Interviews

Your retirement income may flow from many different streams: Sheryl Smolkin

July 29, 2021

We got a chance to catch up recently with Sheryl Smolkin, the original Save with SPP writer who has had a long career as a pension lawyer, a magazine editor, and a freelance writer/blogger.

Speaking over the phone from her Toronto home, Sheryl explains that because she worked at a variety of jobs over her working years, her retirement income comes from a variety of different streams.

She was Canadian Director of Research and Information at a global consulting firm for 18 years. Later, she became editor of Employee Benefit News magazine for four years, and subsequently she turned her talents to freelance writing. Sheryl played a pivotal role in setting up the Saskatchewan Pension Plan’s (SPP) social media efforts, including the Save with SPP blog that she pioneered.

When she left consulting, she received a defined benefit pension and retiree health insurance, she explains. As a result, she and her husband have retirement income from an employment pension, government benefits, and other registered and un-registered savings, including SPP. They have been “drawing down” income from various streams since their mid-50s.

Sheryl says she regularly transferred $10,000 annually from her RRSP to SPP over the years. When she reached 71, she looked at her SPP options and decided on the prescribed registered retirement income fund (PRRIF) to draw down her savings. With that option, she will cash out the Canada Revenue Agency (CRA) required minimum amount from her account each year.

So, she says, while some folks (including this writer) might think that 71 is a sort of magic age when all retirement savings gets converted to retirement income, that’s probably not the case for many people.

“My recommendation is always this,” she explains. “Everybody worries about having enough money in retirement; but the real worry is, are you going to have enough time” to spend it. “Enjoy spending the money – there are very few people who actually run out of money.”

She’s been busy since she wrapped up her writing work for SPP back in 2018. In the pre-COVID era, she took courses at Ryerson University, took care of her aging mom who passed away in 2019, visited the kids and her granddaughter in Ottawa, and went to every sort of live theatre, music performance or other show on offer. “We were having a lot of fun before COVID,” she says, and that will resume now that the pandemic appears to be winding down.

Her husband, a “serial hobbyist,” has not slowed down on his woodworking during the pandemic. She has taken advantage of the quiet period to catch up on her reading.

Sheryl does not hanker for a return to the workforce. When she left her consulting position in 2005, she notes, “I was NOT ready for retirement, but by 2018, it was time.”

She says however, that occasionally she does “miss the satisfaction of producing a piece of work, and seeing it online or in print – creating.” With her job at the magazine, there were a lot of conferences and travel, which she liked – but recalls that at one conference, she also agreed to produce a daily newspaper which was particularly hectic.

Fun is a central theme in talking to Sheryl. She says it is very important to have fun in your retired life. “Everyone has something they want to do, but the beauty of it (retirement) is that you don’t HAVE to do anything, if you don’t want to,” she says.

These days, she is anticipating getting involved “in the rhythm of the year” again through visits with friends and family. She looks forward to resuming “long distance travel” again once things are safe. Until then, “I’m excited to be able to go back to Stratford, back to the Shaw Festival, and other Canadian destinations.”

Sheryl says retirement really consists of three phases – the early stage, the mid-stage, and the later stage.

“Don’t be afraid to spend money in the earlier, more active stage of retirement,” she advised. “There will be less travel and shopping as you get older.”

She is glad that the SPP has provided one of her retirement income streams. “I think it’s a very good program,” she says. “For us, SPP is part of a bigger overall plan, which has both registered and unregistered components.”

So retirement income is a river fed by multiple income streams – we thank Sheryl for that lovely, and very evocative image. She says hi to everyone at SPP in Kindersley, and we all thank her very much for her time and wish her continued happiness in her life after work.

Need to add a good stream to your future retirement river? Consider joining the SPP. It can augment the income you’ll receive from workplace and government plans, and the best part is that you can now contribute up to $6,600 a year – and can transfer in up to $10,000 a year from other RRSPs. 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.


Saying a fond farewell to SPP’s Executive Director, Katherine Strutt

June 24, 2021

After nearly 31 years of service, the Saskatchewan Pension Plan’s Executive Director, Katherine Strutt, starts her “life after work” July 31.

Over the phone from Kindersley, Strutt tells Save with SPP that she has seen “a lot of changes” over her decades of working for the plan.

“When we started in 1990, we didn’t all have our own computers and the secretaries, as we called them then, did the typing. It was quite a revolution when we got our own computer,” she adds. “We kept the same number of people, but the computer changed how we did things.” SPP was an early adopter of having a toll-free number for members, and Strutt says it is still very important for the plan to have “that human touch” when members contact them with questions. “They tell us that it is so nice to have a person to talk to on the other end of the line,” she says.

A key change along the way for SPP was raising the contribution ceiling from the old $600 back in 2010, to $6,600 today. That was a “game changer” in terms of growing the plan’s assets, she says. Similarly, moving to pre-authorized contributions years ago allowed members – who had tended to make contributions at the February deadline – to spread contributions out throughout the year.

