Blogosphere

Jan 25: BEST FROM THE BLOGOSPHERE

January 25, 2021

Are we “living a lie” when it comes to retirement planning?

An insightful article from Espresso Communications suggests that many of us are nervously whistling as we shuffle past the graveyard of “retirement planning.”

First of all, many of us are still on the job past retirement age, the article begins. “The number of retirement-age Americans in the workforce has doubled since 1985,” Espresso tells us.

Another notion we cling to is that we can work as long as we want. But, the article warns, “37 per cent of retirees stopped working before they planned. The decision to stop work is often involuntary, and it can be precipitated by poor health or late-in-career layoffs,” the authors tell us.

Many of us think we won’t have to work at all once we punch out for the last time. “Retirement isn’t what it used to be,” the article points out. “Full pensions aren’t common and you can expect to live longer than ever.” So, work may be inescapable, the article notes.

On the retirement savings front, many of us think we won’t need to start until later in life. “Investments grow over time, which is why it’s important to start saving early,” the  article advises. Citing research from Vanguard, “a dollar you invest at 20 could be worth almost four times a dollar invested at age 55.”

Another argument is that many of us just can’t afford to save. You need to get into the habit, the article notes, even “if you can put aside only a small portion of your paycheque, or even a few dollars a day.”

And those savings need to be invested and not just stashed in a savings account, the authors say. Otherwise, “inflation is going to eat away at those savings the longer they sit there,” Espresso’s team states.

Some of us figure an inheritance will solve our savings problems. “Well,” the article warns, “your parents may not see it that way. As baby boomers pay out for expensive end-of-life care… Gen Xers and millennials may be surprised at how little is coming their way.”

The article says the economic crisis of 2008-9 shows the folly of thinking you can “live off the equity of your home” instead of saving.

Even if you have a retirement plan at work, the article notes, it may not provide you with sufficient income. And retiring early means you’ll get less per month from your workplace retirement plan and government retirement benefit plans.

There’s a lot of ground covered in this article, and more than one key message. One that blares out clearly is the need to have a realistic plan of attack – getting yourself ready to live on less income by clearing up your debts and paying off the mortgage, for instance. The other is that you have to be ready for changes – the way things are ticking along today with your income, your health, your earning power, your savings – can all change with an employment, wellness, or market volatility.

The notion of investing for your future, rather than saving for it, is an important message. If you’re a member of the Saskatchewan Pension Plan, you can rest assured that SPP’s investment professionals are working hard to sweat the details on your behalf. That’s why the SPP has, since its founding 35 years ago, been able to deliver impressive average annual returns of over eight per cent, despite the crash of 1987, the tech wreck of the early 2000s, the Global Financial Crisis of 2008-9 and even today’s terrifying pandemic. 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.


Jan 18: BEST FROM THE BLOGOSPHERE

January 18, 2021

Your retirement may include work – and quite a bit of it

Writing in the Financial Post, financial expert and columnist Jason Heath suggest cutting ties with work is no longer synonymous with the term “retirement.”

He notes that things have changed since the first pension plan was rolled out in Germany back in 1889. At that point, he writes, the state decided to look after former workers (via a pension) once they reached age 70. The goal was to free up jobs for younger workers, Heath notes.

However, in those days, the average German died around age 70, “so German retirement tended to be short-lived.” By comparison, he points out, Canadians (on average) want to retire around age 64.3, and there is a 50 per cent probability that women aged 65 today will live to 90, and men to 89.

“Typical Canadian retirees should therefore plan for a retirement of more than 30 years, much longer than their late-19th-century German counterparts,” Heath writes. That’s a very long time, and that’s why Heath sees continuing some form of employment as being a key piece of the retirement puzzle.

His first thought – why not try to work at what you do now, but part-time?

“If you can do a phased retirement, transitioning to part time, it can be a great option to dip your toes into the retirement pool slowly,” he explains. Continuing to work a bit will put less strain on your retirement savings – or allow you to build more, the thinking goes.

Another option is to take the knowledge you gained while at work, and offer consulting services for companies in your field. This idea can offer you a little more flexibility – you can set your own hours – and by working for several companies you will meet some new people.

