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 First, the debt-relief site notes, since you are withdrawing tax-sheltered funds to pay debt, the withdrawn funds “will be added to the income you make this year, and you may find that you owe quite a bit more in taxes than you expected.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

RBC Wealth Management survey sees rising living costs, unexpected expenses, as barriers to wealth for higher-income Canadians

A recent Royal Bank of Canada survey on wealth management, conducted by Ipsos, found there were a few new obstacles that were impeding even wealthy Canadians’ efforts to build wealth.

Save with SPP reached out to RBC Wealth Management to probe a bit more about these obstacles, and to ask if the study’s authors found any other surprises in their research. Their answers are here:

Q. Did the study and its authors find higher levels of debt to be a part of the “cost of living barrier” to building wealth, given the high record of household debt? Helping kids is also mentioned.

The study didn’t specifically ask respondents about levels of debt. After the rising cost of living, the next reasons that ranked highest on the survey were:

  • Unexpected expenses
  • Cost of raising children (survey did not specify what “helping kids” meant)
  • Home prices

Q. The survey says “traditional ways of building wealth” may not be doing the job like they used to. Is this referring to the volatile stock markets and the low-interest environment for fixed income? Are there any thoughts about new types of investment strategies/alternative categories that the study and its authors think could address this?

In the survey news release, Tony Maiorino, Head, RBC Wealth Management Services, says “regardless of income, many Canadians find themselves behind on their wealth goals as many of the traditional ways we build wealth have changed over the generations. With the added backdrop of market uncertainty, clients are voicing their concerns and looking for support using non-traditional methods of meeting their wealth goals.”

Howard Kabot, Vice-President, Financial Planning, RBC Wealth Management Services, elaborates, saying “things like tax strategies, insurance and retirement planning play a key role in building wealth today but I’m not surprised that so many respondents find them challenging. The financial landscape is always evolving and people have less time to research and learn about wealth management topics. Most clients need to explore a variety of tactics through a holistic lens to build and preserve wealth.”

The survey found that 81 per cent of Ontario respondents, 80 per cent of Albertans and 77 per cent of BC residents felt “building wealth now is more difficult than it was in previous generations.” Thirty-eight per cent of BC respondents (vs. 26 per cent for Ontarians and 20 per cent for Albertans) reported experiencing “poor investment performance.”

Q. Did the study indicate when respondents would use the services of a financial adviser like RBC? Did the study turn up any sense that people are having difficulty putting away as much as they would like for retirement, given the high cost of living, lower salaries, and maybe the lack of workplace pension plans?

The study found that three-quarters of higher-income Canadians were confident “they will reach their financial goals before retirement.” However, 41 per cent of the same group said they would “work with a financial expert to invest the money” if they experienced a windfall, such as an inheritance. Advisors might come in handy with things that “challenged” respondents, such as “staying on top of markets” (76 per cent) and “using… strategies to minimize taxes (71 per cent).”

The lack of a pension plan at work was cited by 20 per cent of those surveyed as one of the “unexpected expenses,” like the increased cost of living, raising children, lower salaries than expected and poor investment performance, that was a factor in respondents being less wealthy than they expected.

Q. Where there any other findings that surprised the authors?

The news release noted that it was surprising that respondents found it challenging to understand financial topics but still felt confident they would meet their financial goals.

The release noted that “of the 48 per cent of respondents who are not as wealthy as they thought they would be, almost three quarters (73 per cent) believe they will reach their financial goals before retirement.” This optimism seems to be at odds with their confidence when it comes to aspects of wealth management topics, with the majority agreeing the following topics are challenging:

  • Knowing which information to trust (78 per cent)
  • Staying on top of what’s happening in the financial markets (76 per cent)
  • Using tax strategies to minimize taxes (71 per cent)
  • Ensuring they don’t outlive their assets during retirement (70 per cent)
  • Understanding the use of insurance in a financial plan (66 per cent)

If you lack a workplace pension, and need a do-it-yourself solution for retirement savings, consider membership in the Saskatchewan Pension Plan. You can start small and gear up your contributions over time. At retirement, the SPP can convert those savings into a lifetime income stream – you won’t be able to outlive your savings. 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. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Pat Foran’s book offers a wide-ranging look at ways Canadians can save

There’s a lot of meat in Pat Foran’s book The Smart Canadian’s Guide to Saving Money.

