Category Archives: Blogosphere

Jan 21: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

Level of debt restricting Canadians’ ability to save

Canadians, who have for decades enjoyed the low cost of borrowing, are about to face a big problem – rising interest rates.

According to an article in Maclean’s, the Bank of Canada recently raised its interest rate to 1.75 per cent, but has “mused about bringing interest rates back to normal levels, between 2.5 and 3.5 per cent,” the article notes.

The rates had been held “artificially low” by the Bank of Canada to “keep economic forces at bay” in the wake of the 2008 credit crunch. So during that period of super-low interest rates, Canadians had a debt party, the article notes. “Citizens were busy amassing debt for home renovations, new vehicles and eating out. In 2016, Canadians owed more than $142 billion in lines of credit, up from just over $35 billion in 1999—an increase of more than 400 per cent. Credit card debt and vehicle loans doubled over the same period. The total debt load of all Canadian households sits at over $2 trillion, an amount roughly equal to the country’s entire economic output,” the article notes.

What’s worse, the article notes, is that this is not a case of a few overspenders making things rough for the rest of us. “Approximately 70 per cent of Canadian households have debt, with the average indebtedness at 170 per cent of disposable income—meaning that for every dollar households earn after taxes, Canadians owe $1.70. The situation for some Canadians is even bleaker: approximately one in 10 Canadian households have debt levels of 350 per cent,” warns Maclean’s.

“It’s time for Canadians to recognize that the good times of cheap credit are coming to a close. It’s already begun—Canadian spending on renovations is down seven per cent, its lowest level in five years of explosive growth—but in 2019, Canadians are going to have to change their personal spending habits to reflect the trend toward fiscal conservatism, or risk feeling the inevitable financial burn,” advises Maclean’s.

We used to save more, years ago, when interest rates were much higher and levels of personal debts were lower. However, the twin realities of historically low interest rates – great for borrowing but less great for earning interest – and high debt levels are throttling our ability to save. According to an article in Bloomberg, Canadians’ savings rates are the lowest they have been in more than 10 years.

Canadians, on average, are saving just 1.4 per cent of their household income, Bloomberg notes, citing Statistics Canada figures. That’s the lowest rate we’ve seen since 2005, the article notes.

“It’s concerning that Canadians aren’t building up buffers and prepping for retirement like they used to,” states TD Bank’s Brian DePratto in the article.

As we begin 2019, we should definitely start getting serious about managing our debts – but we shouldn’t completely overlook saving for retirement. Are you putting away 1.4 per cent of your disposable income towards long-term saving? If not, maybe it’s time to start. Even a small start like that can add up over time, and a wonderful destination for those retirement savings dollars is the Saskatchewan Pension Plan.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Jan 14: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

Blogger sees CPP expansion as helping hand for retirement saving

While many politicians and financial think-tanks like to refer to Canada Pension Plan (CPP) contributions as a tax – one they say is being increased through expansion of the program – at least one blogger sees it as a positive step towards retirement saving.

The Michael James on Money blog recently took a look at the issue of CPP expansion.

In his post, James notes that many observers say CPP expansion is “unnecessary,” and cite average saving figures as proof that a bigger CPP is not needed.

“But averages are irrelevant in this discussion,” writes James. “Consider two sisters heading into retirement. One sister has twice as much money as she needs and the other has nothing. On average, they’re fine, but individually, one sister has a big problem. CPP expansion is aimed at those who can’t or won’t save on their own.”

And while there are many programs – CPP, Old Age Security, and the Guaranteed Income Supplement – designed to ensure “we don’t… see seniors begging for food in our streets,” the CPP is something that working Canadians and their employers pay into, rather than a taxpayer-funded program, he explains.

He makes the point that CPP should not be an optional savings program, like an RRSP. “If CPP were optional, too many of those who need it most would opt out. The only way CPP can serve its purpose well is if it’s mandatory for everyone,” he writes.

