Category Archives: Blogosphere

JUL 27: BEST FROM THE BLOGOSPHERE

Life without savings “difficult, but not impossible,” experts say

Like many things in life, such as quitting smoking or losing weight, saving for retirement – even though it is good for us – is often difficult to do.

Jobs aren’t as plentiful these days, household debt is at record highs, and there just isn’t always a lot of cash for putting aside long term.

But what kind of retirement will people who can’t or didn’t save face when they’re older?

According to a recent article in MoneySense, life without retirement savings (or a workplace plan) is “difficult, but not impossible.”

Canadians who have worked and paid into the Canada Pension Plan (CPP) can, in 2020, expect a maximum annual pension of “$1,176 per month – that’s $14,112 per year,” the article notes. However, the writers warn, not all of us will have worked long enough (and made enough contributions) to get the maximum.

“The average CPP retirement pension recipient currently receives $697 per month, or $8,359 per year. That’s only about 59 per cent of the maximum,” reports MoneySense

You can start getting CPP as early as 60 or as late as 70, and the longer you wait, the more you get, the article notes.

All Canadian residents – even those who don’t qualify for CPP – can qualify for Old Age Security (OAS). If you don’t remember paying into OAS, don’t worry – you didn’t directly pay for it via contributions. Instead, the OAS is paid from general tax revenues.

“A lifetime or long-time Canadian resident may receive up to $614 per month at age 65 as of the third quarter of 2020, which is $7,362 annualized. OAS is adjusted quarterly based on inflation,” MoneySense reports. 

There’s another government program that’s beneficial for lower-income retirees, MoneySense notes. The Guaranteed Income Supplement (GIS) “is a tax-free monthly benefit payable to OAS pensioners with low incomes. Single retirees whose incomes are below $18,600 excluding OAS may receive up to $916 per month, or $10,997 per year, as of the third quarter of 2020.”

What’s the bottom line? Someone qualifying for any or all of these programs can receive up to $23,721 per year, with “little to no tax required” per the rules of your province or territory.

The article notes that those saving $10,000 before retirement could add $25 to $33 a month to that total. Those saving $50,000 could see an additional $125 to $167 a month, and those putting away $100,000 will have $250 to $330 more per month.

The takeaway from all of this is quite simple – if you are expecting a generous retirement from CPP, OAS, and GIS, you may be in for a surprise. It’s not going to be a huge amount of income, but it’s a reasonable base.

If you’re eligible for any sort of retirement benefit from work, sign up. You won’t miss the money deducted from your pay after a while and your savings will quietly grow.

If there is no retirement program at work, set up your own using the Saskatchewan Pension Plan. Start small, with contributions you can afford. Dial up your contributions every time you get a raise. With this “set it and forget it” approach, you’ll have your own retirement income to bolster that provided by government, which will give you a little more security in life after work.

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.

JUL 20: BEST FROM THE BLOGOSPHERE

Canucks doing better than we think at retirement saving: report

It’s somewhat rare to see a headline saying Canadians are on track for retirement saving, but that’s the key point of new research from HEC Montreal’s Retirement and Savings Institute.

The study, funded by the Global Risk Institute, was featured in a recent Benefits Canada article.

The positive news – “more than 80 per cent of Canadians aged 25 to 64 are prepared for retirement and the vast majority have a high probability of being prepared,” the magazine notes.

According to the research, which was conducted featuring a large sample of more than 17,000 Canadians, those who are the best prepared are those whose household earnings are below the national median, and “those covered by pension plans,” Benefits Canada notes.

Those who are in the worst shape – somewhat surprisingly – are “upper-middle earners without retirement savings,” the magazine reports, adding that CPP and QPP improvements may benefit that segment of the population down the road.

The authors of the study used what they called a “new stochastic retirement income calculator,” which unlike many calculators, models “the evolution of private savings, accounting for individual and aggregate risk; taxation of savings, including capital gains; employer pensions; a realistic stochastic modelling of work income; the value of housing; and debt dynamics.”

So for those, like us, who got lost at “stochastic,” it seems that this calculation takes into account risk, taxation, future work income, housing prices and levels of debt when calculating what one actually needs to maintain the same standard of living in the life after work.

That calculation showed that on average, participants would have 104.6 per cent of the net income they need, once they are retired, to maintain their pre-retirement living costs.