A third idea – work, but at something else, maybe something that you did a long time ago and really liked.

“What did you enjoy doing when you were younger, maybe even as a child? There may be some clues here as to what new job you should consider in retirement,” he tells us. Save with SPP remembers the good old days of working, as a student, at a large hardware store, cutting curtain rods and window blinds – could such a second career be on the agenda?

If you don’t really need extra money, but want to still feel part of a team, Heath says volunteering may be your work of choice. “Sometimes volunteer work can be more lucrative in non-monetary ways than any job during your career,” he explains.

Heath says a little work at the front end of retirement won’t just help you financially, but it will boost your mental health and keep you engaged. “Some of the happiest and healthiest retirees I have met are still quite busy in retirement, whether they are in their 50s or 80s. This is one of the most important lessons I have learned during my own career, and something I imagine as I envision my own retirement,” he concludes.

Are you looking to increase your retirement savings as the golden years approach? A great all-in-one Swiss army knife for retirement can be the Saskatchewan Pension Plan, which is celebrating 35 years of operations this year. The SPP allows you to save any way you like – a lump sum, a regular automated contribution from your bank; you can even contribute with your credit card. But there’s more than just saving with SPP. Experts will invest your nest egg over the years, at a very low rate, and at retirement, those hard-saved dollars can be converted to a lifetime pension you’ll receive every month. Be sure to check out SPP!

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.


Jan 4: BEST FROM THE BLOGOSPHERE

January 4, 2021

Seniors – many lacking pensions and facing depleted savings – struggle to find work

Many of us of a certain vintage – say boomers in their late 50s and early 60s – plan to work as long as we can before entering retirement.

But a report by the Globe and Mail suggests that these days, as we recover from the pandemic, jobs for older workers aren’t as easy to come by as they may once have been.

“As we survey the damage from the COVID-wrecked economy, we may find that the employment prospects for older workers are getting thin just as the supply of mature job-seekers starts to climb,” writes the Globe’s Linda Nazareth.

First, she explains, things have changed for older workers.

“The old model of work, with the notion of leaving with a gold watch and a pension for life, is over. According to Statistics Canada, 52 per cent of the employed population was covered by a pension plan in 1977, a figure that had fallen to 37 per cent by 2018. Making up the difference with private savings does not always work out, and 2020 has offered a stark reminder that volatile markets, recessions, job losses and illness can wreak havoc on the best-laid plans,” she writes.

So, she notes, without pension income or savings, the other option is to keep working.

“No surprise, then, that the labour force participation rate (the percentage of the population either working or looking for work) of those aged from 55 to 64 has been trending higher for years, climbing from 63.6 per cent in November, 2010, to 66.6 per cent in November of this year,” Nazareth writes.

The rub, unfortunately, is that the kinds of jobs older workers are now holding down may not be there once the “K-shaped recovery” is fully underway, Nazareth explains.

“Many will be caught in the sectors and occupations that find themselves in the downslide of the K, including occupations in the struggling hospitality sector, but also those in a wide swath of manufacturing and services. Automation and a competitive global economy were already taking things in that direction but picking up the pieces after the pandemic will only make things worse and increase the potential for a spate of very-much involuntary unemployment,” she warns.

She concludes the article by hoping that a full economic recovery will lead to new types of jobs to aid the older workers in their job search.

In the U.S., reports Forbes magazine, it’s a similar situation.

The unemployment rate among workers 65 and older was an alarming 10.8 per cent, the article reports. Worse, it’s lower-income workers who are most affected, the article explains.

Writer Christian Weller concludes that there are basically two camps in the U.S. “Some could glide towards a comfortable retirement after working at good wages and saving enough during the preceding years. Others were left to fend for themselves as jobs became scarce and health risks became widespread since they had too little in wealth to weather the multitude of emergencies and start retiring earlier than planned. The pandemic starkly illustrates the massive retirement gulf that epitomizes the U.S.’s aging society.”