These are excellent arguments. The days when everyone had a pension plan at work, and the CPP was a sort of supplement to it, are long gone. According to Statistics Canada, the number of men with registered pension plan coverage dropped from 52 per cent to 37 per cent between 1997 and 2011. For women, coverage increased to from 36 per cent to 40 per cent during the same period. That means more than 60 per cent of us don’t have a pension at work.

CPP expansion helps fill that coverage void. If workplace pension plans were on the increase, certainly CPP expansion wouldn’t be necessary – the statistics show that’s simply not the case.

If you don’t have a pension plan at work, you can self-fund your retirement through membership in the Saskatchewan Pension Plan. Any Canadian can join and contribute up to $6,200 annually to an SPP account. When you retire, SPP takes the headaches out of the process for you and converts your savings into a lifetime income stream. You can start small and build your contributions as your career moves forward.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Jan 7: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

Think hard before you start spending a lottery win or inheritance: BMO

If you ask Canadians about their financial goals, you’ll get a sensible answer – most want to “achieve lifestyle goals in retirement.”

But a recent survey by BMO Wealth Management, released via Yahoo! Finance, suggests common-sense goals may got out the window if people get a “sudden windfall.”

Pre-windfall, which BMO defines as “winning the lottery,” or getting an inheritance, legal settlement or insurance payout, Canadians seem to have reasonable goals. The “lifestyle in retirement” goal was shared by 55 per cent of those surveyed. A further 49 per cent had the goal of increasing their wealth, followed by “protecting current wealth (40 per cent), managing taxes in retirement (27 per cent),” and “helping grandchildren (20 per cent),” the study notes.

Post-windfall, it’s a totally different story. Sixty-four per cent of those surveyed would “share, with family, friends and charity.” An equal percentage would “pay off all debts.” Forty-seven per cent say they would “invest in the stock market, a business, or a property.” Other choices were “buy the big ticket items I always wanted (17 per cent),” and “splurge and spend freely (10 per cent).”

Only 38 per cent of those surveyed said they would carry on with the same pre-windfall goals.

You’re probably thinking hey, who wouldn’t go a little bit nuts if they won millions, and it is hard to disagree with that thought. However, BMO says that this sudden change of thinking – tossing sensible plans out the window – is worrisome given the fact that “approximately $1 trillion in personal wealth will be transferred from one generation to the next by 2026.”

“While the significant investment opportunities can be exciting, be cautious of psychological issues associated with sudden wealth syndrome,” states Chris Buttigieg , Director, Wealth Institute, BMO Wealth Management in the release. “It is important to seek expert advice to discuss how a windfall will alter your financial goals and which causes matter most to you and your loved ones.”

The advice from BMO is to take your time if you’re in the lucky position of receiving an unexpected financial windfall. “Remain calm… think about how a windfall will affect your financial goals,” BMO advises. They also recommend developing a wealth plan so that the goals you establish can be met. As well, they say it’s wise to get rid of high-interest debt as quickly as possible.

A good retirement plan can be improved dramatically through the addition of newfound wealth. If you have unused RRSP room like millions of other Canadians, a good strategy would be to fill that room. The Saskatchewan Pension Plan provides a great place to save some of that unexpected cash for the many happy days of retirement that lie ahead.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Dec 31: Best from the blogosphere – Retirement system OK

A look at the best of the Internet, from an SPP point of view

Retirement system OK, but more needs to be done: study

It’s a classic “good news, bad news” situation, this Canadian retirement system of ours. The good news, according to OECD research published recently in Wealth Professional, is that the developed world’s pension systems are much more stable.

The bad news is that they’re not necessarily delivering an adequate retirement benefit, the magazine notes.

“Governments are facing growing challenges from an aging population, low returns on retirement savings, low growth, less stable employment careers and insufficient pension coverage among some groups of workers,” the article notes. “These challenges are eroding belief that pensions will provide enough income for comfortable living in retirement,” the article adds.