We can share a personal experience here. When the head of our household decided to get an estimate of what her pension from work would be, she was at first a little dismayed to see that the gross annual pension income – despite 35 years of membership in her workplace plan – was lower than what she was making at work. But when she looked at the net, after-tax income, or take-home pay, it was actually higher. It’s because she’s paying less income tax, no longer making pension contributions, and no longer paying into CPP and EI. That all makes a big difference on the bottom line.

So, the authors of the study conclude, “on average, if (Canadians) retire at the age they intend to, maintain their saving and debt payment strategies and convert all of their financial wealth into income, Canadians have net income in retirement which is higher than their pre-retirement income.”

The reason for the high numbers may be that for those making at or below the median income  “are well covered by the public system even if they have no savings or [registered pension plan] coverage,” the authors of the report state in the Benefits Canada piece. It’s those with income above the median and who also lack workplace pensions – about 15 per cent of Canadians – who need to worry, the article concludes.

If you don’t have a retirement program through work, and don’t really want to take on saving and investing on your own, an excellent option is the Saskatchewan Pension Plan. The plan will invest your contributions at a very low investment cost, thanks to the fact the SPP is not operated on a “for profit” basis. Since its inception in the late 1980s the SPP has grown the savings of its members at an average annual rate of eight per cent. And when the time come for you to convert those savings into a lifetime income, the SPP has flexible annuity options to turn your hard-saved dollars into a lifetime income stream.

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.

JUL 13: BEST FROM THE BLOGOSPHERE

Pandemic a bigger challenge to retirement saving than Great Recession: report

Unless all your retirement savings are invested in low-risk securities like GICs or government bonds, you’ve probably spent a lot of time watching the pendulum swings in the market since March.

A new report from Fidelity Investments Canada says it’s clear that today’s pandemic-influenced markets are worse for savers than the shaky markets of the “2008-2009 Great Financial Crisis.”

“Data shows Canadians near and in retirement are more negatively impacted by COVID-19 than the Great Financial Crisis,” states Peter Bowen, Vice-President, Tax and Retirement Research in a media release from Fidelity. “However, we are in this together and there is help. By seeking financial advice and writing down an action plan, Canadians can feel better and navigate the uncertainty,” he states in the release.

The data was gathered for Fidelity Canada’s annual Retirement 20/20 survey, which gathered data from Canadians “already in and approaching retirement.”

Here are some of the key findings mentioned in the media release:

  • 40 per cent of retirees reported “a negative outlook on their life in retirement,” the worst score in this category since 2014.
  • 40 per cent said their earnings had decreased owing to the pandemic, and 50 per cent said that fact, in turn, means they are “reducing the amount of money they are able to save.”
  • Those (80 per cent of pre-retirees and 92 per cent of retirees) with a written financial plan felt “positive about their (future) life in retirement.”
  • Eighty-five per cent of those with a plan said they worked with an advisor.

What’s different about this market rollback from the 2008-09 crisis?

According to Nicolas Samaan of Manulife, interviewed by Wealth Professional, this crisis has a different element to it.

“You’ve seen on LinkedIn people posting about losing their job and people helping each other,” Samaan tells Wealth Professional. “You see that human interaction, not just financially but in general, people making sure others are okay.

“It’s more about wellness – that is so much more important. I’ve always said to people, if you don’t have the health to do your (personal projects), it’s not going to work. In that sense, this crash was very different than what we’ve seen in the past,” he states in the article.

Samaan is right. The last crisis was scary but on a strictly economic basis – will banks fail, will the economy tank? This one has the overlay of a worldwide health crisis – will we find a way to cope with, or become immune from, this virus, and will the economy be able to hold on until that happens?

Picking stocks when markets are uncertain is not something for the faint of heart. Having professionals handle the investing is especially valuable at times like these. It’s nice to realize that the Saskatchewan Pension Plan has averaged an eight per cent rate of return since its inception in the 1980s, a period of time that included the Tech Wreck in 2000-2001 and the Great Financial Crisis a decade or so ago. The pros can make adjustments when markets take an unexpected turn, and can look at alternative ways to grow your money. Check out the 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.

JUL 6: BEST FROM THE BLOGOSPHERE

New research from the World Economic Forum, reported by Corporate Advisor, suggests the “savings gap” between what we should set aside for retirement, and what we actually have, is on track for monumental growth.