Over the years, SPP “grew, and grew well – we had very good investment earnings, and a lot of loyalty from our members,” she says. She has high words of praise for the team at SPP. “It’s a good solid team… a good bunch of people with some really good synergies,” she says.

Strutt says she takes great pride in the improvements SPP has made in outreach, via the web and social media. “That has been gold for us,” she says. Having a great website, videos, e-updates, and “leveraging the use of social media has helped make us a leader” in outreach and communications, she explains.

A more recent achievement Strutt looks upon with pride is the introduction of the Variable Benefit, a program that lets a retiree keep his or her money within SPP at retirement, with income being gradually drawn down, much like a registered retirement income fund (RRIF) operates. “This benefit has been very well received,” she says, and while it is currently only available to Saskatchewan residents Strutt is hopeful it will be rolled out to members in other provinces soon.

Another growing effort has been outreach to businesses, with the goal of having them offer SPP as their company pension plan. “Having a pension plan is a big benefit to a small business, and with SPP, they can offer a pension plan no matter how small a business they are. It’s a great way to retain, and attract people,” she says.

SPP has always been about delivering a pension savings program to those who wouldn’t have one otherwise. The plan initially was aimed at homemakers, but gradually expanded its reach. Today SPP has, according to its 2020 annual report, $528.8 million in assets under management, and more than 32,000 members.

That growth speaks to the success SPP has had bringing pensions to those who otherwise wouldn’t have them. “The whole point is being able to save at a reasonable cost, and to offer the pooling of risks,” she explains. With SPP, all contributions are pooled together and invested, which lowers the investment cost, lately to about 85 basis points or less. And with a rate of return exceeding eight per cent since the plan’s inception 35 years ago, the strategy is a winning one, Strutt says.

And SPP is more than just a retirement saving vehicle. Through e-updates, presentations, and other outreach a goal is to build up the financial literacy of plan members, she says.

Strutt – already active with several service clubs – doesn’t plan to slow down much in retirement. She’ll have more time to farm, with her husband, their farm near Kindersley. There’s a son to visit in Finland, a daughter in Nova Scotia, and a spry, 92-year-old mom in B.C. – so travel is in order, she says.

“When I started in November 1990 I was so pleased to be given the opportunity,” she says. “It has turned into a 31-year career. I’m proud to have been part of such an innovative program, one that is a made in Saskatchewan success story.” She says she is excited for incoming Executive Director Shannan Corey, who will benefit from “a really great staff” at SPP. “I’m looking forward to positive things coming out of SPP – I feel I’m leaving on a really good note,” she concludes.

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.


OAS still doing the job, says CCPA economist Sheila Block

May 27, 2021

Recent changes to the federal Old Age Security (OAS) program, including two one-time extra payments of $500, and a plan to increase the program’s payout by 10 per cent for those 75 and over, shouldn’t impact Ottawa’s ability to sustain the program.

So says Sheila Block, chief economist for the Canadian Centre for Policy Alternatives (CCPA), Ontario branch.

On the phone to Save with SPP from Toronto, Block notes that unlike the Canada Pension Plan (CPP), OAS isn’t funding through contributions and investment returns like a private pension plan – it’s a government program, paid for through taxation. So, she says, if planned changes go ahead there is “absolutely… the capacity for the government to afford it.”

While OAS is a fairly modest benefit, currently about $615.37 per month maximum, Block notes that it has an important feature – it is indexed, meaning that it is increased to reflect inflation every year.

“This acknowledges that a lot of retirees’ pension plans are not indexed,” she explains, or that they are living on savings which diminish as they age. An indexed benefit retains its value over time.

Many people who lack a workplace pension and/or retirement savings will receive not only the OAS, but also the Guaranteed Income Supplement (GIS), which is also a government retirement income program. OAS and GIS together provide about $16,000 a year, which is helpful in fighting poverty among those with lower incomes, she explains.

“OAS was not designed to support people on its own,” she explains. “And the GIS is an anti-poverty measure that supplements OAS. As we see fewer people with defined benefit pensions or adequate retirement savings, there is an argument to increase OAS, for sure.” But, she reiterates, the OAS is more of a supplement than it is a program designed to provide full support.

As well, she notes, many getting OAS and GIS also get some or all of the CPP’s benefits.

Save with SPP noted that much is made about the OAS clawback in retirement-related media reports. But, Block notes, in reality, the threshold for clawbacks is quite high. The OAS “recovery tax” begins if an individual’s income is more than about $78,000 per year, and you become ineligible for OAS if your income exceeds about $126,000, she says.

A 2012 research paper by CCPA’s Monica Townson, which made the case then that OAS was sustainable, noted that only about six per cent of OAS payments were clawed back.

Citing data from the Canada Revenue Agency, Block notes that today, only about 4.4 per cent of OAS payments are “recovered” through the recovery tax.

We thank Sheila Block for taking the time to talk with Save with SPP.

Retirement security has traditionally depended on three pillars – government programs, like CPP and OAS, personal savings, and workplace retirement programs. If you don’t have a workplace pension plan, you’re effectively shouldering two of those pillars on your own.

