Six smart money moves for the younger set

When this writer thinks of his own terrible money habits in his 20s – no budget, no savings, living payday to payday, high debt – the memory is cringeworthy.

We wish we had been able to read CNBC Select’s article, “Six Money Moves to Make in Your 20s,” back in the day. But for those of you blessed to be young, this article has some great concepts.

First, the article recommends, “create a budget and stick to it.”

“While it may seem like a lot of work to create a budget, there are numerous online resources and apps that can help you. Plus, once you have one, the majority of the work is done, and you can tweak it as your spending habits or income change,” the article advises.

“After you create a budget, it’s important to stick to it. Regularly check-in with your budgeting goals so you don’t spend more than you can afford to repay. And if you share expenses with someone else, make sure you both have access to the budget and hold each other accountable,” the article continues.

The next tip is to “build a good credit score.”

“Establishing a good credit score is key to qualifying for the best financial products, like credit cards and loans. Plus, the higher your credit score, the better terms you’ll receive, which can save you thousands of dollars in interest in the long run (we always recommend you pay your balance on time and in full each month),” the article explains.

If you get a credit card, “the easiest way to improve your credit score is to use the card, be mindful to spend within your means, make sure you pay at least the minimum on time every month and pay it in full when possible,” CNBC Select suggests.

Tip number three is to build up an emergency fund, for unexpected expenses like car repairs, the article notes. “The money in your emergency fund can help you avoid taking out a loan or carrying a balance on a credit card, which can save you money on interest charges,” the article adds.

Your emergency fund should be in a “high yield savings account,” and experts recommend building it up to cover “three to six months of expenses.” Start small but build it steadily, the article suggests. “Saving $20 a week (roughly $3 a day) adds up to $1,000 in a year, which is a good cushion to get you started,” the article continues.

The next tip is to save for retirement.

“It’s never too soon to start saving for retirement, and the earlier you start putting money toward your future, the more it can grow,” the article begins. If your employer offers any kind of retirement savings program, be sure to sign up and contribute to the max, the article continues. Otherwise, you can save on your own – here in Canada, you can contribute to a registered retirement savings plan, a Tax Free Savings Account, and (of course) the Saskatchewan Pension Plan, a voluntary defined contribution plan.

Pay off your debt, the article advises – if you have “student loan or credit card debt, you should make paying it off a priority in your 20s.” Carrying debt, the article says, not only can lower your credit score and make it harder to borrow money, but it will cost you “a lot of money in interest charges the longer you carry the debt.”

Finally, the article concludes by recommending we develop “good money habits,” such as regularly reviewing your money situation, avoiding high fee banking, and “spending within your means.”

This is a nice overview and makes sense for older people as well as young.

If, as the article suggests, you want to start saving on your own for retirement, the SPP may be of interest. It’s a government-run, not-for-profit plan, so the fees are low – less than one per cent. SPP takes the money you contribute (which you get a tax deduction for), invests and grows it in a professionally managed pooled fund, and then will turn it into retirement income for the future you. Options include a lifetime monthly annuity payment or the more flexible Variable Benefit.

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Tips provide ways you can have a happy and financially secure retirement

What sorts of things do we need to think about to have a happy retirement – fun and financially secure?

Save with SPP decided to take a look around the Web to see what sort of retirement tips there are for those of us who are still working away.

The Wellington Advertiser in Ontario offers up several tips.

First, the newspaper suggests, you need to “get your finances in order.” As you prepare to retire you need to “plan out your finances ahead of time… people heading towards retirement should look into paying off any outstanding debts, and organizing their money, so they know what to expect come retirement and how much they will be living on.”

The Advertiser’s second tip is to “take it slow.”

“Going from working full time to not working at all can be a harsh adjustment for some, slowly working into retirement is a great way to smooth out the transition. Those heading towards retirement should consider easing off their workload over the course of several years or months,” the newspaper notes.

The article’s other tips include being active, and “getting out” as well. “It’s important to stay mentally active as well, volunteering, clubs, committees and community events are all great ways to stay connected in the community.” That involvement can ease any feelings of loneliness you may have post-work, the article concludes.

