend to spend more money, which can boost corporate profits. When interest rates rise, consumers and companies typically curb their spending, which can result in lower stock prices,” the newspaper explains.

A rise in interest rates is also bad for bond prices, the article adds. “Bonds and interest rates have an inverse relationship, meaning that bond prices fall when interest rates rise,” the article explains. “But don’t liquidate your bond positions yet. Experts say bonds still hold value in an investment portfolio.”

It’s a complicated topic, to be sure. The old rule of thumb used to be that your age was the percentage of your savings that should be in fixed-income (bonds, GICs, etc.), with the rest in equity. So if you are 60, the rule suggests, 60 per cent should be in fixed income – the argument being that this would “safen” your overall holdings from some of the ups and downs the equity markets can provide.

Balance is a good thing in investing. The Saskatchewan Pension Plan’s Balanced Fund currently has this asset mix – 50 per cent Canadian, U.S. and non-North American equity, 26 per cent bonds, 7.5 per cent mortgages, 10 per cent real estate, five per cent infrastructure and 1.5 per cent in short term investments. SPP’s managers can switch up this mix to align with changing market conditions, so that all your eggs are never in just one basket. SPP has been helping Canadians save for retirement for 35 years; check them out today!

Written by Martin Biefer

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


Nov 22: BEST FROM THE BLOGOSPHERE

November 22, 2021

New retirement plan’s goal is to “coast” into retirement

Writing in the Toronto Star, Lesley-Anne Scorgie reveals a new variation on the “financial independence, retire early” or FIRE plan.

This new variant, she tells us, is called the Coast FIRE plan.

But let’s backtrack. What exactly is the basic FIRE plan?

Scorgie writes that the FIRE movement was born in the late 1990s.

“These people were obsessed with early retirement and were willing to sacrifice just about anything to contribute significant sums of money to their nest egg as quickly as possible so that they could quit their jobs generally before age 50 and start to ‘live,’” she explains.

But, she says, for many this FIRE plan meant “going without vacations, eating beans daily and just being a cheapskate.” The idea was that foregoing the “extras” in life would allow one to put away thousands a month until having enough money to retire completely by age 50.

“I have two major issues with the concept,” she writes. “Firstly, the lifestyle of ultra-frugality is not appealing. Secondly, banking many thousands of dollars every month throughout your 20s, 30s and 40s is pretty unattainable for most people living in just about any city in Canada. The cost of living and debt are major preventative barriers.”

She goes on to point out “also, who retires at 50? You could have a whole other life, career and so on at that age!”

This is where Coast FIRE puts a different spin on the plan.

There is still an emphasis on financial independence, writes Scorgie, but “you steadily build up your nest egg until it reaches a point where it can grow independently through the power of compound interest and reinvested returns to the ultimate nest egg size you want, without you having to save another dime after you get to that initial savings point.”

So rather than having a hard stop to work, this variant of the plan has you basically creating a significant wealth creation nest egg that allows you to bolster your retirement income significantly when it’s time to log off for a final time.

And that’s the significant difference – the frugality and penny-pinching ends when your nest egg has reached its target amount.

“Once you reach the point where you no longer need to add another dollar to your retirement portfolio, you can have loads more freedom to do what you want like — work part-time or at a different job you like better, enjoy more cash flow for vacations and fun because you no longer have to tuck away 20 per cent of your income into your registered retirement savings plan (RRSP) and tax free savings account (TFSA),” she writes.

To figure out this retirement math, you need to have a general idea of when you want to retire (age) and the approximate money you will need for financial independence at that age. Scorgie says there are many Coast FIRE calculators out there to help you figure out your numbers, but key to the calculation is “current age, desired retirement age, a safe withdrawal rate… and an inflation-adjusted growth rate.”

This is a great column, and Scorgie’s views make a lot of sense. Many of us, for instance, only put away enough money in RRSPs to get us a tax refund each year. Not putting away enough when you are young makes it harder to catch up later.