A program that may be of interest is the Saskatchewan Pension Plan. This is an open defined contribution program with a voluntary contribution rate. You can contribute up to $6,600 per year, and can transfer up to $10,000 from your registered retirement savings plan to SPP. They’ll invest the contributions for you, and when it’s time to retire, can help you convert your savings to income, including via lifetime annuity options. 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.


No “magic formula” for decumulation, but frugality and realism help retirees: Dr. John Por

April 29, 2021

Recently, Save with SPP got an opportunity to speak with long-time pension expert Dr. John Por, whose 40-year career in pensions includes consulting work with large U.S. and Canadian pension boards and offering expertise on pension risk policy. He has also researched the tricky “decumulation” stage in which savings are turned into retirement income.

Our far-ranging interview covered decumulation, spending in retirement, frugality, advice on saving for retirement, and annuities.

Decumulation

Dr. Por says common mistakes with decumulation – the stage where retirement savings are used to provide retirement income – can include problematic asset allocation, lack of appropriate goal setting, high investment costs and, often, setting a withdrawal rate that’s too high or taking out too much money early in retirement.

So is there a correct withdrawal rate?

“At one point in time, maybe 20-25 years ago, four per cent was said to be the right withdrawal rate,” he explains.

Decumulation “depends on future interest rates, the stock markets, inflation, life expectancy and income needs,” says Dr. Por. A “correct” rate “is therefore unknowable.”

“It depends on the reigning circumstances, both personal and market,” he explains. “Who could have predicted, even five years ago, the current existing zero or the negative real rate of bond returns?”

“The problem is, though we desperately want to find a magic formula, how can you do this – we don’t know how it will be (in the future); no one knows.”

Noting the volatility in the stock markets in just the last couple of years, he notes that “even a Nobel Prize winner professed not knowing where the markets will go in the next 10 years, or how to invest your money after retirement.”

“This, of course, has not kept the retirement or investment industry from providing copious, and often prudent, advice, it simply means that looking for a, or the, magic bullet, or the infallible sage, will not be successful,” he adds.

Spending in retirement

While decumulation carries a lot of unknowns, much more is known about how much retirees actually need, Dr. Por says.

He says research by noted pension actuary Malcolm Hamilton shows that people need far less “replacement income” in retirement than the 75 per cent figure bandied about by the industry. 

Hamilton has for many years said the research suggests not everyone needs to save “heavily” for retirement, because of the existence of government income programs for retirees and lower costs once you are retired. (Here’s a link to a Globe and Mail interview with Malcolm Hamilton.)

Dr. Por agrees, calling an overall 75 per cent rule “misguided.”

“While this may be true for low-income people, they are supported by the above-mentioned government programs, so for them the 75 per cent is not a stretch, people at higher income levels are not likely to need 75 per cent of their earned income to pursue an age-appropriate lifestyle,” he says.

“One of the most important steps to understanding (retirement spending) is… knowing how much money you need to survive,” Dr. Por explains.

Rather than going through “painful” pre-retirement budget forecasting, he recommends a simpler approach.

“How much do you save in a month? If the answer is zero, your retirement budget will be what you spend now, minus what you won’t have to pay in retirement.” This can include things like your mortgage, tax savings when you earn less, childcare and education expenses, Canada Pension Plan and Employment Insurance, and so on. 

It’s a common-sense issue, he says. Individuals must decide “how much is necessary (spending) versus how much you would like to have.”

This knowledge is crucial for retirees, who have extremely limited options in dealing with income shortfalls, he explains. 

Working Canadians needing more money could “work harder – get a job that pays better, spend less, save more, take more investment risks, etc.… but when you are retired, you don’t have the same tools,” he explains.

 “Lifestyle becomes the main tool, you can cut back on your lifestyle (to save money), which is difficult,” he says. “Another tool still at your disposal is taking on more investment risk in retirement, but, if you’re not successful, it would easily lead to a further diminished lifestyle,” Dr. Por adds.

Frugality 

At 74, Dr. Por says he is “still engaged” and “living frugally.”

In this context, he defines frugality as bringing your lifestyle and realistic earning capability (and not your hoped-for future earnings) into a healthy balance. 

Living frugally is a key way to make your money last longer, and also that when in financial trouble, the cutback would be smaller thus less painful. Big expenses in the early years of retirement should be avoided, he says, because you may need your retirement savings for decades. “

While at age 65 it is hard to envisage how long you may live” he explains, “you may easily live beyond age 90.”

For example, he adds, if you are married, “the probability that either you or your spouse will live to age 93 is about 50 per cent. You can live for a very, very long time.” 

Working after retirement is a way to support your retirement spending and to keep your mind active, he says.

“Some people still work part-time after they stop working full time. You don’t realize how important your work is … not that many people spend their time well in retirement,” he says.

“Apart from the income work provides, it also structures your day, can add meaning to your existence after retirement (admittedly not everybody needs it), and equally important, it helps you maintain your links with the outside world and friends,” he says. His observation is that most people (especially men) form the majority of their extra-family relationships through work, and once they retired such contacts tend to fade away over time,” he says.