So let’s sift through this. Basically both authors are saying that older citizens with a pension or retirement savings to fall back on are doing better than those without, and that finding and keeping a job when you’re older may not be a slam dunk.

What can we do about it if we aren’t older? Saving for retirement seems a good way to cushion your future self against shifts in the job market. If you are fortunate enough to have a pension at work, be sure you are maximizing your contributions to it. If not, you’ll need to be self-reliant, and build your own retirement nest egg. A good place to start the savings journey could be the Saskatchewan Pension Plan, celebrating its 35th year in 2021. 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.


Dec 28: BEST FROM THE BLOGOSPHERE

December 28, 2020

Retirement income will come from many different buckets – so be aware of tax rules

When we are working full time, taxes are fairly straightforward. Our one source of income is the only one that gets taxed. Very straightforward.

It’s a far different story, writes Dale Jackson for BNN Bloomberg, once you’re retired. Income may come from multiple sources, he explains.

“Think of your retirement savings as several buckets with different tax consequences: registered retirement savings plan (RRSP), spousal RRSP, workplace pension or annuity, part-time work income, tax-free savings account (TFSA), non-registered savings, Canada Pension Plan (CPP) and Old Age Security benefits (OAS), and home equity lines of credit (HELOC),” he explains. 

“The trick is to take money from the buckets with the highest tax implications at the lowest possible tax rate and top it off with money from the buckets with little or no tax consequences.” Jackson points out.

A company pension plan is a great thing, he writes, but income from it is taxable. “If you are fortunate enough to have had a company-sponsored pension plan – whether it is defined contribution or defined benefit – or an annuity, you have the misfortune of being fully taxed on withdrawals in retirement,” he explains.

It’s the same story for your RRSP – it’s fully taxable. Both pension income and RRSP income may be eligible for income splitting if you qualify, Jackson notes.

He explains how a spousal RRSP can save you taxes. “If one spouse contributes much more than the other during their working life, they can split their contributions with the lower-income spouse through a spousal RRSP. The contribution can be claimed by the higher-income spouse and gives the spouse under 65 a bucket of money that will be taxed at their lower rate,” Jackson writes.

CPP and OAS benefits are also fully taxed, and the latter can be clawed back in whole or in part depending on your other income, he notes.

Other buckets to consider include part-time work. “More seniors are working in retirement than ever,” Jackson writes. While income is taxable, he recommends that you talk to your financial adviser – there may be work-related expenses that are tax-deductible. And you can always work less if you find your other sources of income are increasing!

Interest from non-registered investments like Guaranteed Investment Certificates (GICs) or bonds is taxable. Dividends on non-registered investments are also taxable, but dividend tax credits are available. You will be taxed on half of the gains you make on investments like stocks (again, if they are non-registered) when you sell, Jackson explains. There’s no tax on interest, dividends or growth for investments that are in a RRSP, a Registered Retirement Income Fund, or a TFSA, Jackson notes.

Tax-free income can come from TFSAs or reverse mortgages and HELOCs, but Jackson warns that “a HELOC is a loan against your own home… you will pay interest when the house is sold or the owner dies.”

The takeaway from all this great advice is this – be sure you’re aware of all your sources of post-work income and the tax rules for each. That knowledge will making managing the taxes on all these buckets a little less stressful.

The Saskatchewan Pension Plan is celebrating its 35th year of operations in 2021. Check out their website 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.


Dec 21: BEST FROM THE BLOGOSPHERE

December 21, 2020

How will the pandemic affect your retirement?

As we prepare to start a new year, it appears that there is a faint light visible at the end of the tunnel that is the pandemic. Vaccines have been developed that appear promising and hopefully they’ll start to be in distribution by the time you are reading this.

That said, the pandemic has had a serious impact on all of us, and especially on our plans for retirement. An interesting article in Espresso covers the topic in detail. Here are some of their key findings.

Those relying on their own savings, rather than a pension plan from work, for retirement may have to postpone their retirement “by up to five years,” the article reports. This is because of the shellacking our economy – and our savings – took due to the COVID-19 outbreak.

