Category Archives: Blogosphere

Oct 28: Best from the blogosphere

Canada – still among the world’s top places to retire

Canada – true north strong and free – has been ranked the 8th-best country in the world in which to retire, according to a recent survey by Natixis Investment Managers.

The study, which was reported on in Wealth Professional, covered 44 developed countries, the magazine reports.

“Canada has been ranked eighth among 44 developed countries for retiree wellbeing in the 2019 Natixis Global Retirement Index with an overall score of 77 per cent. It improved its standing by one spot compared to last year by improving in retirement finances and material wellbeing and holding steady in health, though it slipped in terms of quality of life,” the magazine reports.

While the study put Canada’s finances near the top of the list, a couple of warning signs are out there, the magazine reports.

“The ongoing rise in the ratio of retirees to active workers has introduced a risk of old-age dependency — a trend that could impact future generations, particularly women — as well as rising pressure on government services over time. Canada’s financial ranking is also threatened by lower scores for tax pressure and interest rates,” reports Wealth Professional.

In plainer terms, since the number of retirees is gaining on the number of those working, the survey makers felt Canada may see negative impacts on government retirement services in the future.

Canada improved to 21st in the “material wellbeing” category, the magazine notes, but again warned that the current low-interest rate environment is forcing retirement savers “to invest in higher-risk assets, increasing their exposure to volatile markets — something that’s especially concerning for an investor segment that’s less able to recover from possible losses from market downturns,” Wealth Professional reports.

Other future concerns noted in the article are longevity risk – the danger of living to a very old age – and concerns about the climate.

On balance, however, it is nice to see that our many efforts to save for retirement are paying off, in that we live in a country that is one of the best to retire in. Think of that when you’re wrestling over whether or not to direct a few more dollars to retirement savings – at the end of the day, you’re going to be where you want to be, and those dollars will come in handy as future income. The Saskatchewan Pension Plan offers a great way to do just that.

Top 5 things about retirement

Now that we have proof that Canada is a great place to be a retiree, let’s look at some of the great things about being retired in general.

According to The Kerrie Show blog, the best things are:

  • Time to spoil yourself
  • Freedom to choose (as in, what to do)
  • Being financially secure
  • Pursuing your interests
  • Having a busy social life

The blog notes that while some of us may find retirement to be a “strange environment,” and may miss performing “a necessary service” on the job, “one should look at the positive side of retirement… there are many benefits.” Very true, those words.

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

Oct 21: Best from the blogosphere

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

Taking debt to the grave – reverse mortgages catching on

What can you do if you’re old, not working, and don’t have enough income to make ends meet?

Well, according to the Edmonton Journal, one option – if you are also a homeowner – is the reverse mortgage.

“If you’re 55 or older, you can borrow as much as 55 per cent of the value of your home. Principal and compound interest don’t have to be paid back until you sell the home or die. To keep the loan in good standing, homeowners only need to pay property tax and insurance, and maintain the home in good repair,” the article explains.

In the article, Equitable Bank spokesman Andrew Moor says reverse mortgages are a booming market. “We’ve only been in this market for the past 18 months, but applications are jumping,” he states. Moor tells the Journal that he expects the market will grow by a whopping 25 per cent annually. “Canadians are getting older, and there is an opportunity there,” he states in the report.

The article notes that the explosive growth in reverse mortgages demonstrates “how some seniors are becoming part of Canada’s new debt reality. After a decades-long housing boom, the nation has the highest household debt load in the Group of Seven.”

Critics of the growing sector warn there can be downsides. Reverse mortgages “are a high-cost solution that should only be used as a last resort,” the article says, quoting industry experts who worry about the practice.

“When they think of their cash flow, they’re not going to get kicked out of their house, but in reality, it really has the ability to erode the asset of the borrower,” states Shawn Stillman of the Mortgage Outlet in the Journal article.

Another thing that can happen is that your home may continue to appreciate in value during the period of the reverse mortgage – so you will miss out on growth, the article states.

The sector has grown to an incredible $3.12 billion, the article notes. That’s more than double what the balance was on reverse mortgages just four years ago, the story reports. And while reverse mortgages are a relatively small sliver of the overall $12 trillion Canadian residential mortgage pie, the reverse mortgage share is up 22 per cent in the last year, the article reports.