The Kiplinger website offers up a few more ideas.

“Happy retirees find a clear sense of purpose,” the site explains. Sometimes, the article continues, golf, strolling the beach and reading don’t provide enough “purpose or meaning.” Many retirees go back to the workforce, not only for the money but for the social connections and sense of purpose, the article adds. Others like to volunteer, which “keeps the brain healthy and active” and prevents “loneliness and isolation.”

The article notes that happier retirees “never stop learning.”

“Experts believe that ongoing education and learning new things can help keep you mentally sharp. Plus, exercising your brain may help prevent cognitive decline and reduce the risk of dementia,” the article reports.

Finally, the folks at Kiplinger extoll the virtues of having a “furry friend” in retirement.

“It turns out that Fido can provide more benefits to you than grabbing the newspaper. Older dog owners who walked their dogs at least once a day got 20 per cent more physical activity than people without dogs, and spent 30 fewer minutes a day being sedentary, on average, according to a study published in The Journal of Epidemiology and Community Health. Research has also indicated that dogs help soothe those suffering from cognitive decline, and the physical and mental health benefits of owning a dog can boost the longevity of the owner.

At Forbes Advisor, the importance of having money in retirement is raised.

“Strive to save 10 per cent (or more) of your gross income in a tax-advantaged retirement account,” the article suggests. In Canada, this would include things like a registered retirement savings plan, a company pension plan, a Tax Free Savings Account, and so on.

The article also suggests you “spend smarter” in retirement. Huh?

“Cost and value are not the same thing. For example, if two couples took the same trip of a lifetime, stayed in the same level hotel, and booked the same class of airfare, it would be fair to say that they got the same value from the trip. But if one couple paid full price and the other couple booked at a discounted rate, like my mom always does when she travels, there would be an obvious difference between the cost for each couple. I will give my mom credit; she is the queen of stretching a dollar,” author David Rae writes.

So let’s recap. You’ll want to plan ahead for retirement and set up a budget to handle the fact you will probably be living on less income. The more you save before retirement, the closer your post-work income will be to what you are making now.

Ease into retirement, rather than jumping headlong. Stay active, get out and do things with new people. Have a sense of purpose – maybe volunteer or join a group. Keep learning. Spend smart.

If you don’t have a retirement program through work, a great resource that may be of interest is the Saskatchewan Pension Plan. Join the more than 30,000 Canadians who are members of this voluntary defined contribution pension plan that not only helps you save but can help turn those savings into retirement income.

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Homeowners with pensions faring better than others: Stats Canada survey

New research from Statistics Canada finds that “Canadians… 55 to 64 who have both a principal residence and an employer-sponsored pension plan” have, on average, a net worth that is “$1.4 million more than those who have neither.”

The Statistics Canada Survey of Financial Security, based on 2023 data, was covered in an article by Money Canada’s Nicholas Sokic.

The article notes that “those near retirement age who rented and did not have an employer-sponsored pension plan had a median net worth of $11,900.”

“The longstanding expectation is that families build up their assets and reduce their debts over their working years and spend down their assets during their retirement years,” Money Canada notes, quoting from the report. “Canadian families with low net worth will be more likely to need to work longer, may need more government support and may be at greater risk of poverty.”

What about those in the middle of those two examples? Let’s read on.

“Families with only one of these two assets formed another, separate group,” the article explains.

“Families who owned their principal residence but who did not have an employer-sponsored pension plan had a median net worth of $914,000 in 2023. At the same time, those who had an employer pension plan, but who did not own their principal residence, had a median net worth of $359,000,” reports Money Canada.

The article notes that younger people without houses or pension plans are building net worth “in other ways.”

“Many young families are trying to build their wealth in other ways, given the economic challenges of that generation. Among young families who rented their principal residence and who had no employer pension plan, 15 per cent had a net worth greater than $150,000 in 2023, compared to five per cent in 2019,” the article explains.

“Members of this group commonly held assets in real estate that was not their principal residence with a median of $350,000. The median in their RRSPs was $35,000, and the median in their TFSAs was $20,000,” the article continues.

“The median net worth of Canadian families in 2023 was $519,700,” the article concludes.