“Globally, experts are concerned many people could be sleepwalking into retirement poverty. The World Economic Forum (WEF) highlighted that the gap between what people save and what is needed for an adequate standard of living in retirement will create a financial black hole for younger generations,” the Advisor’s Emma Simon reports.

The WEF looked at the some of the world’s largest pension markets, including Canada, the U.K., Australia, the U.S., the Netherlands, China, India and Japan, and concluded “the gap” could reach a staggering $400 trillion U.S. in 30 years.

But, the article says, there is still time to do something to avert a crisis.

“With ageing populations putting increasing pressure on global pension and retirement plans, employees, employers and governments need to take more responsibility and act to prioritise pensions and savings,” Simon explains.

Countries around the world have done some interesting things to boost retirement savings.

In the U.K., the article notes, “automatic enrolment” was rolled out in 2012. This means that new employees are automatically signed up for their workplace pension plan, with an option to opt out. Thanks to this, there are 10 million more pension plan members in the U.K., although there are concerns about 9.3 million who aren’t in plans because they were too old for auto-enrolment, the article explains.

In Australia, the Superannuation fund system was made mandatory “in 1992 for all employees older than 17 and younger than 70 earning more than $450 (AUD) a month.” So this means everyone is saving on their own – but with the current maximum contribution of 9.5 per cent (soon to rise to 12 per cent), there are questions as to whether they are saving enough.

A Benefits Canada article from a couple of years ago raised the same question – are Canadians saving enough for retirement on their own? While Canadians had accumulated an impressive-sounding $40.4 billion in RRSPs as of 2016, the article notes that the median contribution annually was just $3,000.

As of 2018, reports the Boomer & Echo blog, the average Canadian RRSP was an impressive sounding $101,155. But if someone handed you $100 grand and then said “live off this for 30 years in retirement,” it wouldn’t sound quite so great.

There’s no question that saving needs to be encourage in Canada and around the world. The Canada Pension Plan and Old Age Security both provide a pretty modest benefit, and most of us don’t have a workplace pension. So steps should be taken to encourage more access to pensions, to look at increases to government benefits, and to encourage more saving.

If you don’t have a workplace pension plan, the Saskatchewan Pension Plan may be just what you’re looking for. The SPP is a defined contribution plan. You can contribute up to $6,300 a year, and your contributions are carefully invested at a very low fee. When the day comes that work is no longer a priority, the money you’ve accumulated through growth and ongoing contributions can be converted to a lifetime pension. 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.

JUN 29: BEST FROM THE BLOGOSPHERE

It’s not what you save, but how you manage money, writes Catherine Brock

Is there some sort of magic solution that will help us gear up for our eventual retirement?

Writing for the Magic Valley blog, Catherine Brock says you don’t necessarily need magic. She sees four specific things that you need to have locked down before entering life after work.

First, she writes, you need to be able to “budget confidently.”

“Budgeting doesn’t mean you know generally how much you spend each month. It means you know exactly how much you spend,” she explains. This will force you to live within your means, and if you want to buy something that’s over your budget, you will have to save up for it, Brock notes.

The next thing is to have “control over spending.”

Once you are following a budget, you can focus on your spending, and if you can save a few dollars, those savings are real. “You’ll probably find that focusing on your spending naturally creates savings by eliminating mindless purchases. And then you can get creative, cut back, price shop, and even freeze spending temporarily to uncover additional savings,” she explains.

An emergency fund is a third “must” for retirement readiness, Brock writes.

“Experts recommend keeping at least three months of living expenses on hand in a cash account. Heading into retirement, it’s a good idea to target more than that, say six or 12 months of expenses,” she points out. Without an emergency fund, you’ll need to tap into your retirement savings for your emergencies, a losing strategy that can cause trouble later, Brock notes.

The last category is a big one – eliminating revolving debt.

She says that if you are on course for the first three categories, then getting rid of debt should be your focus. A good approach is, after you have paid off one debt (credit card or line of credit), to use the money you were paying on it to help target the next one. Repeat the strategy until you are debt free, she advises.

She concludes by saying that mastering these four skills is as important as what the balance is in your retirement savings account. In plainer terms, it’s not what you save, it’s how you manage it that wins the retirement race.

If you haven’t heard how the Saskatchewan Pension Plan can help grow your retirement savings, you should check them out today. This professionally managed open defined contribution plan can invest your contributions, grow them over time, and convert them to a lifetime income stream when you turn in your ID badge at work.