While Canada’s system is ranked sixth best among those studied, the article points out that Canadians contribute about 10 per cent of their earnings towards government retirement programs. By comparison, Italians contribute about 30 per cent of earnings, the article notes.

There’s no question that the CPP is on much more stable footing than in years past. The giant CPPIB fund, as of mid-2018, had $366 billion in assets and had an investment rate of return of 11.6 per cent, according to a media release.

But the CPP payout, while being improved, is currently quite modest. The maximum monthly amount as of July 2018 was $1,134.17, and the average amount paid out to new CPP retirees was $673.10. The great thing about CPP is that it continues for the rest of your life and is inflation protected.

Most of us will also get Old Age Security payments, which are currently around $600 a month. This is also a lifetime benefit.

What the studies are telling us, however, is that if we don’t have a workplace pension, we need to be saving on our own for retirement. CPP and OAS were designed to supplement your workplace pension and personal savings. Many of us don’t have pensions at work, and a surprising number of us don’t have any retirement savings either.

If you are in that situation, there is still time to take action. If you don’t have a pension at work, you can create your own by joining the Saskatchewan Pension Plan. You can determine how much to contribute up to a maximum level of $6,200 a year.

If you have dribs and drabs of RRSP savings in other places, those can be consolidated in the SPP (up to $10,000 a year).

Not only will SPP invest that money for you, but at the time you want to retire, they’ll convert it into a lifetime monthly pension. By creating your own retirement income base, those helpful government benefits waiting for you in your future will be icing on the cake, rather than the cake itself.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

Dec 24: Best from the blogosphere – Feds want input on how to make retirement more secure

A look at the best of the Internet, from an SPP point of view

Feds want input on how to make retirement more secure

Retirement security is a hard thing to define, particularly if you are not yet retired.

Some imagine it as an upgrade from working – you’ll have more time to do all the things you want, no more slogging away at the office. Others worry if they will have enough savings to fund the kind of life they have now – or even a more austere one.

Workplace pensions are far rarer than they were in decades past, leaving most of us to have to create our own retirement security.

The federal government, reports Wealth Professional, is opening public consultations on the growing problem of retirement security. It wants to take a harder look at pension regulations, as well as (and perhaps, the article says, in light of the Sears pension debacle), “insolvency and bankruptcy laws.”

The consultations want to “improve retirement security for Canadians” by looking at ways to ensure workplace plans are “well funded,” and corporate decisions are better aligned with “pensioner and employee interests.” The government, the article notes, talks about the improvements that have been made to government pensions, such as the OAS and GIS.

We learned recently that Canadians ought to have saved 11 times their salary by the time they are ready to retire. But in an era when workplace pensions are scarce, how can such saving be encouraged? And how do we ensure folks don’t dip into the savings before it’s time to live off them?

If RRSP savings were locked in people wouldn’t be able to withdraw money until they reach retirement age, and at that point, if funds were be converted to an income stream people would be assure of income for life.

A second idea might be to add a voluntary savings component to the CPP; this has been floated before.

Another idea might be to create investment funds for the OAS and the GIS. Right now these benefits are paid 100 per cent via taxpayer dollars. If, as is the case with the CPP, some of the dollars could be diverted to investment funds, maybe that taxpayer portion of future benefit costs could be reduced.

The real challenge is getting people to save more. One can argue truthfully that there are plenty of great savings vehicles out there that just aren’t being fully used. Could the feds offer some new tax incentives to put money away?

It will be interesting to see what the government finds out on this important topic.