If there’s a message here, it’s that if you can’t get into the housing market – and it is increasingly difficult for younger people to do that – you need to set aside some long-term savings in other ways, such as through a workplace pension plan or personal retirement savings.

If you have such an arrangement at work, be sure to sign up and contribute to the max. Often, there is an employer contribution match that speeds up the building of your nest egg.

Don’t have a workplace pension plan to join? Don’t worry. An answer for you may be the Saskatchewan Pension Plan. Any Canadian with unused registered retirement plan room can join. Once you’ve joined as an individual member, you decide how much to contribute, and SPP does the heavy lifting of investing and growing your savings. When it’s time to retire, you can choose from such options as a lifetime monthly annuity payment, or the more flexible Variable Benefit.

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In his practical, clear and helpful book – Everything You Need to Know About Saving for Retirement – author Ben Carlson identifies the problem of low savings rates and offers up a clear approach to get going on saving.

He begins by noting that “four million people (are) reaching retirement age annually in the United States,” and that “the vast majority of them are ill-prepared for this next stage of their financial lives.” Half of those aged 55-61 in the U.S., he writes, have saved less than $21,000 for retirement; half of those aged 50-55 have less than $11,000 in savings.

Yet, retirees can expect to live more than 20 years, on average, in retirement, he notes.

While building wealth is “simple… just live below your means, save the difference, and invest for the long term,” Carlson makes the point that because something is simple does not mean it is easy. “Getting your finances in order is more difficult than it seems because money impacts so many different aspects of your life,” he writes.

Nevertheless, Carlson identifies three things “you need to get right to give yourself a chance at financial independence one day,” specifically:

• “Save at least 10 per cent of your income (preferably 15 to 20 per cent).”
• “Make your saving and investing automatic.”
• “Think and act for the long term.”

“Saving money provides a margin of safety when life inevitably gets in the way of your best-laid plans,” he writes. “The last thing you want to worry about when life throws you a curve ball is money. Money issues amplify stressful situations.”

So, you want to start small, he explains. Small wins. He started with just $50 a month in his first job, and over time “I slowly increased the amount saved. Every time I received a raise, I would bump up my savings rate.”

He gives the example of famed investor Warren Buffett, who at age 60 had a fortune valued at $4 billion, but turned 90 in 2020 with a net worth of $70 billion.

“Real wealth for normal retirement savers comes from a combination of saving, compounding, and sitting on your hands. It takes time and it’s not easy. It could take decades to see extraordinary results,” he explains.

Another tip is to start young, he writes. “Starting at a young age not only helps you take advantage of compound interest, it can also save you stress and financial strain later in life,” he continues. All is not lost, he adds, if you are older, but it will take “some more planning and a higher savings rate.”

Talking about investing, he says you have to be comfortable with risk – what goes up can go down. “If there is an ironclad rule in the world of investing, it’s that risk and reward are always and forever attached at the hip,” he explains.

He suggests that putting your budget on “autopilot,” or automating “as much of your spending and saving as humanly possible” and spending only “what is left over” is an effort that “requires more work up front but the benefits can last a lifetime.”

Near the end of the book, he advocates paying yourself first. “Saving is more important than investing,” he writes. “Pay yourself first is such simple advice, but so few people do this. The best investment decision you can make is setting a high savings rate because it gives you a huge margin of safety.” As well, he concludes, the savings rate is something you have control over.

While this book is intended for a U.S. audience and has chapters on American retirement savings plans and government benefits, the core of the book offers sound advice for any reader – it is highly recommended!

The Saskatchewan Pension Plan allows its members to use an auto-pilot approach. You can set up pre-authorized contributions to SPP from your bank account, so the money goes into your retirement nest egg before you have a chance to spend it. And, as the book suggests, you can up your contributions any time you get a raise. It’s a “set it and forget it” way to build your future retirement security.

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Two-thirds of millennials fear money shortfall in retirement: CPPIB study

A whopping 67 per cent of “Canadians aged 28 to 44 are afraid they won’t have enough income during retirement,” reports The Financial Post.