Scorgie concludes by recommending that we all get some financial advice to ensure our savings plan is sound, also a wise suggestion.

If you are looking for a retirement savings vehicle that can generate steady growth and good returns during the time between now and the time to “coast” into retirement, consider the Saskatchewan Pension Plan. While past performance is not an indicator of future growth, the plan has averaged returns of eight per cent since its inception in 1986. That’s helped many of us build our retirement nest eggs. Check out SPP 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, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Exercise that boosts flexibility, corrects posture can slow aging process: Aging Backwards

November 18, 2021

We talk – some might say endlessly – about saving for retirement, the need for income for the latter part of our lives, and so on.

But the book Aging Backwards by Miranda Esmonde-White focuses on the other side of retirement – having a sensible exercise plan that keeps your body from aging prematurely.

Most people, she begins, may see aging “as something they have no control over, just like the passage of time.” However, she says, “you absolutely do have a choice in the age of your bones, your muscles, your internal organs and your skin.” Thirty minutes per day of targeted exercise, she writes, can decide between a “vital, energetic and healthy” life versus “a life of joint and back pain, limited mobility, and a lack of physical strength.”

The exercise program that Esmonde-White prescribes is called the “Essentrics” system, which she writes is “exactly the opposite of the unproductive, dangerous ‘no pain no gain’ philosophy of yore.” She says it is more about “no pain, all pleasure.”

She notes that every minute you exercise lengthens your life by seven minutes… “a guaranteed 1-to-7 return on your investment.”

And for those who argue that genetics controls how you will age, she cites research that shows only 25 per cent of our longevity is determined by our genes – the rest is “due to lifestyle and environmental factors.”

Another crucial stat she cites is that those with a “somewhat sedentary, somewhat active” lifestyle lose seven to eight per cent of their body’s cells each decade. Those who exercise “using the entirety of their musculature lose an average of only two to three per cent of… cells each decade.”

The second half of the book gets into the Essentrics program, which has elements of isotonic, concentric and eccentric exercise. She notes that the movements in the program mimic some of the activities that were common for everyone in the past – such as cleaning the windows, mopping the floors, and moving furniture.

“The unfortunate truth is that many of us rarely do these chores anymore, and if we do them at all we don’t do them long enough to derive any real benefit from them,” Esmonde-White explains.

The last part of the book shows all the workouts, with photos. There are exercises like ceiling reaches and the “open chest swan sequence” to improve your posture. The weight loss exercises include a “pulling weeds sequence” and some plie-type dance movements. There’s a “washing tables” movement, as well as a “washing windows” exercise in the section on exercise to soothe your joints. Calf stretches and “barre footwork” with a simple chair are found in the “increase your energy section.” There are many more exercises and many more sections in this informative how-to book.

She concludes by writing that if you decide against regular, targeted exercise, “all you are `putting off’ is your chance of having a vital, exciting, energized time well into your twilight years.”

There is a contagious enthusiasm in this well-written book that coaxes you out of the easy chair and into more exercise. It’s definitely a book worth adding to your personal fitness library.

If, as we have read, the payoff from targeted exercise is longevity, one must invariably think about addressing the cost of that extra time on earth. You’ll still need food, shelter and some sort of fuel in the future, and all of these things will cost money. If you’ve got a retirement program at work, you are ahead of the game – be sure to join it.

But if not, you’ll need to carry the retirement savings load on your own shoulders. And if you put that off, you’ll run out of time to catch up later. A handy solution to the problem is the Saskatchewan Pension Plan, a one-stop shop for setting up your very own personal pension.

Be sure to check out SPP – celebrating its 35th year of operations – 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, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Nov 15: BEST FROM THE BLOGOSPHERE

November 15, 2021

Canadian pension system earns a “B” rating

Canada’s pension system stacks up reasonably well against those of other developed countries, reports Wealth Professional.