But in an unusual twist, the article continues, “some people in their 50s and 60s are being forced to retire early.” Many of these folks are people who lost their jobs due to the pandemic, the article notes.

Many of us with adult children are having to help them out more than usual due to the crisis, Espresso reports. “If you want to help your kids out,” states financial planner Lawrence Sprung, speaking to U.S. network CNBC, “make sure you don’t give them an amount that is greater than, or outside the scope of your normal excesses.” The implication is that if you raid your retirement cookie jar to help the kids, it will mean you’ll retire later or with less.

And, Espresso reveals, the opposite situation – kids helping parents – has also become more common. Research from the American Association for Retired People “found that roughly a third of adults in their 40s to 60s had offered financial support to their parents in the last year.”

While Espresso warns that some of us will retire with less, others will retire with more savings than planned. “A significant number of Americans – including more than half between the ages of 55 and 64 – are spending less money during the pandemic,” the article tells us.

One thing that’s become popular as we all sit around at home more is renovating the old home office. Be careful, advises Espresso. South of the border, the average kitchen renovation costs $56,000, but tends to add only $38,000 (on average) to resale prices.

The article advises older people to consider part-time work, launch a business, or to delay government retirement benefits for as long as possible. “It’s worth it to wait until (you can) receive full benefits,” Espresso suggests.

Finally, the article says, if your savings have taken a hit in the short term, “focus on the long-term plan.” Markets can rebound so don’t let short-term bumps in the road cause you to “act irrationally,” Espresso says.

Members of the Saskatchewan Pension Plan have flexibility when it comes to retirement savings. If you’re out of work and can’t contribute, you can take a pause. If you’re one of the lucky ones who is finding they have more money to save these days, consider adding a few extra dollars to your SPP account. The experts running SPP’s finances always focus on long-term investing, and that’s allowed SPP – which celebrates its 35th year of operations in 2021 – to have an average rate of return since inception of over 8 per cent. That’s quite an achievement when you consider that the last 35 years includes Black Friday in 1987, the “tech wreck” of 2001-2, the Global Financial Crisis of 2008-9 and our current pandemic! Be sure to 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.


Dec 14: BEST FROM THE BLOGOSPHERE

December 14, 2020

Could we see a change in RRIF withdrawal rules?

An interesting idea that’s apparently being discussed in political circles is one of high interest to retirees – it’s the thought of doing away with minimum withdrawal rules from Registered Retirement Income Funds (RRIFs).

According to an article on the Sudbury.com site, this idea seems to be focusing on the fact that retirees may not want to withdraw funds – or at least, less funds than the usual minimum – from their RRIFs during a time when the markets have been volatile due to the worldwide pandemic.

“Each year, seniors with registered retirement income funds have to withdraw a minimum amount from their savings, which is considered taxable income,” the article explains.

“The Liberals shifted the marker this year, dropping the minimum for each senior by 25 per cent to ease concerns raised by the effect of the COVID-19 pandemic. That let those who could afford it leave more money in their tax-sheltered investments, hoping to recoup losses from the pounding the pandemic delivered to the markets,” the article continues.

The article notes that 2.1 million Canadians had RRIFs in 2018, with an average balance of $114,019. That average withdrawal, again according to the article, was $10,645 in 2018, with 41 per cent of RRIF owners withdrawing more than that.

When you’re too old to put money into a Registered Retirement Savings Plan (RRSP), one of your options is to transfer the funds into a RRIF. There, your funds continue to grow tax-free, but you are taxed on a minimum amount you have to take out each year – at least under the present rules.

Your other options for the RRSP, when it ends, are to buy a life annuity (more on that later) or to withdraw it all in cash and pay taxes on the entire amount.

So what’s the deal with this new RRIF idea?

It could be a good option for those of us with RRIF savings who don’t want to “sell low,” and take money out when markets aren’t strong. But, as the Sudbury.com article tells us, if this option ever comes to pass, it carries a price tag – for Ottawa.

The Parliamentary Budget Office, the article notes, says “cutting the minimum withdrawal all the way to zero would end up costing the federal treasury $940 million next year, rising each year until hitting just over $1 billion in 2025.”  That said, presumably – even if there is no minimum withdrawal amount – some seniors will still need to withdraw money from their RRIFs and would pay some of those “waived” taxes.