The Post highlighted this, as well as other findings, from a recent report by the Canada Pension Plan Investment Board (CPPIB). While the millennials are most concerned about income shortfalls, overall, 61 per cent of Canadians share their fear, the article notes.

CPPIB’s Frank Switzer tells the Post that “planning for retirement can be intimidating, especially for younger Canadians.” He says that building a plan – one that factors in the retirement benefits you’ll receive from the Canada Pension Plan – “provides a roadmap to ensure your savings will last in your retirement years.”

The article includes the views of Dylan Wilson of Verecan Capital Management, who states that “inflation, the rising cost of living and market shocks over the past few years” may be making younger people more anxious about their retirement nest eggs.

“You’ve got an entire generation that was raised on cheap money that financed everything, and now that inflation has returned and there’s more uncertainty globally going forward, I can see why people would have anxiety,” he tells the Post.

Participation in workplace pension plans is also facing a decline, the article reports.

“The Office of the Chief Actuary reported that the proportion of active registered pension plan members in defined benefit plans declined from 90 per cent in 1989 to 67 per cent in 2019. In the private sector, this had plunged from 85 per cent to 39 per cent, especially as more employers switched to offering defined contribution plans instead,” the Post tells us.

A defined benefit plan provides a lifetime pension based on a formula that typically factors in your years of service with your employer and salary. A defined contribution plan is the kind where how much you pay in is defined – your future income isn’t known in advance but is based on how much has been saved in the plan at the time you want to retire.

While those who bought houses decades ago have seen gains in real estate value that might help fund their retirement, the same is not true for those just entering the market, the Post reports.

“Younger Canadians who either cannot afford homeownership in the current market or are grappling with hefty mortgage payments may not be as confident when it comes to relying on real estate assets for their retirement,” the article notes.

Other findings from the CPPIB report:

• “Day-to-day financial stress was 42 per cent for the 18-24 age group and 12 per cent for the 65-plus age group. As for general anxiety about money, 64 per cent of the 18-24 age group experienced this, compared with 33 per cent of those over 65,” the Post reports.
• “Retirement planning stress climbed to a peak for the 45-54 age group — Generation X starting to inch closer to retirement — and steadily dropped for older age groups,” the article adds.
• “The study found Canadians now have higher expectations of how much money they will require in retirement. The typical amount non-retirees expect they will need each year rose from $50,000 to $55,000, while their expected total savings required climbed from $700,000 to $900,000 over the past year,” the article states.

Wilson tells the Post that “it is important for Canadians to start saving for retirement now, even in small amounts.”

Automating your savings – by transferring an amount directly from your bank account to retirement savings one or two times monthly – was recommended in the article by Wilson, as was getting your spending under control to make room for saving.

“Life’s an expectations game,” Wilson tells the Post. “Everything you take today, you’re giving up tomorrow.”

The availability of workplace pension plans has declined over the years, with many of us having no such program to join at work. If you’re in that boat, check out the Saskatchewan Pension Plan, which you can join either as an individual or an organization. You decide how much to contribute (and you can automate those contributions), and SPP invests your savings in a professionally managed, low-cost pooled fund.

At retirement, your choices include a monthly lifetime annuity payment that guarantees you’ll never run out of money, or the more flexible Variable Benefit.

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Things seniors need to be aware of to avoid senior poverty: Janet Gray

While the Conference Board of Canada reports that only 6.7 per cent of Canadian seniors live in poverty, it’s still a concern giving the rising cost of housing and the relative modesty of government retirement benefits.

We asked Janet Gray, an advice-only Certified Financial Planner with MoneyCoachesCanada, for her thoughts on this issue. She believes that most people aren’t aware of what they are getting into when they retire.

She began our conversation by saying that she wished there was some sort of mandatory retirement coaching for people prior to them leaving the workforce, to help deal with the “fear of the unknown” that many face. It’s important, she says, for people to have “at least some awareness of their situation.”

As an example, many seniors living in expensive homes worry that they only have $5,000 in the bank, even though the home may be worth a million or two.

Senior females tend to be the people who have lower incomes, and for a variety of reasons, she explains.

First, women tend to be paid less throughout their working careers, she says.