The magazine cites new research from the Mercer CFA Global Pension Index, research that covered pension systems that served “65 per cent of the world’s population,” and notes that Canada retained its prior “B” rating.

“Ranked for adequacy, sustainability, and integrity, Iceland came top … with an overall score of 84.2, followed by the Netherlands (83.5) and Denmark (82.0),” Wealth Professional reports.

Canada, the magazine reports, came in at 69.8, putting it “ahead of countries including the U.S. (61.4), Germany (67.9) and New Zealand (67.4).”

So while “B” is not bad, there is still work to be done, the magazine article continues. A higher overall savings rate (thanks to COVID) and economic growth help, but there are still issues that need to be addressed, the magazine adds.

“While COVID-19 had a disproportionate impact on the retirement savings of certain groups, such as women, gender gaps in retirement savings have long existed,” Scott Clausen, a Mercer Canada partner, tells Wealth Professional. “Employers are encouraged to review the design of their pension plans, as well as other compensation programs, to ensure that they are not unconsciously disadvantaging women in their workforce,” he states in the article.

The article points out that “most of the Canadian workforce are left to save for their pension themselves rather than through workplace schemes.”

Clausen tells Wealth Professional that this shortfall in coverage represents an opportunity for the country.

“Employers can provide a pension to their employees, while delegating the governance and administration responsibilities to a third party, by joining a collective defined benefit pension plan or by providing an outsourced defined contribution pension plan,” he states in the article.

Making it easier for women to save is something that pension systems in Canada and worldwide need to improve on, says Mercer’s Dr. David Knox. He tells Wealth Professional “the world cannot sit idle as data shows that poverty among older people is more prevalent for women.”

He suggests making it easier for individuals to join pension plans generally, as well as adding some sort of pension credit system that factors in time spent caring “for the young and the old.” Decades ago, it was quite common for most employers to offer some sort of pension plan for their employees. Over the years, the level of coverage has slipped.

The bottom line is this – if there’s any sort of pension arrangement at your place of work, be sure to join and contribute to the maximum. After a while, like any benefit deducted from your paycheque, you won’t notice money being put away for your future.

If there isn’t a plan to join at work, the responsibility for retirement saving has been shifted onto your shoulders. If you’re not sure how to go about the job of saving, the Saskatchewan Pension Plan may be an answer. SPP will invest the money you contribute – professionally, and at a low rate – and then can convert your nest egg to retirement income down the road. This do-it-yourself pension plan has been getting it done for an impressive 35 years. Check them out today!

Written by Martin Biefer

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


Nov 8: BEST FROM THE BLOGOSPHERE

November 8, 2021

More than three quarters of older Canadians fretting about retirement finances: NIA

Is retirement a concern for Canadians – especially those aged 55 to 69 who are approaching or have begun their “golden years?”

New research from the National Institute on Ageing at Toronto’s Ryerson University, reported on by CTV News, suggests that a significant majority of older folks are indeed quite worried.

According to the CTV report, the research found that “77 per cent of Canadians within the 55-69 age demographic are worried about their financial health.” As well, CTV notes, “79 per cent of respondents aged 55 and older revealed that their retirement income – through RRSPs, pension plans and Old Age Security – will not be enough for a comfortable retirement.”

The NIA research found that people were worried about the cost of long-term care in the latter part of their retired life.

While 44 per cent say the plan is to “age at home,” the data suggests that many don’t realize how expensive long-term care at a facility would be.

“Nearly half of respondents aged 45 and older believe that in-home care for themselves or a loved one would cost about $1,100 per month, while 37 per cent think it would cost about $2,000 per month,” CTV reports.

“In reality, it actually costs about $3,000 per month to provide in-home care comparable to a long-term care facility, according to Ontario’s Ministry of Health,” the broadcaster explains.

It’s essential that Canadians know the true costs of long-term care as they plan for the future, says Dr. Bonnie-Jeanne MacDonald of the NIA.