Dr. Por recommends that everyone consider living frugally at any age; he sees it as a great lifetime habit to get into.

Saving for retirement

While some people suggest you should save for retirement from early in life until the end of your career, Dr. Por says that view isn’t usually realistic.

“You can’t save in your 30s and 40s – you are paying for your kids’ education, your mortgage. So, save what you can, if you can, but (know) you may not be able to,” he advises. “No heroism is called for, as you also have to live a reasonable life.”

The optimum time to save “is in your 50s, and then, you can save 20 to 40 per cent,” he says. By then, “your children will be out in the world, your mortgage is paid… you can save.”

For savers, equities add the most value, but of course, it depends on the environment you happen to fall into. Bonds don’t provide as much income and growth, Dr. Por explains.

Pay close attention to investment fees, he advises. “With exchange-traded funds (ETFs), you can control costs – the management expense ratios are low.” However, financial advisers may not suggest this investment because they can make higher commissions on other products, Dr. Por says.

“Even a fee of one percent can, over 30 years, reduce your available assets significantly,” he says.

What you want to avoid is being forced to sell securities when the market is down, thus Dr. Por likes the concept of having a cash reserve to tide you through periods of market decline. 

“If you take on extra risk… by putting more money into equities, you should also have a cash reserve fund worth three to five years of spending,” he says. If equities perform well, you may wish to extend such cash reserves to cover longer periods. Overall, Dr. Por says, a chief problem with retirement saving is that most people “look at it as an investment issue,” and become focused on today’s investment risks, interest rates, equity return rates, and so on. Instead, you should be thinking about the income your investments will generate when you stop working. 

What’s going on today with investment risks and other factors “is not relevant 30 to 50 years out,” when you will be drawing income from your investments, he advises. Your focus should be on that long term, and not on volatility or return rates in a given year, Dr. Por says.

Annuities

Dr. Por talked about the “annuity paradox”. While financial experts like annuities, most people refuse to follow such advice. Most people shy away from the idea of taking a large lump sum of money – say $1.5 million – and turning it into an annuity that pays $60,000 a year. He noted that when he mentioned the concept to his wife (a highly educated professional, an MD), she refused the idea saying that “… if we die soon for whatever reason the children will get nothing.”

Also, retired people want to have cash available for future expenses, and, not always unreasonably, are afraid of inflation, and the potential extinction of the financial institution, which issued the annuity. 

But, he added, “annuities later in life is a good idea”. When you are getting too old to run your money – say by your late 70s or 80s – that’s the time to consider an annuity, he says. The older you are when you convert to an annuity, the cheaper the annuity is to buy. And today’s low interest rates make the conversion to annuities expensive. “The interesting phenomenon is though”, he added, “that when interest rates were exceptionally high, say in the late 1990ies, people still did not buy annuities, nor did the advisers promote the idea.”

Finally, he noted the importance of discipline. He speaks from experience, and says that had he followed all the major precepts mentioned in this piece, he would be now in a much better financial position himself. “Know your needs, be prudent in your expectations, live frugally, create a plan or direction and stick to it while making adjustments, if needed,” he advises.  

We thank Dr. Por for taking the time to speak with us.

Celebrating 35 years of operations, the Saskatchewan Pension Plan is a full-service retirement plan. SPP will invest the money you contribute, and at the time you retire, gives you the option of converting your invested savings into a lifetime annuity. 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.


Retirement saving “out of sight, out of mind” for many – financial planner Janet Gray

April 1, 2021

Asked if Canadians are paying enough attention to the importance of retirement saving, Janet Gray of Money Coaches Canada has a simple answer. “No,” says the Ottawa-based financial planner.

“It’s always a case of `out of sight, out of mind,’” she explains over the phone to Save with SPP. A lot of people “don’t really look at it (retirement saving) until five to 10 years from their perceived retirement date.”

Some, she says, belong to pension plans and expect those will look after them. Most don’t have such workplace plans.

A key question, then, is whether or not your retirement savings from all sources will be enough, explains Gray. “You need to know your numbers – have you got enough?” she says. Will you be able to cover your costs after work is over?

And your perceived retirement date may change, she explains. Many of us find that poor health, or changes at work, force them to start retirement earlier than they expected. Again, the question for them is will they have enough, she explains.

When it comes to retirement savings, Gray says she has noticed that many have a sort of “all or nothing” mindset on the topic. People are either fully engaged savers, or they aren’t doing anything.

That said, some people are doing well on the retirement savings front.

“I’ve got clients in their 30s, professionals, who are doing well,” she explains. They want to have an enjoyable retirement, and unlike their parents, “they don’t want to work forever.” But not everyone is so organized, especially at a young age, she warns.

“We really need more financial literacy in Canada,” she says. Retirement savings, she explains, is really a case of “pay me now, or pay me later.” As an example, to match the money saved by someone who starts putting away $100 per month in their 30s, a 50-year-old would need to start putting away thousands a month (due to compound growth and early start), she says. And if you can’t do that, “you’re working until a later age than first planned,” she notes.