SPP is especially helpful if you don’t have a pension plan at work – if you work part-time, casual, or via the so-called gig economy, you can contribute at a rate that works for you. You can turn SPP into your own personal retirement savings system.

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

JUN 22: BEST FROM THE BLOGOSPHERE

What to do when the markets tumble

Every once in a while, the financial markets will throw you a curve ball. That’s the nature of investing – what goes up can come down. But what should one do during a downturn?

A recent article in the Financial Post  says the “days of turbulence” this year may have some folks thinking of giving up on stocks altogether, and stuffing “money into a shoebox under your bed” instead.

But, the article advises, that would be the wrong approach. Markets tend to bounce back after setbacks – they are resilient.

Quoted in the article, investment professional Dan Tersigni says staying the course, rather than bailing on stocks, is the wisest approach. “The odds are overwhelmingly in your favour,” he tells the Post. But patience is a must, the article says, as it can take four or five years for markets to fully recover from a slide.

The next tip from the Post is to remember what your investment goals are. If it’s retirement down the road you’re saving for, “the worst thing is to go off track by ditching investments when stocks take a dive,” the article notes.

“You still have time on your side, and you really don’t want to be making short-term decisions,” Tersigni tells the Post. Retirement can be a multi-decade journey with time to make up short-term losses, the article states. If you are up at night fretting about volatility in your investments, perhaps should look at a more diversified portfolio, the Post reports.

Finally, remember that down markets can often be a good time to buy, the Post tells us.

“Normally when the stock market takes a pounding, you shouldn’t focus on what you’re losing but instead on what you could be buying. A market plunge or `correction, makes stocks cheaper,” the article notes. However, the Post says, getting it exactly right on timing – buying at the lowest point – is extremely difficult. A better plan is to automate the process, and buy a set amount of investments every month, the article says.

“That way, you’ll get the best performance from your money – even during the worst of times,” the Post concludes.

So to recap – don’t panic and sell everything at a loss. Focus on the longer term goals – you may have more time than you think until you are actually dipping into those savings as income. And making regular investments, a practice called “dollar cost averaging,” lets you take advantage of dips without getting into the risky business of timing the market.

A nice feature of the Saskatchewan Pension Plan is that you can automate your savings by setting up a periodic direct withdrawal from your bank to SPP. This accomplishes two goals – as discussed, you are now doing dollar cost averaging. And as well, you are paying yourself first, and directing money into your savings before you start paying the bills. Win win.

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

JUN 15: BEST FROM THE BLOGOSPHERE

60 per cent of pension plan members report barriers to retirement saving

New research from Benefits Canada magazine shows that even folks who are in retirement plans say they’re finding barriers to saving – all thanks to the impacts from the pandemic.

The magazine’s annual CAP (capital accumulation plan) Member Survey was carried during the start of the crisis, from March 30 to April 1.

A capital accumulation plan is any type of savings vehicle where members put in money – sometimes matched by the employer – over their working lives. At the end of work, the total amount saved for retirement is then either paid out to them via an annuity, drawn down from a special locked-in RRIF, or a combination of both.

The folks at Benefits Canada asked people in these types of plans how the pandemic was affecting their spending and saving habits.

The research found that Canadians “are continuing to juggle their financial priorities. More than half (54 per cent) of CAP members are prioritizing day-to-day expenses, followed by paying the mortgage or rent (47 per cent), paying off personal debt (38 per cent), enhancing personal savings (34 per cent) and saving for retirement (28 per cent),” the magazine reports.

A fairly low number of respondents – 41 per cent – “described their current financial situation as excellent or very good,” the magazine notes. A further 40 per cent said their finances were “adequate,” but 19 per cent said things were “somewhat poor or very poor.” A whopping 60 per cent said “they’re unable to save as much as they’d like for retirement due to other financial debts, such as credit cards or student loans,” Benefits Canada reports.

Debt is definitely a barrier to saving, the magazine reports. “I think the big thing we need to start to get across to workers, savers, Canadians . . . is that having too much credit card debt is the opposite side of insufficient retirement savings,” Joe Nunes, executive chairman of Actuarial Solutions Inc., states in the article. “It comes from too much spending. We have to get better at educating people that they need to keep the spending in check to get the savings in order.”

The problem, however, is that the pandemic is making Canadian household debt even worse.