RRIFs aren’t perfect. As mentioned, you (currently) have to take money out even if markets tank, a set amount each year. As well, your income from a RRIF tends to fluctuate; you generally don’t get the same amount each year because you are withdrawing funds from a declining account balance. And, you could run out of RRIF money before you run out of life.

If you’re a Saskatchewan Pension Plan member, you have an additional option when you retire. You can convert your SPP savings to a life annuity. You’ll get the same income every month – for life – regardless of whether the markets go up or down, and the longer you live the more payments you get. SPP also has options for your spouse and beneficiary to receive income upon your death. Check this important SPP benefit 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.


Dec 7: BEST FROM THE BLOGOSPHERE

December 7, 2020

Pension expert Vettese warns that fixed-income retirement is challenging; stocks can be risky

In a recent interview with the Globe and Mail, pension expert, actuary and financial writer Fred Vettese has a few words of caution for those of us who like to avoid the risks of the markets by finding safe harbour in the world of fixed income.

Vettese has written a number of books on the subject of retirement planning; Save with SPP reviewed his book The Essential Retirement Guide and found it packed with great advice.

He tells the Globe that due to the economic uncertainty the pandemic has brought, “if you have enough assets now and can live with a less risky portfolio to achieve your lifestyle, then do it.” His message, the article notes, is specifically directed at those age 65 plus.

Noting that interest rates are the lowest they’ve ever been, Vettese states in the article that “we can’t say that we’ll put some money in bonds and it will stabilize the overall portfolio and we’ll still get a pretty good return. COVID has pretty much squeezed out any kind of risk-free income.”

So, he warns, “if you’re going to keep risk-free investments in your portfolio like bonds and guaranteed investment certificates (GICs), then you’re going to have to find a rational way to actually draw down the principal over your lifetime. You can’t live off interest from bonds and GICs.”

This last statement is a bit of a gobsmacker for those of us who have ardently believed in a balanced, bond/equity view of retirement saving! But he’s right, of course – bond yields, as he points out in the article, will deliver negative returns over the long haul at today’s interest rates.

What’s a retirement saver to do?

If you’re looking to replace the income that bonds used to provide you with high-dividend stocks, be careful, Vettese advises.

“Implicit in holding dividend stocks is the idea that those stocks are not going to suffer capital losses, that they’re not going to go down 20 or 30 per cent. And what if these companies start struggling and can’t keep up their earnings and have to cut their dividends? There’s a lot of risk in dividend stocks, even if we haven’t seen that risk showing its teeth yet,” he states in the Globe article.

Vettese says it is a tough time for savers – especially young ones – to try and invest on their own. He suggests that they get professional advice, and says most people would be better off in a low-cost market-based exchange traded fund (ETF) than they would be if they picked their own stocks. He’s also a proponent of waiting until age 70 to start your government retirement benefits, such as the Canada Pension Plan and Old Age Security, because you get quite a bit more income each month that way.

There’s a lot of great stuff to recap here. Fixed-income isn’t the solid pillar it once was, at least for now, and stocks paying high dividends can be risky. Advice with retirement saving is well worth it, and delaying your government benefits as long as you can will give you a bigger monthly payout.

There’s no question that investing all by yourself can be risky. You might be paying fees that are too high. You could pick a category that isn’t going up in value – or risky stocks that don’t pan out. If you’re not really ready to go it alone in the euchre hand of retirement investing, the Saskatchewan Pension Plan could be an option for you. SPP looks after the tricky investing part for you, at a very low cost, usually less than 100 basis points. Why not 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.


Nov 30: Best from the blogosphere

November 30, 2020

Canadians budgeting better, many will work past 65, research says

2020 has been a really strange time, one where we’ve lost a lot of people we care about, and have been generally beaten up financially, all thanks to the pandemic.

But a new study from the Chartered Professional Accountants of Canada (CPA), referenced by Business Insider, suggests that we Canucks are bearing up fairly well under the strain.