Let’s think of what this means in the overall retirement savings picture. Canadians are grappling with high debt, largely caused by the high price of housing. This debt is a savings restrictor – there often isn’t money left over to put away for retirement. Good workplace retirement plans are scarce. So we shouldn’t be surprised to see some folks, unable to make ends meet on government retirement benefits, having to cash in the value of their homes.

The reverse mortgage trend underlines the need we all have to save for retirement on our own – whether or not we have benefits for retirement via work. The cost of living rarely, if ever, goes down, so money tucked away today and invested over time will be very handy in your costly future. An easy way to get going on retirement savings is through membership in the Saskatchewan Pension Plan. It’s open to all Canadians, and offers low-cost, professional investing to grow your money, and a full-service annuity program to convert those savings into retirement income once you’ve slipped the bonds of work. You owe it to your future self to check them out today.

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

Oct 7: Best from the blogosphere

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

Debt begins to gnaw away at Canadians’ wealth

For the first time since 2008, reports Advisor’s Edge, Canadians’ wealth is in decline.

And unlike 2008, when a global financial crisis routed the markets and shuttered a number of financial institutions, another more insidious factor is to blame this time, at least in part – personal debt.

Advisor’s Edge, citing data from Toronto research firm Investor Economics, reports that “discretionary financial wealth – including deposits, investment funds, and securities holdings – fell by one per cent to $4.4 trillion.”

While the markets had a bad last quarter in 2018 (markets have recovered thus far in 2019), debt is becoming a problem that people have to deal with, the article notes.

“This has translated into a sharper focus by Canadian households in diverting discretionary financial assets toward lowering personal debt with associated adverse impacts for the retail financial services industry,” states Investor Economics president and CEO Goshka Folda in the article.

In plainer terms, financial assets under management are being cashed in to pay down personal debt. Money once earmarked for long-term wealth or savings is going on the credit card or line of credit.

An eye-popping $45 billion of wealth was diverted towards debt repayment in 2018, the article notes.

Worse, Investor Economics predicts slower growth in financial wealth over the next 10 years.

With debt at all-time highs, should we be surprised that people are raiding their savings to cut down on creditor calls? For many of us, our biggest pool of cash is our retirement savings – should we crack into that?

The Hoyes-Michalos website warns that cashing in RRSPs is a very poor strategy, for several reasons. First, the debt-relief site notes, since you are withdrawing tax-sheltered funds to pay debt, the withdrawn funds “will be added to the income you make this year, and you may find that you owe quite a bit more in taxes than you expected. By using the money to solve one problem, you have created a new tax debt once you file your income taxes.”

As well, Hoyes-Michalos notes, when you take out money from an RRSP there is also a withholding tax applied. You won’t get the full amount you want to take out.

Next, the site advises, by “putting your retirement savings toward debt repayment, you will have to start saving for retirement all over again with less time and money to do so.” And if your debt has you in a precarious financial situation, the site notes that “RRSPs are protected in a bankruptcy.”

If your goal is to have your retirement savings in a secure cookie jar that you won’t be able to hack into, the Saskatchewan Pension Plan has a unique feature you should be aware of. Because SPP is a defined contribution pension plan, and not an RRSP, the money you deposit in your SPP account is locked in until you reach age 55, the earliest age you can begin to receive your pension (the latest age is 71). The cookie jar, in a sense, is welded shut until you get that gold watch – these days, that’s probably a good thing!

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

Sep 16: Best from the blogosphere

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

High housing costs are throwing a wrench in peoples’ retirement savings plans

In the good and now gone old days, people finished paying for their mortgages, hit age 65, and then collected their workplace pensions. They also got Canada Pension Plan and Old Age Security – bonus!

But those days appear to be gone.

Research from the Toronto Board of Trade, reported on in the Toronto Star, suggests the old way of doing things is no longer working, especially for big-city dwellers.

The story says that 83 per cent of those surveyed by the Board of Trade believe “the high cost of housing in the (Toronto) area was impeding their ability to save for retirement.”