“You don’t need to be a psychic to predict that over the next weeks and months, the country will see an increase in personal bankruptcies, while household debt is going to soar,” reports Maclean’s magazine. “Well before COVID-19, there was growing concern over the country’s personal finances, with debt-to-income ratios topping 176 per cent in the third quarter of 2019, which means for that every dollar of income we earn we owe $1.76.”

With so many people off work and receiving CERB benefits, which may equal only about half of what they were making at work, credit cards and lines of credit will feel the strain, the magazine predicts.

Let’s face it – at a time when just staying healthy and avoiding COVID-19 is the new national priority, followed by keeping a roof overhead and food in the fridge, retirement saving is going to get bumped to the bottom of most people’s to-do lists.

But remember that with some capital accumulation plans, like your RRSP or your Saskatchewan Pension Plan account, you can reduce your contributions and put in what you can. If you can’t chip in what you did last year, put in less. Any contribution, however small today, will benefit you in the future, thanks to the professional investment growth it will receive over the years. You can ramp things up again when better times return.

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

JUN 8: BEST FROM THE BLOGOSPHERE

Will pandemic make us rethink our retirement plans?

Financial author Alexandra Macqueen, writing in MoneySense magazine, notes that we’ve always planned for retirement based on the assumption that things will be pretty much stable between the “now” of working and the “then” of retiring.

But, she asks, how will things change when the “now” is totally thrown into chaos by the pandemic?

Up until recently, she writes, we have thought about early, late, or part-time retirement. “All of these variations on the retirement theme have been built on a relatively steady set of economic conditions and assumptions: that housing and financial markets will remain stable, the economy will continue to function, and Canadians will continue to pay the Canada Pension Plan premiums and income taxes that keep CPP and Old Age Security payments flowing,” she explains.

But, she writes, the global pandemic and its “resulting economic fallout… could reshape retirement in Canada.”

First, she says, the idea of early retirement has always been associated with the idea that there are “fallbacks” if things don’t go smoothly – “returning to paid employment, harvesting home equity or counting on continued asset growth.”

But if jobs are scarce, property values drop and “markets tumble,” Macqueen notes, “these backup plans may not be available. As a result, more Canadians may opt to remain in their paid employment (if they’re employed) longer.”

As well, Canadians may find work hard to come by generally, and if they work part-time or via “gigs,” retirement savings will also be difficult to come up with, another reason Macqueen gives for seeing fewer early retirements going forward.

The next big change Macqueen predicts is that of Canadians finally coming to terms with their debt.

“The economic fallout from COVID-19 also means that many highly indebted Canadians will need to take a fresh look at the spending that got them where they are, because the security of the income or assets they expected to use to retire the debt has diminished or even disappeared,” she explains.

With no investment returns to pay down debt with, and with housing prices uncertain, Canadians may be forced to downsize their primary residence purely to save on mortgage costs, cut back on big vacations and fancy home renovations, or in extreme cases enter “a consumer proposal or bankruptcy proceedings to resolve outstanding debt,” she warns.

Finally, the COVID-19 era and its volatile market may result in a return to simpler and less risky retirement finances, such as guaranteed investment certificates (GICs) and annuities.

GICs carry almost no risk – they pay out a set amount of interest depending on the term of the certificate.

“A life annuity is a financial product, sold by an insurance company, that pays a guaranteed monthly income to the annuitant(s) for as long as they are alive—sort of like a “DIY version” of a defined-benefit pension,” notes Macqueen, co-author of a book on the subject, Pensionize Your Nest Egg.

Summing it up – we may need to work longer to have enough savings to retire on, or to pay off debt first before retiring, and when the wonderful day arrives, we might want to convert savings into a guaranteed lifetime income via annuities and GICs.

If you’re a member of the Saskatchewan Pension Plan, the idea of converting your retirement savings into a guaranteed lifetime income stream is already part of your retirement tool kit. SPP has a variety of annuity options available that will ensure you get a monthly cheque for as long as you’re alive. Check it out today.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Jun 1: BEST FROM THE BLOGOSPHERE

If you’re nest-egg is getting a short-term pinch, it’s time to make do with less for a while

Those of us who are living on income from our retirement savings – drawing down from a big nest egg – are probably feeling like they are a GPS system in a car these days. Thanks to volatile investment conditions, the route has changed – and it’s time to recalculate.

An article on the Toronto.com site offers some interesting tips on how to cope with unpredictable income from volatile markets.

Those who “have seen that your stocks have been hit hard,” and who “realize they could fall further,” need “to act cautiously to bolster your finances without necessarily doing anything drastic, at least for now,” the article suggests.