“Canadians retiring today are likely going to face longer and more expensive retirements than their parents – solving this disconnect will need better planning by people and innovation from industry and government,” she tells CTV.

Dr. MacDonald suggests one step we can take early in retirement to help us fund unexpected care costs later is deferring our Canada Pension Plan or Quebec Pension Plan payments until age 70.

Dr. MacDonald spoke to Save with SPP on this topic in detail earlier this year.

“Someone receiving $1,000 per month at age 60 would receive $2,218.75 per month if they wait until age 70 to begin collecting,” the article notes. Another source of income for long-term care costs could be the equity in your home, the article concludes.

Save with SPP has gone through this, with both our parents having had to receive the help of a long-term care facility to battle health issues in their latter years. Fortunately our parents had always been savers, and their retirement income was sufficient to handle these unexpected costs. Will yours?

If there’s a retirement savings program available at your workplace, consider joining it and contributing at the maximum possible level. If your employer doesn’t offer a program, refer the boss to the Saskatchewan Pension Plan. They can help set up a retirement program at businesses large and small. Check out SPP, marking 35 years of delivering retirement security, 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, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Pandemic created a wave of migration to smaller towns and other provinces – will it continue?

November 4, 2021

Many people young and old made a big change in their living arrangements during the pandemic.

Younger people – liberated from having to go to the office each day – sought more affordable housing in other cities or provinces. City dwellers generally, including retirees, wondered if it would be safer during times of COVID to move to places with lower infection rates.

Save with SPP took a look around the Interweb to see how this is playing out now that the pandemic is (hopefully) starting to turn the final corner towards “over.”

Better Dwelling magazine reports on how people have left Ontario to live in Atlantic Canada. In the second quarter of 2021, Nova Scotia and New Brunswick attracted 4,678 and 2,145 interprovincial newcomers. Ontario saw an outflow of 11,857 people in the same quarter, the magazine reports.

What’s the attraction?

“Lower COVID spread in the Maritimes probably amplified the region’s appeal. But relatively affordable housing was likely an even bigger draw, especially as home prices skyrocketed in already-expensive parts of the country and more Canadians were able to work remotely,” states RBC economist Carrie Freestone in the article. 

“With housing affordability worsening in major urban markets in Central Canada, this may mark the beginning of a trend: young talent moving east for an improved quality of life,” she tells Better Dwelling.

But it’s not just Ontario that is seeing people move. Closer to home, Alberta is also seeing people pack up to start over elsewhere, reports the CBC via Yahoo! News.

Why are they leaving?

The article says high COVID case counts may be one reason, but quotes Mount Royal Professor David Finch as saying “”Young people are leaving the province for a variety of reasons — some tied to employment, some tied to economics or education.”

A recent study, the 2020 Calgary Attitudes and Outlook Survey, found that a startling 27 per cent of Calgarians aged 18 to 24 planned to leave the city in the next five years, the CBC reports.

“In Alberta, there is a perception that there is a lack of diverse career pathways, leading people to look at other parts of Canada or beyond for opportunities in education or employment that may be closer aligned to their career objectives and social values,” Finch states in the article.

Retirees thinking of relocating to cheaper places need to think the idea through carefully, suggests the Boomer & Echo blog.

Most seniors making such moves do so for better weather, as well as “proximity to family, affordable housing costs, the availability of healthcare facilities, and things to do,” the blog notes.

A lower housing budget will give you more money for travel (when travelling is more common), the blog adds. The blog advises that you try visiting your intended destination for a long stay before committing to the move, and go in both summer and winter. Check differences in provincial tax rates, and find out about transferring your provincial healthcare.

The grass may appear greener down the highway, but you may expect some higher costs and fewer services if you move from a city to a smaller centre, warns the Globe and Mail.

The article cites the example of Ian Cable and Amy Stewart, who decided to move from Toronto to Owen Sound, a small city on the shores of Lake Huron. They found that the cost of a house in Owen Sound “was a fraction (of the cost) of a similar property in Toronto.”