With retirement savings, “every little bit helps.” The stats show that most people live on average well into their 80s and even beyond, so without some sort of savings plan, you “won’t have as much money as you’d think you would have.”

It takes discipline to save. “Our culture is really hinged on a `spend now, buy now, live now’” theme, she says. People use credit, which works against them. “A $5,000 purchase plus interest on a credit card would take the average Canadian, making the average income of $29 per hour (from Stats Can), 211 hours to pay off,” Gray notes. Before you buy something for $5,000 on credit, remember that it could take 200 hours of work to pay for it, she warns.

So, how do people change their habits?

“The first step is awareness,” she explains. Once you get the need to have savings, “it’s like the old Nike ad – just do it. Starting small, say $25 a pay, is a good way, because once you’ve started and the money starts to pile up, you will be able to say to yourself “this is working!” and then keep doing it–or more, she says.

There are so many thousands who never take that first step, she says. Many have high levels of debt, which “holds people back so much,” she says, but even if you are restricted by debt you need to set aside what you can for retirement. The biggest mistake people make, therefore, is never getting started on retirement savings, she says.

We thank Janet Gray for taking the time to speak with us. Check out her Facebook page.

Starting small, and making automatic contributions, is something the Saskatchewan Pension Plan can help you with. SPP contributions can be made via automatic transfers from your bank account, and you can choose to increase those contributions when you earn more, or owe less. 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.


Research suggests many should take CPP, QPP later – and use RRSPs to bridge the gap

February 25, 2021

Are Canadians doing things backwards when it comes to rolling out their retirement plans?

New research from Dr. Bonnie-Jeanne MacDonald of the National Institute on Ageing at Ryerson University suggests that in some cases, we are putting the cart before the horse when it comes to our Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) benefits.

Save with SPP spoke by telephone with Dr. MacDonald to find out more about her research.

In her paper, titled Get the Most from the Canada and Quebec Pension Plans by Delaying Benefits, Dr. MacDonald notes that “95 per cent of Canadians have consistently taken CPP at normal retirement age (65) or earlier,” and that a mere one per cent “choose to delay for as long as possible, to age 70.”

This, she writes in the paper, can be a costly decision. “An average Canadian receiving the median CPP income who chooses to take benefits at age 60 rather than at age 70 is forfeiting over $100,000 (in current dollars) of secure lifetime income.”

She tells Save with SPP that tapping into your (registered retirement savings plan) RRSP and other savings first, as a bridge to a higher CPP or QPP later, can make a lot of sense. “Rather than holding on to the RRSP, why not use the RRSPs sooner and CPP later,” she explains.

Even waiting one year – taking CPP or QPP at 61 instead of 60 – means you will get nearly 12 per cent more pension for life, she says. The longer they wait to start CPP, the more they get – about 8.2 per cent more for each year after age 65, Dr. MacDonald explains.

If you go the other route, and take your government pension at 60, “you don’t know what your savings will look like at 70,” she notes. As well, those savings may be harder to manage when you are older, especially if you are “drawing down” money from a registered retirement income fund (RRIF).

Many people, she notes, worry that taking government benefits at 70 is too late, and that they will potentially die before getting any benefits. Most people who are in good health will live long beyond age 70, she says; the data shows that only a small percentage of Canadians don’t make it past their 60s.

Dr. MacDonald notes as well that the retirement industry tends to help people save, but doesn’t help them on the tricky “decumulation,” or drawdown phase. It would be akin to having an adviser set you up with skis, boots, poles and bindings, and deliver you the top of the ski hill – where you would be on your own to figure out how to get to the bottom, she says.

While “Freedom 55” was a popular concept in decades past, the data shows that the retirement age is creeping back up to age 65 and beyond, she says.

“Finances… are part of the reason why people are retiring later,” she explains. Pension plans are less common these days, and not all of them still offer an early retirement window. Few offer incentives to late retirement, she adds.

Her paper concludes that Canadians – and the financial industry that advises many of them – need to rethink the conventional idea of taking CPP or QPP as soon as possible in retirement, and then hanging onto RRSPs until it is time to RRIF them up the road.

“Despite wanting and needing greater income security, Canadians are clearly choosing not to delay CPP/QPP benefits, thereby forfeiting the safest, most inexpensive approach to get more secure retirement income,” she writes. By showing, through the Lifetime Loss calculation, that Canadians can lose out on $100,000 of secure retirement income, the hope is that the industry and policymakers will begin to rethink how they present retirement strategies to Canadians, the paper concludes.

We thank Dr. Bonnie-Jeanne MacDonald for taking the time to speak with Save with SPP.

Celebrating its 35th year, the Saskatchewan Pension Plan (SPP) has a long tradition of building retirement security. SPP is flexible when it comes to paying out pensions – you can start as early as 55 or as late as 71. Check out SPP, it may be the retirement solution you are looking for.

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.


Now is the time to act on boosting retirement security: C.A.R.P.’s VanGorder

January 14, 2021

For those of us who aren’t yet retired, it’s difficult to put ourselves in the shoes of a retiree and imagine what issues they may be facing.