If you don’t have a pension plan at work – and even if you do – it’s always wise to put away money for retirement, which will come sooner than you think. The Saskatchewan Pension Plan offers a simple, well-run savings vehicle that is flexible and effective. You decide how much to put away, you can ramp it up or down over your career, and you get multiple options on how to receive a pension when the golden handshake comes. Be sure to check it out.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Dec 17: Best from the blogosphere – Canadians need to save 11 times their salary by retirement

A look at the best of the Internet, from an SPP point of view

Canadians need to save 11 times their salary by retirement

There are many “rules of thumb” in the world of money. One used to be that your rent should equal one quarter of your monthly take home pay. Another used to be that your house should be worth twice your annual salary.

According to research by Fidelity in the US, reported by Market Watch, people should have saved a year’s salary for retirement by age 30.

By age 40, Canadians should have saved three times their salary for retirement. And by “average retirement age,” usually early 60s, Canucks need to have saved 11 times their salary, the article says.

The article tempers the alarm it raises with these high figures by pointing out that they are just guidelines. “Everyone faces different circumstances, and therefore need varying amounts of money by the time they retire,” the article reports. “Some people may choose to rent or pay off a mortgage, while others may not have any housing obligations except for taxes and utilities. Some retirees may want to take more vacations, or have more medical bills to pay, or have intentions with their money, such as an inheritance for their children and grandchildren.”

And don’t forget that the contributions you make towards CPP and a portion of your income tax are retirement savings payments, since you will get a CPP pension one day and likely Old Age Security as well.

That said, Statistics Canada, via the CBC, reports that the average Canadian saves only four per cent of his or her income, and that there was a whopping $683.6 billion in unused RRSP room as of the end of 2011. The article notes that someone saving $2,000 a year from age 25 on would have $301,478 by age 65. That might not be 11 times his or her salary, but it is a pretty good number.

Retirement savings, like losing weight or getting out of debt, is overwhelming when you first set out to do it. But if you start small, and chip away over the years at your target, you will be surprised to see how far you’ve come when the time comes to log out of work for the last time.

If you’re not fortunate enough to have a pension plan at work – and if you do, and have extra contribution room each year – the Saskatchewan Pension Plan is a great way to build your retirement savings. You can start small, or can contribute up to $6,200 per year. You can transfer savings in from other retirement savings vehicles. The money is invested professionally at a very low fee, and when you retire, you’ll have many options for turning savings into a lifetime income stream. Check it out today.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

Dec 10: Best from the blogosphere – Millennials “optimistic” about their finances, yet aren’t big savers

A look at the best of the Internet, from an SPP point of view

Millennials “optimistic” about their finances, yet aren’t big savers

We boomers often fall into the trap of sighing and tutting about the purported problems of our millennial children. This is often the source of snide snickering around the table at major holidays.

But there’s evidence, in the form of Equifax research published in Digital Journal, that the younger generation has a better grasp than we do regarding the dangers of credit and its negative effects on saving. That poll, the magazine reports, shows 82 per cent of millennials are optimistic about their financial future, versus only 73 per cent of the general population.

A big reason for millennial glee is that they are on top of their credit cards. “This younger age group appears to have learned from the misfortune of their older peers. Establishing good credit behaviours at this stage in life and maintaining them will likely serve millennials well as they get older,” the article notes.

Millennial credit scores have gone up in the last decade, while everyone else’s have gone down, the article reports.

Interestingly, the article says 75 per cent of those surveyed save something every month. A surprising 20 per cent “are not saving at all,” the article says. Most (40 per cent) save 10 per cent or less of their income, 26 per cent save 10 to 25 per cent and nine per cent of those surveyed save an astonishing 26 per cent or more of their income.

The millennials are even thinking of retirement, which is certainly not what boomers were thinking about 30 years ago. The poll found 72 per cent of millennials felt “they would be financially comfortable… and the youngest of the millennials were the least likely to (expect to) work into their retirement years,” the survey said.

When pressed, however, the millennials said the things that would be hardest to give up in order to save more were “eating out (33 per cent), morning coffee (13 per cent)… and Netflix (11 per cent).”