Second, because Canada is so “home ownership focused,” older women are very reluctant to give up the family home even after their partners have passed away. “People are almost declaring bankruptcy to stay in the house,” she explains. “They’d rather cut off their leg than lose the house.”

But, if the cost of owning and maintaining a house becomes more expensive over time, there are still things that can be done, she says.

“Here in Ottawa you can defer property taxes until you pass away (or sell the home), and let them be settled through your estate/time of sale,” she explains.

Older women living alone face safety issues – getting up on a ladder to change a light bulb can be risky. She says some of her clients have gone the “co-housing” route, having a friend or family member move in with them and share the costs of running the place.

Another option is a reverse mortgage, where you access some of the equity in your home now.

She recommends that clients open a home equity line of credit while they can before retirement, because these are harder to get once have less income in retirement. “That way, if one day you might need to access that money, it’s there for you,” she notes.

People also don’t seem to realize that the Canada Pension Plan doesn’t offer a full survivor benefit to the surviving spouse. Sometimes, she says, all that happens is that the surviving spouse gets their CPP topped up to the maximum individual benefit amount from what their late partner was getting (even if the partner was getting more). The partner’s Old Age Security  payments end upon the partner’s death, she explains.

That, she says, can be a big hit, as the survivor “loses most of the CPP their partner was getting and also all of the OAS.” She says these rules “are not well understood by people,” but they should be, particularly by women who tend to “live longer generally.”

She thinks it is unlikely any future government will try to improve CPP benefits.

And for that reason, it’s important for people to personally save for retirement, even if they have some sort of retirement savings arrangement at work. “People often remark on how government workers get better pensions, but they are putting away 10 per cent of their earnings into the pension every year,” she explains. “If everyone tried to put away 10 per cent of their earnings each year, we would have less problems” with retirement income, she says.

Low income seniors can get subsidized accommodation in places like a long-term care residence, she says. She also says the Disability Tax Credit is worth applying for seniors, as it could lead to a significant tax refund.

For having cars in one’s senior years, Gray says that while older, lower income people are less likely to qualify for car loans, they can still get around with ride-sharing services, or by leasing a car. While age might stand in the way of a car loan, it’s not usually an issue with a car lease, she explains.

We thank Janet Gray for taking the time to speak with us.

If you are saving on your own for retirement, take a look at the Saskatchewan Pension Plan. You provide the savings, and we’ll invest your hard-saved dollars in a low-cost, professionally managed pooled fund. At retirement, your options include the possibility of a lifetime monthly annuity payment or the more flexible Variable Benefit.

Check out SPP today!

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Should RRIF rules be modernized?

Is it time to revisit the rules regarding converting registered retirement savings plans (RRSPs) to registered retirement income funds (RRIFs)?

Commenting in The Globe and Mail, Tim Cestnick is of the opinion that modernization of the rules is in order.

Cestnick’s neighbour has reached the age when he has to begin taking money out of his RRIF.

“Thousands of Canadians are worried about outliving their RRIFs and the rules that require withdrawals starting in the year they reach 72. The government is aware of the concerns,” writes Cestnick.

Right now, you must stop contributing to an RRSP by the end of the year in which you reach age 71, he explains. “The most common strategy is to convert the RRSP to a RRIF by that date, with mandatory withdrawals from the RRIF starting the following year,” he continues.

Ah, those mandatory withdrawals.

“The withdrawals required from a RRIF are calculated as a percentage of the assets in the RRIF on Jan. 1 each year. The older you get, the higher the percentage you’ve got to withdraw. These percentages were set by the government to allow you to preserve enough savings to provide a constant income stream, indexed to inflation, from age 72 to 100. The rules also assume that you can earn a three per cent real (after inflation) rate of return on your portfolio each year, and that inflation is an average of two per cent annually.”

There are some flaws with the status quo, Cestnick explains.

“One key issue is that folks are living longer, and longer. In the early 1990s, when registered plan reform took place, life expectancy at age 71 was 13.7 years. This has increased to 16.2 years as of 2020 (the most recent data available). The 2020 data shows that 14 per cent of the population will live to age 95 (the figure for women is 18 per cent), which has increased from 5.6 per cent in the early 1980s. And the proportion of people making it to 100 has nearly doubled over that time,” he writes.