Save with SPP reached out recently to Bill VanGorder, Chief Policy Officer for C.A.R.P., a group that advocates for older adults, to find out what it’s like once you’re no longer working.

For a start, says VanGorder, all older people aren’t set for life with a good pension from their place of work. In fact, he says, “65 to 70 per cent of those reaching retirement age don’t have a (workplace) pension.”

As a result of that, most people are getting by on income from their own retirement savings, along with government benefits like the Canada Pension Plan (CPP), Old Age Security (OAS), and the Guaranteed Income Supplement (GIS).

“Politicians don’t understand what it’s like to live on a fixed income,” VanGorder explains, adding that any unexpected expenses hit those on a fixed income really hard. Right now in Nova Scotia C.A.R.P. is trying to stop plans to end a longstanding cap on property taxes – a move that would hit fixed-income folks the hardest.

In removing the cap, the province has suggested it would “look after” low-income seniors, but VanGorder points out that retirees at all levels of income are on fixed income. “It’s not just low-income earners… everyone would be hit by this,” he says.

It’s an example of how older Canadians seem to be overlooked when the government is writing up new public policies, VanGorder says. When the pandemic struck, all that older Canadians were offered was a one-time $300 payment, plus an extra $200 for the lower income group, he notes. Meanwhile younger Canadians were eligible for Canada Emergency Response Benefit payments of $2,000 per month, there were wage subsidies and rent subsidies for business, and more.

Older Canadians “feel they’ve seen every other part of the country get more economic assistance,” he explains. That’s because there’s a misconception that older Canadians “are already getting stuff… and are being looked after.”

“Their cost of living has gone up exponentially,” VanGorder says, noting that many services for seniors – getting volunteer drivers, or home support visits – have been curtailed for health reasons. These changes lead to increased costs for older Canadians, he explains.

C.A.R.P. is looking for ways to keep more money in the pockets of older people. For example, he notes, C.A.R.P. feels that there should be no minimum withdrawal rule for Registered Retirement Income Funds (RRIFs). “It’s unfair to force people to take their money out once they reach a certain age,” he explains. “A lot of people are retiring later (than age 71).” He notes that since taxes are paid on any amount withdrawn anyway, the government would always get its share eventually if there was no minimum withdrawal rule.

Another argument against the minimum withdrawal rule is the increase in longevity, VanGorder says. Ten per cent of kids born today will live to be over 100, he points out. “We’re adding a year more longevity for every decade,” he says.

C.A.R.P. is also pushing the federal government to move forward with election promises on increasing OAS payments for those over age 75, and to increase survivor benefits. While the feds did improve the CPP, the improvements will not impact today’s retirees; instead they’ll help millennials and younger generations following them.

Another area of concern to C.A.R.P. on the pension front is the rights of plan members when the company offering the pension goes under. “C.A.R.P. would like to see the plan members get super-priority creditor status,” he explains. That way, they’d be first in line to get money moved into their pensions when a Nortel or Sears-type situation occurs.

He notes that Canada is the only country with government-run healthcare that doesn’t also offer government-run pharmacare.

VanGorder agrees that there aren’t enough workplace pensions anymore. “Canada doesn’t mandate employers to offer pensions, making (reliance) on CPP and OAS more critical than it is in other countries,” he explains. The solutions would be forcing companies to offer a pension plan, or greatly increasing the benefits offered by OAS and CPP, he says.

“If we don’t start fixing it now, we are going to end up with a horrible problem when the millennials start to retire,” VanGorder predicts. Now is the time to act on expanding retirement security, he says. “They always say the best time to plant a tree is 20 years ago,” he says. “But the second-best time is today.”

We thank Bill VanGorder for taking the time to speak to Save with SPP.

Don’t have a pension plan at work? Not sure how to save on your own? The experts at the Saskatchewan Pension Plan can help you get your savings on track. SPP offers a well-run, low-cost defined contribution plan that invests the money you contribute, and provides you with the option of a lifetime pension when work’s in the rear-view mirror. An employer pension plan option is also available. See if they’re right for you!

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.


U.S. research warns of retirement’s hidden costs – housing and long-term care

November 26, 2020

Is retirement really a gilded life at the end of a rainbow of work?

Not necessarily, says a new research paper from the National Institute on Retirement Security (NIRS) in the U.S., titled The Growing Burden of Retirement . The paper warns that unexpected costs may prove daunting when we’ve reached the after-work stage of life.

Save with SPP reached out to Tyler Bond, one of the authors of the NIRS report, to find out what else the research discovered.

“A lot of people still go into (retirement) with the `golden years’ in mind; they are going to live off their nest egg, travel, they now qualify for Medicare, and they’ll visit their grandkids,” he explains.

But near retirees should also be thinking about any debt they may be carrying into retirement, such as mortgages. “If you own your home, is it paid for?” he asks. “Do you have any health concerns that might cause you to need long-term care? For me, the most important finding of this report is for people to see there is a wide range of outcomes in retirement,” he tells Save with SPP.