The study, according to a CPA news release, “shows great variations in how Canadians are coping and even succeeding during this unprecedented time.”

We seem to feel we are handling our finances well, the study reveals. Seventy-eight per cent of us believe we can “stick to a budget” and 81 per cent think we “can successfully manage our debts,” the study finds.

CPA Canada’s Doretta Thompson credits increased financial literacy for these strong numbers.

 “Providing financial literacy information is essential in these unsettled times as it can assist individuals and families in making smart decisions to successfully manage their financial wellbeing,” she says in the release.

The research shows nearly half of those surveyed – 49 per cent – have “modified their savings strategy,” with 63 per cent having savings accounts, 60 per cent with Tax-Free Savings Accounts, and 53 per cent contributing to either a Registered Retirement Savings Plan or a registered pension plan at work, the release says.

That focus on savings is important, the study notes. One in four of pre-retirement age respondents says they plan to retire in the next 25 years. Forty per cent of the pre-retirees plan to work past age 65, the release adds, and 43 per cent say they will do so because “they cannot afford to retire.”

An impressive 60 per cent of those surveyed have put aside funds for retirement in the last five years, the study found.

The pandemic has made most of us feel a bit of a pinch. The CPA survey found that 61 per cent of respondents “cut back on day-to-day spending,” and 49 per cent have developed household budgets, which 86 per cent say they are following.

“It’s encouraging to see many Canadians taking action to stay afloat during the fiscal turmoil of today but also looking to the future,” Thompson states in the media release. “Our country’s challenge is to ensure every Canadian has the knowledge and means to be financially secure.”

Personal finances, and the related issues of personal debt (or wealth) are things we Canadians don’t always like to talk about. An old saying in pension circles is that if you ask 100 people to describe a perfect wedding, you will get 100 different answers. The same is true if you ask them about a perfect retirement and how to save for it.

What the CPA is saying is that the more we know about saving, and the savings vehicles available, the more likely it is we will use them. And the more we understand debt, and how to manage it, the less debt we will all carry. It’s solid advice – educating yourself is a gift that keeps on giving.

Whether you are just starting to save for retirement, are midway to retirement, or are at its front door, the Saskatchewan Pension Plan has tools to help you. SPP invests your savings, either via contributions or transfers from other plans, and then at retirement time, can convert those savings into long-term security in the form of a monthly pension amount – for life! Why not 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 16: BEST FROM THE BLOGOSPHERE

November 16, 2020

Pandemic’s a worry for Canadians, and impacting their ability to save: survey

New research from CIBC and Maru/Blue finds that 40 per cent of Canucks are worried about how the pandemic will affect “their retirement and savings plans,” reports Wealth Professional.

Also alarming – 23 per cent of those surveyed have “been unable to contribute to their retirement plans since the pandemic began,” the magazine reports.

There are also subtle additional ways the pandemic may impact future retirements, Wealth Professional notes, again citing the survey’s findings. Thirty per cent of Canadians surveyed believe they will have to work longer than they originally had planned, and 32 per cent don’t think they’ll do as much travelling in retirement as they had hoped, the magazine reports.

This level of pessimism around retirement has not been seen since 2014, the article adds.

Other learnings from the pandemic include:

  • 20 per cent say they are paying more attention to their personal finances
  • 21 per cent say they “won’t panic when markets become volatile”
  • 19 per cent agree it is “important to save for retirement/their future”
  • 26 per cent feel the pandemic has “significantly increased the cost of retiring”
  • 24 per cent now feel they can live with less and will reduce discretionary spending

The amount needed for a comfortable retirement is, according to Wealth Professional, “10.9 times their final pay to maintain the same spendable income after retirement.” The magazine cites findings from actuarial firm Aon for this figure.

These figures are certainly not surprising. Many Canadians have had their income slashed, are receiving benefits, and have deferred repayment of mortgages as we all try to tough out the pandemic.

It’s encouraging that nearly 20 per cent of us – despite being downtrodden by the pandemic – still see the value of setting aside whatever they can today to benefit themselves in the future.

