June 6, 2022

Taking a look at common barriers to retirement

Writing for the GoBankingRates blog via Yahoo! Casey Bond provides a rundown of the barriers that get in the way of our retirement plans.

Although Bond is writing for a U.S. audience, many of the topics raised are equally relevant here in Canada.

Bond begins by citing TransAmerica Centre for Retirement Studies research that found half of American workers agreed that “I don’t have enough income to save for retirement,” and 57 per cent said they planned to continue to work after hitting retirement age. A whopping 80 per cent of that group cited “financial reasons” as the reason why they won’t be leaving work.

Bond’s article cites these key barriers to being able to retire.

High debt: While having some debt in retirement can be coped with, high levels of debt are a problem, the article notes. High levels, the article explains, are mortgage costs exceeding 28 per cent of your “pre-tax household income,” and total debt of more than “36 per cent of your pre-tax income.” Certified financial planner Melissa Hannum is quoted in the article as saying “if you are already struggling to keep your debt below these percentages, then you are not ready to retire.”

Spending more than you earn: Hannum states that if “you are spending more than you’re earning, you are not on track to retire.” She tells GoBankingRates that those of us still working have a chance to pay down debt via a pay raise or a bonus – you don’t get either once you are retired.

Little to no emergency funds: You should, the article notes, “have at least one full year’s worth of expenses saved in a liquid and conservative form of investment.” They suggest a money market fund, guaranteed investment certificates (known as certificates of deposit in the U.S.) or a high-interest savings account.

You haven’t reviewed your retirement savings portfolio: If funds earmarked for retirement savings, in a registered retirement savings plan, tax free savings account or other account are in a portfolio you haven’t been keeping an eye on, that may impede your retirement.

“Taking on excess risk as you near retirement can be extremely hazardous and your portfolio could take a major hit just as you’re ready to call it quits,” Hannum states. Your investment focus should be changing towards “wealth preservation” rather than growth as you near retirement, Hannum states.

Social plan: Are you, the article asks, mentally prepared for retirement? “If your social circle is strictly co-workers and Facebook friends, you may not be ready to retire,” Hannum states in the piece.

Summing it up – you need to pay your future self first via dedicating a portion of your current income towards retirement savings. You need to try to get rid of debt before you retire (it will be harder to pay it off after). Become someone who spends less than they earn, build a one-year emergency fund, and have an idea of what you’ll do with all your newfound time. It’s a great take on the subject by the GoBankingRate folks.

If you are among the fortunate few with a workplace savings plan, be sure you are taking part to the fullest. If you don’t have a plan, and aren’t so sure about investing and the tricky “turning savings into income” stage, any Canadian has another option – the Saskatchewan Pension Plan. SPP will invest your savings professionally and at a low cost in a pooled fund, and when it’s time to punch out for the final time, you’ll be able to choose from several options, including a lifetime monthly pension via an SPP annuity. You can transfer any bits and pieces from past pension plans into SPP to collect a unified amount from a single source! Check them out!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

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


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