But in Toronto, with a vast public transit system, they only needed one vehicle; in Owen Sound they have two. Isaiah Chan of the Credit Counselling Society tells the Globe that smaller town residents usually have to drive more often, and farther – instead of a half hour drive for your kids’ hockey you might now be looking at two to three hours, Chan says.

The article flags other possible problems – are you on a water and sewer system, or septic tanks and wells? If you need to return to the office from the country, can you afford the commute, the article asks.

The article concludes by suggesting anyone moving to a smaller place to save money must do thorough research on what the full costs of living there will be.

The key takeaways here seem to be that you need to get as much intel as possible about the place you are thinking of moving to before you make the jump. Save with SPP once travelled two hours by car – each way – to work from about 10 years. The cost of keeping the car going tended to wipe out any advantage from the lower cost of living.

In a way, retirement is like a destination – a place where you are going to go one day. The intel you need to know now is whether or not you have sufficient retirement income. If you are in a retirement plan at work, great; if not, consider joining it. If there isn’t a plan, the Saskatchewan Pension Plan has everything you need to set up your own individual or employer-based one. Wherever you end up in retirement, things will go more smoothly if you can unpack some retirement income when you get there, so check out SPP – celebrating 35 years of building retirement futures – 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, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Nov 1: BEST FROM THE BLOGOSPHERE

November 1, 2021

U.K. research shows a lack of pension awareness, confusion on how plans work

While it’s great to be encouraging people to join pension plans if they can, and to save for retirement on their own if they can’t, new research from the U.K. suggests we may need to educate people a little better first.

According to Employee Benefits, a recent survey carried out by U.K. HR and payroll services firm MHR found that one in four Britons didn’t have a pension at work – and that “58 per cent of respondents admitted they find it hard to understand how their schemes operate and how to contribute to a pension plan.”

The research prompted MHR’s CFO, Mark Jenkins, to tell Employee Benefits that this figure shows “the stark reality of how unprepared today’s workforces are for their future.”

The article, citing research by Canada Life, suggests there is a gender divide in the U.K. on the issue of retirement confidence, with “two-thirds of men feeling confident they will retire at the age they intend to, compared to around half of women.”

As well, the Canada Life research showed fewer women than men “did not feel they would have any financial worries in retirement, at 45 per cent and 58 per cent respectively,” Employee Benefits reports. “This suggests that targeted pensions communications may be needed to address this gender imbalance,” the article adds.

Finally, the article – citing a third batch of research from Nudge Global – notes that “only 32 per cent of (U.K.) respondents receive” personal finance education (known on this side of the pond as financial literacy). All this research leads the Employee Benefits editor, Kavitha Sivasubramaniam, to conclude that despite the fact that Brits have “auto-enrolment” in workplace pension plans (they are automatically signed up for any pension program, with the right to opt out) “it hasn’t necessarily increased engagement with, or understanding of, pensions among employees.”

She goes on to write that “studies are constantly reaching the same conclusion, highlighting that raising pensions awareness is still most definitely a work in progress.”

One could easily write a book about pension awareness/literacy. So let’s not do that here. Let’s just say this – if you’re not sure whether or not your workplace offers a retirement plan, find out from a co-worker, the boss, your internal website, the HR folks. And if you can, consider signing up to whatever type of plan is being offered.

A pension, and your retirement, is never top of mind until you get within a few years of the actual last day at work/golden watch/retirement party. From that point forward, any workplace-related pension benefit will make life much easier for the future, retired you. It’s easy, especially when you are young, with many other things on your plate, to put off thinking about retirement.

So if there’s a workplace pension that you may be able to join, consider doing so. You really don’t want to regret not joining it 30 or 40 years from now.

And if you don’t have a plan at work, fear not. The Saskatchewan Pension Plan has all the pension infrastructure you need to build your own, do-it-yourself program. They’ve been helping people save for retirement for 35 years – be sure to check them out today!

Written by Martin Biefer

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