The CTV “On Your Side” reporter covers a lot of ground. He starts by asking the rich and the famous about their personal money tips. The late Alberta premier, Ralph Klein, states “never spend what you do not have. It is far better… to put off a purchase for three months until you can afford it than to spend the next six months paying it off.” Don’t, Klein notes in the book, “line the pockets of your bank… line your own!”

Noted financial author David Chilton tells Foran that “as corny as it sounds, what people have to do is stop caring so much about stuff.” He adds that as he gets older “the more I realize that good financial planning is less about the intricate knowledge of the stock market and forecasting future interest rates, and more and more about discipline and not wanting so much stuff.”

And Ben Franklin once said “the borrower is a slave to the lender… be industrious and free; be frugal and free.”

But how to get there?

Foran’s book covers all the bases. Everyone, he writes, needs to track their expenses. “The most important thing you can do is monitor the amount of money that is flowing in and out of your life every month,” he notes, providing a sample worksheet to get you started.

After looking at the importance of having a spouse who is your financial partner, he talks about tackling debt. Consolidation loans aren’t always the best approach, he warns. “Consolidating various high interest rate balances into one easy-to-handle payment is often just a quick fix to roll your `junk debt’ into a bigger pile,” he notes. He defines `junk debt’ as debt “that has been rolled around so many times you can’t remember what you originally went into debt to buy in the first place.”

So, he suggests, cut back on “bad spending habits,” such as smoking and excessive drinking. A case of beer a week costs you $1,872 each year, he writes. Even $4 a day spent at Timmy’s can add up to $1,460 per year, Foran writes. Other “money wasters” that make his list are dining out often, expensive clothes and jewellery, premium gas, dry cleaning clothes you could wash yourself, buying a brand-new car, flying first class, and so on. With all such expenses, he suggests, one should first ask “can I afford it.” If not, perhaps there are cheaper ways to go, he notes.

Credit cards, write Foran, need to be paid off and cancelled. “Once you have paid off a credit card, you must let it rest in peace! You have to call your credit card company and say… please cancel my credit card.”

After mastering debt, you need to look at saving, and the power it has. If you were to save $20 a week for 50 years, you’d have $1.4 million in your pocket. “Imagine saving your own jackpot…. Even a small amount, just $20 a week, can become a fortune over time,” he explains.

Other good advice in this book – those saving via mutual funds or other investment vehicles need to take note of the fees charged. A $10,000 investment in a mutual fund with a high “management expense ratio” of 3.1 per cent would cost you $1,029 over three years – three times more than a similar fund with a one per cent fee, he notes. “That’s a huge difference,” Foran warns.

If you are saving in an RRSP or similar vehicle, Foran suggests you should “reinvest your tax refund, which most of us don’t.” RRSPs and debt reduction are both part of a “well balanced retirement plan,” he writes.

This is a great, easy-to-understand book that covers so many bases we don’t have room to explore them all here.

If, like Pat Foran suggests, you are looking for a low-fee retirement savings vehicle, be sure to check out the Saskatchewan Pension Plan. SPP will grow your money and the fee is typically only 100 basis points, or about one per cent. 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. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. 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

Are snowbirds healthier than the rest of us?

It’s a sure sign of winter.

In late November, normally right after American Thanksgiving, a noticeable number of our Canadian seniors start packing up to head out. Their goal – avoiding the icy temperatures, daunting snowbanks and dark days of a Canadian winter.

Save with SPP will admit to a bit of envy here. Surely there is a health benefit to being a hardy Canuck and toughing out a Canadian winter? Isn’t there? Let’s see.

Au contraire, writes the Retire Fabulously blog. “Cold weather can be harder to endure as we get older,” the blog advises. “A slip on the ice could be more likely to result in injury for older folks, and shovelling show can become too physically taxing.”

The Travelers Country Club blog is definitive on the question, saying snowbirds are definitely healthier than those who tough out the winter.