“One simple but smart strategy is to find sensible ways to trim your spending once day-to-day living conditions return closer to normal. The comparison point is your expenditures before the (pandemic) struck,” the article explains. Don’t, the folks at Toronto.com add, base your “back to normal” spending on what you were doing during the pandemic, as “that doesn’t provide a useful model for spending prudently in normal times,” the article advises.

“A planned trim to spending is something you can do quickly; you can cut just what you feel you need to, then loosen the purse strings later when your portfolio eventually recovers. If conditions get worse, you can cut further, but only when and if required,” the article states.

The article points out that at age 65, the rule of thumb is that you need $25 of invested income for every dollar you want to take out and spend. If you expect your income will be depleted due to poor markets, it’s a time to take out less, not more, the article notes.

“While the relationship between spending and the current size of your portfolio will usually vary in subsequent years after you retire, you get the picture that you need a pretty sizable chunk of money in your nest egg to support each $1 of spending. So if you can cut a chunk out of spending without hurting your lifestyle too much, you can take a lot of pressure off a stressed portfolio and increase the odds your savings will last as long as you need it to.”

This great advice is worth heeding.

Members of the Saskatchewan Pension Plan can choose a different approach to managing their retirement income. An option they can choose is the life annuity – with this approach, SPP converts some or all of your account balance at retirement to a guaranteed, monthly payment that you’ll receive every month for the rest of your life. It can continue to a spouse or other beneficiary depending on what annuity option you select. Annuity recipients don’t have to worry about market conditions – however threatening the financial weather may be, they get the same amount every month.

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

MAY 25: BEST FROM THE BLOGOSPHERE

Times are volatile, but there are things NOT to do with retirement savings: Gordon Pape

We’re living through a public health crisis that has undermined Canada’s economy and made the stock and bond markets go topsy-turvy.

Noted financial author Gordon Pape, writing in the St. Catharines Standard, says that this situation is particularly frightening to those among us who are living on their retirement savings.

Protecting your health, he writes, is number one. But number two should be protecting your savings, he advises.

“Some older Canadians have a significant amount of money tucked away in their retirement plans, and they don’t want to lose it,” writes Pape. “They’re depending on those RRSPs, RRIFs, and LIFs to support them in the coming years.”

He notes that the stock market “has taken a beating,” and “there’s turmoil in the bond market,” leaving many with no idea “which way to turn.”

Don’t get frightened and put everything into cash, Pape warns. “I’d prefer to have cash reserves to cover two years of expenses and invest the rest in government-issued fixed income securities, high-quality, dividend-paying stocks, and some gold funds or stocks.”

Putting your investments in cash is problematic, he writes. You won’t earn much interest. But the return of inflation could erode the spending power of your cash, notes Pape – governments are being forced to spend more than expected during the pandemic and some economists feel we could see inflation rates of up to three per cent in just a few years.

A second, albeit unlikely scenario with cash investing is bank failure. “Don’t misunderstand me here,” he stresses, “Canada’s banks are well-capitalized and among the strongest in the world.” But there have been failures among smaller institutions in years gone by.

Be sure to take advantage of the Canada Deposit Insurance Corporation – you can put up to $100,000 per person in CDIC-backed savings accounts, so that in the unlikely event of bank problems, your money is insured, writes Pape.

Pape’s advice makes a lot of sense – he’s describing a balanced approach to retirement savings, with enough cash to cover your expenses for a couple of years, and then a mix of quality equities and government-backed bonds. For good measure, he also recommends a little exposure to precious metals.

There was a time, perhaps in the 1980s, when interest investing through GICs and high-interest savings accounts was seen as the right approach to retirement savings. But in those days, interest rates were far higher, at certain points of time reaching the mid-teens. Save with SPP remembers getting a $1,000 Canada Savings Bond that paid 16 per cent interest – and a car loan, from the bank, that cost 18 per cent interest! So the good old days weren’t always all that good.

The Saskatchewan Pension Plan’s Balanced Fund has an asset mix (as of December 2019) that features 29% bonds, 19% U.S. equity, 18% Canadian equity, 18% per cent non-North American equity, as well as exposure to real estate (10%), infrastructure (3%), mortgages (2%) and short-term investments (1%). Members who have holdings in this SPP fund are benefitting from diversification and professional investment management, with a goal of safe, low-risk growth. 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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22