The story quotes Claire Pfeiffer, a Toronto resident, as saying that she bought her home for $430,000 in October 2007, and it is now worth more than $1 million. But the $1,800 monthly mortgage over the last 12 years has taken up over half of her take-home pay in the period, the article says, leaving her with no money to save for retirement. This, the article says, occasionally keeps her up at night.

There are other factors at play, the story says. “Financial experts say the impact of the region’s affordability challenge extends all the way to the relatively well-off and better-pensioned baby boomers, who are hanging on to big houses longer and sometimes risking their own financial well-being to help their kids,” the article says.

As well, the article notes, “high house costs are set against a backdrop of declining defined benefit pensions, a rising gig economy and record household debt.”

The article notes that only about 25 per cent of today’s workers have a workplace defined benefit pension, “the kind that offers an employer-guaranteed payout,” down from 36 per cent from “10 years earlier.” Coupled with the reality that pension benefits at work are less common is the reality of today’s high debt levels. Quoted in the article, Jacqueline Porter of Carte Wealth Management states “more and more Canadians are retiring with a mortgage, which 30 years ago would have been unheard of. People are retiring with debt, with a mortgage, because they just didn’t plan very well.”

She concludes by saying the notion of “Freedom 55… is out the window.”

Michael Nicin of the National Institute on Ageing states in the article that while debt and high housing costs are definitely restrictors for retirement savings, human behavior needs to change. He thinks automatic savings programs are an answer, the article notes.

“Most people in general don’t consider their future selves multiple decades in advance. They’re more concerned about current priorities — getting ahead, staying ahead, buying a home, going through school, daycare, kids’ education,” he states.

The takeaway here is quite simple – you’ve got to factor retirement savings into your budget, and the earlier you start, the better. Any amount saved and invested today will multiply in the future, and will augment the income you get from any workplace or government program. You need to pay yourself first, and a great tool in this important work is membership in the Saskatchewan Pension Plan. You can start small, and SPP will help grow your savings into a future income stream. Be sure to 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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Sep 9: Best from the blogosphere

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

Three things we can all do to boost our savings: Motley Fool

If you’re just getting on the Retirement Savings train – or if you’re packing up your desk for the last time and getting ready for the main event of retirement – the Motley Fool Canada offers three tips on how you can improve your retirement savings.

According to an article posted on Yahoo! Finance Canada, the tips are billed as something “every single Canadian can do to help prepare themselves for a smarter, happier, and richer life in retirement.”

The writers at Motley Fool point out a fact that many of us tend to ignore – “the only way to consistently save money is by spending less, on average, compared to what you earn.” So if you are, for instance, earning $2,500 a month but spending (thanks to credit cards or lines of credit) $3,000 a month, you are in trouble.

The article says that the best way to ensure you are running your ship of state in the black is by preparing a budget, and sticking to it. The budget should not only include your usual repeat monthly items like rent, light, heat, gas, and other bills, but should factor in money for your vacation and other one-time events, the article says.

With budget in hand, the article recommends, you can follow savings tip number one – to “set aside at least 10 per cent to pay yourself at the end of every month or after each paycheque.”

By paying yourself first, you will grow your savings quickly and efficiently, the Motley Fool observes.

The second tip on offer is to “use Canada’s tax-incentivized savings programs to your benefit,” the article states.

The article cites the availability of the RRSP program, pointing out that contributions to such programs are tax-deductible. As well, money within an RRSP grows tax-free until that future time when you crack into it for retirement.

The article also notes the existence of TFSAs. While you don’t get a tax break on money you put into these savings vehicles, there’s no tax on investment returns and growth, “including capital gains and dividend or interest income,” the writers note.

The last tip from the Motley Fool Canada is a good one for those of us who invest in stocks.

“By investing in the stocks of high-quality businesses in which you possess a firm understanding — those run by experienced and competent management teams that companies that consistently pay their shareholders a regular monthly or quarterly dividend — investors can go a long way toward avoiding the mistakes that so often challenge those just starting out,” the article states.

Recapping the article, it’s important to include a strong commitment to savings in your budget, to take advantage of tax-sheltered savings programs, and to keep quality in mind when investing for the long term.