“According to a 2010 study, enduring cold weather puts people at a greater risk of heart attack. Older people and those with previous coronary heart disease are more vulnerable to the effects of cold temperatures. Bundling up and cranking up the heat in your home can help but it’s not a long-term solution and it can be costly. Snowbirds live in warmer climates all year round, reducing their risk of weather-related heart issues,” the blog notes.

The Cranky Fitness blog sees benefits simply from the increase in outdoor activity snowbirds can enjoy.

“A two to three-fold greater volume of walking for pleasure, the most prevalent type of activity for both men and women, was reported in spring-summer-fall seasons, compared with winter,” the blog reports. As well, data from the Canadian Community Health Survey of 2004 found that the number of respondents who reported they were inactive “increased from 49 per cent in summer to 64 per cent in winter,” the blog reports.

So having less winter means having more spring and summer activities, the blog concludes.

Getting away from winter chores and icy sidewalks is one thing, but the Aging Horizons blog sees other advantages. Citing research from North Dakota State University, the blog says “researchers found seasonal migration provided snowbirds with a change in lifestyle and an extended network of friends, which boosted their quality of life.”

The Ingle International website says that while Canadians travelling abroad – mostly to the U.S. – will enjoy the warmer weather, they have to think about medical coverage while there. “Once you leave your province and enter another country, your medicare benefits stay behind and you become responsible for paying for your own medical costs. You will be lucky if your provincial medicare pays 10 cents on the dollar of any foreign hospital bills you generate,” the site warns.

As well, the blog notes, be sure to check with the federal government’s website on rules on how long you can live outside Canada.

From what we’ve seen here, it sounds like getting away from the winter may indeed make life last a little longer, if only through the boost in activity and less exposure to the toils and travails of winter. If you’re thinking of being a snowbird one day, you may want to put away a little cash today for future travels tomorrow. A wonderful opportunity to turn savings into retirement income is available to all Canadians by opening up a Saskatchewan Pension Plan account – be sure to browse on over 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. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. 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

Can tech help us conquer our inability to save?

These days, Canadians share two unrelated traits – very few of us, the vast majority, aren’t savers. And as well, nearly all of us, a majority, have a smart phone.

Could one attribute help fix the other? Save with SPP had a look around to see if there are any money-saving apps out there, and whether people think they work.

According to Global News, a great app for those who love to clip coupons is Checkout 51. With this app, Global explains, you don’t present coupons at the cash. Instead, you scan your receipt using the app and get money back via cheque.

“After you purchase items on the list you photograph and upload your receipt via the app. The receipt gets checked and once approved (usually within 48 hours) the money you earned gets added to your account. Once you hit $20 a cheque is mailed out to you,” the article explains.

Global also recommends an app called Gas Buddy which tells you where the cheapest gas prices are in your area, using GPS.

Over at the Maple Money blog, among the apps recommended for us Canucks is Mint, which “helps you track your spending, and also alerts you to when you’ve spend too much (or if you get charged a fee for something). In addition to those things, Mint also offers a bunch of money saving tips to help you manage your money better,” the article states.

They also like Flipp which alerts you to flyers for your area after you enter your postal code.

The CBC likes a number of these apps, and also E-bates which is now known as Rakuten. With E-bates, the network notes, you are basically being paid to shop.” Every time you make a purchase through one of their verified vendors, E-bates will send you a cheque. That’s cash back on top of the regular sales your favorite stores are having – and bonus, the app rounds all the deals up for you as well. E-bates earns a commission every time you make a purchase through their website, and instead of keeping it, they pass it on to you,” the network suggests.

Save with SPP can’t vouch for any of these except for E-bates; we have used it for years and yes, when you accumulate enough savings they’ll send you a cheque. It’s sort of like using a cash back card. We will give some of these other ones a try.

Let’s face it – the cost of living never seems to go down, so any app that offers a chance to save you some cash is probably worth at least trying out.

That extra cash, money that you didn’t earn and is thus “free,” can be used for any number of good things. Saving for retirement seems near the top of the list – perhaps the newfound cash can find its way into your Saskatchewan Pension Plan account, where it will grow into future retirement income. And maybe it all starts with a few clicks on an app!

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. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22