It’s great to know that the younger generations aren’t falling into the same mistakes their parents have made. And for those millennials who do try to bank a percentage of their earnings each month for retirement, the Saskatchewan Pension Plan is a great place to start. You can decide how much to contribute, and when, and as one credit-savvy millennial SPP member confided to me recently, you can even make SPP contributions with a credit card and get points! Now there’s a different way of thinking!

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

Nov 26: Best from the blogosphere – The fear of aging

A look at the best of the Internet, from an SPP point of view

The fear of outliving your savings
The old proverb, “live long and prosper,” popularized by Star Trek’s Mr. Spock, may be taking on a new meaning given some recent research.

According to recent research on aging from BMO Wealth Management, the possibility of a very long life, in the late 80s and beyond, is starting to scare Canadians over 55.

BMO found that 51 per cent of those surveyed “are concerned about the health problems and costs that come with living longer.” Forty per cent worry about “becoming a burden for their families,” while 47 per cent worry about outliving their retirement savings.

It’s clear that the spectre of long-term care costs near the end of life is a haunting one for those close to or early into their retirement years.

According to The Care Guide, the cost of long-term care – which is normally over and above the costs of renting a unit in a care facility – can range from $1,000 to $3,000 a month depending where you live in Canada.

That’s a big hit, considering that the average CPP payout in Canada  for a 65-year-old is only about $670 a month (as of July 2018) and the average OAS payment is only about $600. These great programs will help, but you may need to augment them with your own pension or retirement savings.

According to the CBC, citing data from 2011, the average annual RRSP contribution is only about $2,830. The broadcaster says someone saving $2,000 a year from age 25 to age 65 would have a nest egg of more than $300,000 at retirement. That sounds like a lot until you consider living on that for another 20 to 25 years.

A good way to insure yourself against the risk of running out of money is to buy an annuity with some or all of your retirement savings. An annuity will pay you a set amount, each month, for the rest of your life – no matter how long you live. The Saskatchewan Pension Plan not only provides you with a great way to save towards retirement each year you are working. It also provides a range of annuity options; check out SPP’s retirement guide for an overview.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

Nov 19: Best from the blogosphere – Value of offering a pension plan

A look at the best of the Internet, from an SPP point of view

Employers need to help their employees save, says Ontario car dealership
An Ontario car dealership believes they, as an employer, need to play an active role in helping employees prepare for their golden years.

Bruce Dumouchelle is co-president of St. Thomas Ford-Lincoln in St. Thomas, Ont. Speaking to Automotive News Canada he notes that in the old days, retiring long-service employees got “a handshake and a set of golf clubs.”

“I just never felt that was enough,” he tells the magazine. “I felt, as an employer, we have to help employees save for retirement.”

To that end, the magazine notes, the dealership joined the Canadian Ford Dealers’ Pension Plan. Employees now make pension contributions that are matched by the employer, the magazine reports.

Having a pension plan is a great way to attract employees, the article notes.

“Employees feel they have a say over their future. I think the difference between working here and working somewhere else is that when retirement day comes, they’re going to have some money set aside,” Dumouchelle states in the article.

Eight habits are killing your retirement dreams
According to the Boomer & Echo blog, eight bad habits are impacting the retirement savings of Canadians.

First, the article notes, we don’t watch our spending. Second, we “want the newest everything.” Third is our collective need to upgrade, followed by item four, “treating credit card debt as a fact of life and not a hair-on-fire emergency.”

The fifth item is taking on “low-interest debt” to finance assets that depreciate – “weddings, vacations, furniture and vehicles.” Rounding out the list are complacency, putting off retirement savings until “a later that never comes,” and not investing long-term savings, but keeping it all in cash.

“The good news is that it’s never too late to take control of your finances and start saving for retirement. Start by fixing bad habits that have a negative effect on your finances,” the article concludes.

It’s easy to get started on your retirement savings with the Saskatchewan Pension Plan. Visit their site today and see how easy it is to begin putting away today’s dollars for tomorrow’s adventures.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22