A nice addition to your retirement toolkit would be a Saskatchewan Pension Plan account. The contributions you make are, just like RRSP contributions, tax-deductible. You can “pay yourself first” by setting up automatic contributions that go from your account directly to SPP. And the money you earmark for savings is invested at a low fee by a highly competent plan with a strong track record of growth. Win-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

Aug 26: Best from the blogosphere

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

A new snag for retiring boomers – helping the kids buy a house

Troubles for the poor old boomers continue to mount.

Not only are they carrying more debt into retirement than ever before, prompting some to work longer than they planned, but they also want to help their kids. A new survey carried out by the Leger group for FP Canada finds that nearly half of boomers with kids under 18 intend to help them buy a home, even if it postpones their retirement.

The survey is covered in a recent Advisor’s Edge article. The Housing Affordability Survey found that “48 per cent of these parents intend to help their children buy a home, up from 43 per cent of parents surveyed in 2017,” Advisor’s Edge reports.

As well, 39 per cent of those surveyed “expect to postpone their retirement to help their kids buy a home,” which is up from 27 per cent two years ago, the article notes.

The reason for a delayed retirement may be that 30 per cent of respondents planned to dip into their retirement savings to help the kids, up from 21 per cent in 2017. As well, 26 per cent said they would tap into their own home equity to aid the children, up from 23 per cent a couple of years ago.

Thirty-four per cent, the article notes, report that “the financial strain of helping their children” is creating problems with their ability to pay down debt. That’s up from 22 per cent in 2017.

“Even though it’s natural to want to help your children, it’s essential to carefully consider the impact on your own financial security before helping with such a huge purchase,” Kelley Keehn, a consumer advocate for FP Canada, states in the article.

This is a great point. More and more retirees are finding that the biggest costs of retirement come near the end, when a growing number of seniors find they need long-term care in nursing homes, a cost that can be quite significant. You want to help the kids, sure, but you must avoid (if you can) the danger of leaving yourself short when you are too old to work, and your savings are beginning to dry up.

The takeaway from this is that our kids are facing a much more expensive life than we have experienced. Of course they will need some help. That’s a good reason to increase your own commitment to your retirement savings. If you have a little more income in retirement, why, you will have a little bit more to help the kids, right?

An easy way to prevent being short on cash in retirement is to join the Saskatchewan Pension Plan. The money you put away now, while you’re working, will grow into a future stream of income that will supplement whatever you get from government pensions, workplace retirement programs, equity, and so on. It’s a wise step to take!

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

Aug 19: Best from the blogosphere

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

What if the boomer retirement wave is a trickle, rather than a tidal wave?

We all seem to feel pretty certain that any time now, an unprecedented wave of boomer retirements (some call it the silver tsunami) will wash ashore, overloading the system and causing all kinds of problems.

Financial author and MacDonald-Laurier Institute fellow Linda Nazareth isn’t so sure.

Writing in the Globe and Mail, she likens concerns about this upcoming boomer retirement wave to “almost an urban legend.”

She says many speculate that “shortages of workers will be the bane of every industry,” and “younger workers will finally (finally!!) get to experience what it’s like to be in a seller’s market. After all, every day that huge generation gets older they are collectively getting a day closer to the golf course and out of the office.”

However, there may be a few facts getting in the way of this great story, she writes. A recent study by the OECD, Nazareth notes, suggests “there are factors at play that will keep older workers in the workforce and that will go a long way toward offsetting the impact of population aging in most developed countries, including Canada.”

The OECD research noted, she writes, that many countries, including Canada, have done away with mandatory retirement ages. Getting rid of those old rules – here it used to be retirement by age 65 – led to a “10.9 percentage point increase in the labour force participation rate… of those between 55 and 74 between 2002 and 2019,” she explains.

The OECD, Nazareth explains, chalks up the increase in older workers to “rising life expectancy,” the fact that people are living (and thus working) longer, and “educational attainment,” the idea that better-educated workers can stay on the job longer.

So instead of a “silver tsunami,” Nazareth says the OECD data suggests that the number of older people in the workforce should actually begin to increase “by 3.4 percentage points through 2030 for the median (OECD) country.” Japan will see a startling 11.5 per cent increase in older workers by 2030, at the lower end, Germany will see a fall of 2.5 per cent in the same timeframe.  Canada should see the older worker participation rate dip by 1.7 per cent by 2030.