As in Canada, “the lack of (retirement) savings has been a problem in the U.S. for a long time,” says Bond. “Fifty per cent of working Americans don’t have access to a retirement savings plan at work, and all the data points to the fact that people are significantly more likely to save for retirement via a plan at work.”

Bond believes “improving access to workplace retirement plans is an essential first step.”

South of the border, 12 states have taken this bull by the horns and have started their own pension plans for those without workplace pensions. These “state-facilitated retirement savings plans” are being rolled out in California, Illinois and Oregon, Bond says, and Colorado and Pennsylvania are expected to follow suit shortly.

Employers set up their employees for automatic payroll contributions, but the employers don’t contribute. The state plans feature “auto-enrolment,” meaning employees get signed up automatically with a right to opt out if they want. Other features include “auto-escalation” of contributions, Bond explains. Most plans start with a five per cent contribution which is gradually ramped up over time to eight or 10 per cent, he explains.

Another great feature liberates people from the tricky decision of choosing what to invest their money in. Most plans place the first thousand dollars in a money market fund and then switch it over to a target-dated fund.

And the plans help turn the savings into retirement income, the “decumulation” phase. “There will be help with decumulation,” Bond says. “The idea is to come up with some way to annuitize the savings,” converting the saved dollars to a lifetime income stream, he explains.

“All these automatic features make it easier for people, easier for them to save, so we are hopeful (the state plans) will adopt these features,” he explains. There has been talk of launching a national version of these “auto-IRA (individual retirement account)” plans, Bond adds.

The new plans are reminiscent of older defined benefit (DB) plans that were “dominant” in the U.S. years ago. Those plans had similar “easy” enrolment and contribution, and looked after investment and decumulation too.

“In the last 30-40 years, defined contribution (DC) plans have dominated in the private sector,” Bond explains. But these plans didn’t all feature contribution increases and don’t always help with the drawdown, retirement income stage. “Over the next decade we will probably see more innovation in the DC space,” says Bond.

Making savings easier is part of the solution, but so is understanding the retirement spending side, Bond explains. “That’s definitely part of it,” he agrees. People “don’t know how to spend their money over the course of a long retirement – the rest of their lives – and all the challenges associated with it.”

“You don’t know how long you’re going to live – 20, 25 years? More? Will you need long-term care, or will your spouse? There’s an assortment of challenges whenever you get to retirement.”

These are issues “that don’t get talked about much,” he says. “Retirement income and retirement costs are not brought together a lot.” The number of Americans carrying mortgage debt into retirement “has significantly increased” over the past decades, and those who are renting are also experiencing cost increases.

Long-term care in the U.S., as in Canada, is very costly. While some citizens qualify for lower-cost long-term care if they qualify for Medicaid (a program for people with low incomes and savings), the rest have to pay many thousands per month for care.

While long-term care insurance exists, it is expensive – mainly because those buying it tend to be those most likely to need it. One state – Washington – is looking at a “social insurance model” for long term care, a state-run program that would help citizens with long-term care costs. Citizens would contribute 58 cents on every $100 of earnings towards this program, he explains. “A social insurance model (for long-term care coverage) is the best way to go… a system where everyone pays a little bit, versus private insurance.”

We thank Tyler Bond for taking the time to speak with us.

If you don’t have a workplace pension plan – or you want to supplement the plan you have – the Saskatchewan Pension Plan may be the program for you. SPP is defined contribution plan. You can contribute up to $6,300 a year (indexed annually) towards your future pension; SPP will look after your investments and will convert your savings to income once you’ve reached retirement age. Employers are able to offer SPP as a workplace pension. Why not check SPP 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.


Start early and work the tax system in your favour, says Gordon Pape

October 1, 2020

Gordon Pape is one of Canada’s best-known authors and commentators on investing, retirement and tax issues. Save with SPP reached out to him by email to ask a few questions about our favourite topic – saving for retirement.

Q. What are the three most important tips you can provide on saving for retirement?

A. Create a savings plan and stick to it. To do that, make sure it’s realistic. To maximize the odds of success, set up an automatic monthly withdrawal at your financial institution, with the proceeds going directly into a pension plan, Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA).

  • Start as early as possible. Let the magic of compounding work for you for as many years as you can. If you invest $1,000 for 20 years with a five per cent average annual return, it will be worth $2,653.30 at the end of that time. After 40 years, the value will be $7,039.99.
  • Use the tax system to your advantage. All RRSP and pension contributions within the legal limit will generate a deduction that will lower your tax bill. Contributions to Tax-Free Savings Accounts are not deductible, but no tax is assessed on withdrawals.

Q. Given today’s markets, are there any things you think people should be doing differently with their retirement investments?

A. This is a very difficult environment in which to invest because of the uncertainty related to the pandemic and the time it will take the economy to recover. In these circumstances, I advise caution, especially with retirement money. Aim for a balanced portfolio (typically 40 per cent bonds and cash, 60 per cent equities). Dollar-cost average your stock or equity fund investments over time. Always have some cash in reserve to deploy in market corrections.