Another part of the equation, of course, is living on the retirement savings – the so-called decumulation side, where all the money you’ve piled up is turned into what you live on in retirement.

According to Benefits Canada, Canadians need to think about how to make their retirement income last.

“We’ve had a number of tax rules and pension rules based on the age of 65 and that made a lot of sense years ago, but the issue is now, once you hit 65, you can live to 87 or even longer,” states economist Jack Mintz of the University of Calgary in the article.

“I think we need to allow people to put more money in tax-sheltered savings. I would like to see an increase in pension limits and [tax-free savings account] limits in order to help people save more for the future. I’d also like to see more rules around [registered retirement income funds], when you have to withdraw money out of your retirement accounts… to provide more flexibility,” Mintz states in the article.

These are solid ideas for making retirement savings last longer, and for helping Canadians accumulate even more savings than they have at present. If you are looking for a place to stash cash for your retirement future – a place where your savings will be professionally invested at a very low rate – look no further than the Saskatchewan Pension Plan (SPP). The SPP has an impressive rate of return of nearly eight per cent since its launch nearly 35 years ago. And if money is tight today, you can start small and gear up when better times return. Take the time to click over and check them out.

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 9: BEST FROM THE BLOGOSPHERE

November 9, 2020

Survey suggests we’ll work longer and have less retirement income

Writing in the Globe and Mail, Ian McGugan takes a look at a new survey from Mercer Canada that he says suggests “the recession created by the novel coronavirus (has) delivered a stinging blow to many retirement systems, including Canada’s.”

According to the article, David Knox, an author of the 2020 Mercer CFA Institute Global Pension Index, says the current economic downturn “will impact future pensions, meaning some people will work longer while others will have to settle for a lower standard of living in retirement.”

Worse, the article reports – women will suffer more than men from this situation.

“Many of the hardest hit will be women. They have suffered disproportionately large job losses in this downturn because many work in sectors, such as restaurants and retailing, that have been hardest hit by lockdown restrictions,” writes McGugan.

As well, Mercer’s Scott Clausen tells the Globe, the traditional “caregiver role” of women means they have tended “to work part-time or take breaks from their career, which reduces their ability to make pension contributions and accumulate time in a pension plan.” The pandemic, Clausen suggests in the article, has made this retirement savings disparity even worse.

Despite these apparent systemic problems, the Globe notes that Canada recently was ranked 9th out of 39 industrialized nations in meeting the retirement challenge, with a “B” rating.

There’s a second side to the story, the article continues. Not only are people facing challenges in earning money and paying into pension plans, but the pension plans themselves are having a tough time of things, the Globe reports.

Again citing the report, McGugan notes that “a major challenge for retirement planners everywhere is the falling returns from most pension assets. Declining bond yields, reduced company dividends and lower rentals from property investments have shrunk prospective returns.”

In an interesting sort of paradox, the country whose pension system is rated number one in the industrialized world (in the same Mercer survey) is having problems meeting its funding targets. Two large pension plans there may have to cut pension payments next year, reports Dutch News.

“The two biggest Dutch funds, the giant civil service fund APB and the health service fund PFZW had failed to meet official targets in the third quarter of this year. Both funds’ coverage ratios – the assets needed to meet their obligations – had fallen below 90 per cent in the July to September period. If this is the case in the final quarter of the year, they will have to make cuts to pension payouts in 2021. The two big engineering funds are also in the danger zone. Together the four funds cover some eight million pensioners and participants,” the news agency reports.

The key messages here are quite simple – due to the health crisis, many of us are working less, and others not at all. It’s difficult to save for retirement, either in a workplace plan or on your own, if you are earning less overall. At the same time, it’s tough sledding on the investment side for the world’s pension plans. Payouts, as in the Dutch example, could be less.

Members of the Saskatchewan Pension Plan (SPP) have the ability to set their own contribution levels – there’s no set percentage of income that automatically comes off your pay. If you’re making less, or nothing at all, you can reduce or pause contributions without affecting your membership – and when better times return, you can ramp them back up again. Take a minute to check out the SPP today!