Nazareth concludes from the OECD data that the long-expected explosion of boomer retirements is being delayed by “longer lifespans… and higher education levels.” Another factor, she explains, is that while older folks may be working longer, they may tend to be doing so “on contracts or in part-time jobs.” Nonetheless, she concludes, “the rush to the golf greens may be a little slower than expected.”

These conclusions sure seem to line up with what those of us of a certain age – let’s say 60 – are seeing. Those of us with good workplace pensions are leaving or planning to leave the workplace, those without intend to keep working. Many are working or consulting into their 70s.

One great way to ease the transition from working to not working is to augment any workplace pension you may receive with personal savings. A great place to park your hard-earned retirement dollars is the Saskatchewan Pension Plan, which offers professional, low-cost investing, an enviable track record of growth, and best of all, many options at retirement to turn your savings into lifetime income. Be sure to click on over to 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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Aug 12: Best from the blogosphere

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

Data expert proposes boosting CPP payouts, given lack of pensions in the workplace

Writing in the Journal Pioneer, columnist Don Mills reveals a surprising fact – the current maximum payout for the CPP is well below the poverty level.

Mills begins his op-ed piece by noting that increased life expectancy leads to a question – are Prince Edward Islanders “financially prepared for retirement?”

He then observes that only 34 per cent of the workforce in Canada “has employer-sponsored pensions,” with that number dropping to 30 per cent in his native PEI.

“The rest of Canadians must save for retirement or depend on the Canada Pension Plan (CPP) and/or Old Age Security (OAS). While CPP is healthy in terms of sustainability at current payouts, it’s only available to those who have contributed to the plan – and maxes out at $1,100 per month. Without other resources, those relying on CPP and/or OAS are facing a life of poverty or a significantly diminished standard of living,” writes Mills.

He notes that the general “rule of thumb” for retirement is that you should have income that equals 70 per cent of what you made at work. “If a household’s income leading up to retirement was $100,000 per year with two incomes, $70,000 is needed after retirement to maintain current standards,” he explains in the piece. But given the relatively modest payout of CPP, Mills notes that “a two-income household with no other retirement savings would receive less than $30,000 from CPP and have a $40,000 shortfall to maintain previous standards of living.”

He notes that while defined benefit pension plans are still common in the public sector – the type of plan that provides “guaranteed payouts that increase with inflation,” only large private sector companies have such plans. The rest, he says, have defined contribution plans which don’t guarantee a set payout (the amount contributed is what is defined, not the payout), if they have any plan at all.

“Few small- or medium-sized companies have the capacity to fund pension plans for employees – meaning only 25 per cent of those who work in the private sector have a pension. The percentage with a defined benefit (inflation protected) plan has decreased from 61 per cent to 40 per cent in the past 10 years,” he explains.

Mills says that the government needs to take steps to ensure that those without indexed DB plans also get some income guarantees in retirement.

“The federal government must commit to substantially increasing CPP payouts by committing tax revenue to this purpose, the same way taxpayers help fund public sector pensions. This includes increasing the contributions by those working and from the federal government by allocating more taxpayer money for that purpose to the CPP and OAS. At minimum, the government should guarantee a retirement income at least above the poverty line in Canada – currently $20k for an individual and $28k for a couple in P.E.I., where 10 per cent of residents currently live below the poverty line, according to the latest census,” he writes.

Mills’ column underscores the little-known fact that benefits from CPP and OAS are modest – and that if that’s all you have to live on when you retire, it is going to be tough sledding. There is also the Guaranteed Income Supplement for low-income earners which helps those without savings or workplace pensions.

Mills is correct – more and more people lack a workplace pension and must depend on CPP and OAS, which were never really designed to be the main source of retirement income, but were considered supplemental income. When these programs were launched in the 1960s, most workplaces offered pensions; as Mills notes, nearly two-thirds of workers don’t have such coverage today. This is a problem that could lead to future senior poverty.

If you don’t have a workplace pension, or want to supplement it on your own, an excellent do-it-yourself product is available through the Saskatchewan Pension Plan. You decide how much you want to contribute, and they’ll invest it for you – efficiently and at a low cost – so that your savings grow as you approach retirement. Then, they have a wide array of options for you to convert those savings 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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22