Q. Given what seems to be a lack of workplace pension plans in many job categories, is saving for retirement more important than ever before?

A. It has always been important but it’s especially so if you do not have a pension plan (most people in the private sector do not). Few people want to scrape by on payments from the Canada Pension Plan (CPP) and Old Age Security (OAS). To enhance your retirement lifestyle, you’ll need your own personal retirement nest egg – and the larger, the better.

Q. Do you think we’ll see more people working beyond traditional retirement age – and if yes, why do you think that is?

A. Absolutely. We’re already seeing that trend. In some cases, the motivation is financial – people simply don’t have the savings needed to quit work. But in other cases, people keep working because they want to. I’m in my 80s and still work full-time. I enjoy what I do and don’t intend to stop until health forces me to. I know a lot of people that feel the same way.

We thank Gordon Pape for taking the time to answer our questions. Be sure to check out his website for more great information.

If you don’t have a workplace pension, or are looking for a way to top up what you are already saving, consider the Saskatchewan Pension Plan. It’s a one-shop, personal retirement plan that you can set up for yourself or your employer can offer it as part of a benefit package. Once you are a member, your contributions are grown via risk-controlled, low-cost investing, and when it’s time to receive the gold watch, you can choose from a variety of retirement income options including life annuities. Consider checking 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.


Canadians stressed about money, financial buffers can help: FP Canada’s Kelley Keehn

September 10, 2020

FP Canada recently released their annual 2020 Financial Stress Index. Save with SPP reached out to FP Canada’s consumer advocate Kelley Keehn, a noted financial author and educator, by email to find out about the survey’s results.

Q. Research shows money is number one worry, and that people worry about saving for retirement and debt. Is there a relationship between the two – like, if you are paying down debt you can’t save for retirement, and vice-versa? And maybe also did you find out what people think the consequences are of not having enough for retirement (working forever, a less exciting retirement, etc.)

Yes, money still is the #1 worry. FP Canada’s Financial Stress Index found yet again that people worry more about money than health, relationships or work.

The survey didn’t go into your exact questions, but I can anecdotally state that without a clear financial plan, it’s nearly impossible to figure out complex scenarios like paying down your debt vs. saving for an RRSP (or using the tax deduction to pay down on your debt), etc.  And you’re correct, that the consequences for not having saved enough for retirement means either living with less or working longer.  

Consistent with previous years, in 2020 money is the number one cause of stress for Canadians by a large margin. Money (38 per cent) outranks personal health (25 per cent), work (21 per cent) and relationships (16 per cent) as the top source of stress in Canadians’ lives. This is particularly significant given multitude of non-financial stresses related to the COVID-19 global pandemic.

The 2020 Financial Stress Index also reveals that as Canadians age, they feel less stressed about money – with 44 per cent of 18-to-34-year-olds listing money as their leading concern compared to one-in-four (25 per cent) of those aged 65+.

Q. Putting money aside for an emergency fund is a great idea – we would like to hear a bit more about this, if possible. Are people basically realizing they need to create one for the first time? Or are they moving from having a sort of contingency credit line to having actual savings? We guess it’s because of the pandemic that this is being considered more?

Before the crisis, many stats revealed that 50 per cent of Canadians were just $200 away from insolvency.  I don’t know the current numbers, but one could suggest that it’s much worse now.  And, many people don’t realize that the time to get a line of credit is when you don’t need it (i.e. not after you’ve lost your job). 

A recent Canadian Payroll Association survey revealed that it’s not the amount of income that you earn that reduces stress, it’s the financial buffer that you have.  The problem for younger Canadians is that they haven’t been in their career long enough to save (i.e. student loan debt, getting into a home). 

Q. The financial regrets part is fabulous. We wondered whether “having a better job” might refer to having a job with better benefits (or maybe just better money). We retirees sure wish we had had the brains to try and find a job with a good workplace pension earlier (this writer got such a job in his mid-30s). That sort of thing.

The survey didn’t dig deeper unfortunately.  But people really should think of their career as their fourth asset class. If you’re in a high-risk career like an entrepreneur, your investments should perhaps be less risky.  On the flip side, a professor with tenure likely takes less risk with their investments, but possibly should. It’s essential that your career is part of your financial plan (do you have a pension or not, benefits, etc.)

Q. The number one takeaway from the research – what results surprised you the most, and why?

That Canadians are still not reaching out for help and thus suffering sleepless nights.  We wouldn’t self-diagnose when it comes to our health, nor would we go on a new road trip without the help of Google maps on our phone.  Why do so many Canadians still not reach out to a financial pro like a Certified Financial Planner (CFP)?

We thank Kelley Keehn for taking the time to answer our questions, and her colleague Emma Ninham for setting things up.

Is the Saskatchewan Pension Plan part of your own financial plan? The SPP could serve as your personal defined contribution pension plan, a workplace pension or can supplement any workplace or government pension plans to which you belong. It’s a plan with a long history of successful investing returns at a very low management cost, and has averaged returns of more than eight per cent since inception. Consider checking out SPP as a way to help take the stress out of retirement saving.

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.