The idea that you must make three per cent annually on your investments is also a bit of an issue for Cestnick.

“The government report shows that, in order to achieve this return, based on average historical data, you’d have to invest about 30 per cent of your portfolio in equities for 25 years (basically, from 70 to 95 years) – or perhaps invest more in equities to begin with, reducing this percentage as you age,” he explains. That’s a high exposure to risk and volatility for older people, as “the more equities they hold in a portfolio, the more nervous they get.”

He also notes that “there’s no shortage of experts who would suggest” the target inflation rate of two per cent for 28 years is not reasonable.

He concludes with three suggested reforms to the RRIF system to make things more sustainable.

• “There should be an increase in the age at which RRIF withdrawals must start – perhaps to age 75;
• The minimum required RRIF withdrawal schedule should be reduced; and
• RRIFs under a certain amount should be exempt from minimum withdrawals.”

Another less popular option when you reach end of life for your RRSP is to use some or all of the funds to purchase an annuity. The annuity option is best suited for times when interest rates are higher, so it is now beginning to be mentioned as an option again.

Are you saving on your own for retirement? Why not partner up with the Saskatchewan Pension Plan. All you need to do is direct some savings into your SPP account, and we will do the heavy lifting of investing your money in a low-cost, professionally managed, pooled fund. At retirement, your options include a lifetime monthly annuity or the more flexible Variable Benefit.

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Why saving is so hard – and ways to move forward on it

Over the decades, based on countless conversations with friends, family and work colleagues, it’s safe to say that most people find saving difficult, if not impossible.

Save with SPP decided to try and pin down why some folks find it so tough to direct a few bucks into a piggy bank.

An article in the Lemonade blog says science is to blame.

First, the article points out that the majority of Americans “save between zero to five per cent of their money each month,” compared to the recommended rate of 15 per cent.

Most people get their paycheque and spend all their money immediately, the article continues. “Studies show that poor financial choices are associated with high levels of in-the-moment living,” the Lemonade article suggests, citing research from the American Psychological Association.

“It’s hard for us to save up because we tend to value the ‘now’ over the ‘later.’ In behavioral economics speak, this is called ‘present bias,’” the article explains.

The Opportun blog cites a few other reasons besides the “living in the now” theory.

“Thinking is hard, and takes effort,” the blog suggests. Rather than “figuring out the perfect amount to save, or how much extra we can afford to pay on our credit card debt, we might do nothing.” Doing nothing is easier, the article suggests.

Putting money away (by making it harder to access) also requires a lot of willpower, the article says, which not everyone has. Procrastination – not even starting a savings plan – is seen as another culprit, the article adds.

The Finance over Fifty blog lists a number of “barriers to saving money,” which include “living beyond your means, (not) having a budget, (having) too much credit card debt and “not making enough money,” among others.

“If your expenses exceed your monthly income, there’s nothing to left to save,” the blog explains. “Plus, living beyond your means only sets you up to get deeper in debt because you don’t have any cash savings to cover a financial emergency.”

You’ll need to track your expenses, develop a budget, and then reduce spending until there is money left over each month, the blog recommends.

“A budget will help you be more intentional with your money. When you give every dollar a purpose, you maximize your income,” the blog notes. “One way to be purposeful with saving more money is to include it in your budget. Assign your monthly savings goal as a regular expense, and pay it like it’s any other bill.”

Let’s boil all this down. Basically, we are not naturally wired to set money aside for the future. We do what’s easy – spending money – rather the harder ideas of budgeting, living within our means, and being able to save. And that’s the problem – unconscious spending.

Our late Uncle Joe recommended that we put away 10 per cent of what we earn, and live on the rest. “You’ll never have any problems if you do that,” he advised. We are doing that now, but only because we are retired and without a mortgage. But when we were paying down the mortgage and other debt, we always put something away, even one or two per cent.

So, if saving looks impossible, start with a small, affordable amount, and ratchet it up.

If you are saving on your own for retirement, consider joining the Saskatchewan Pension Plan. With SPP, individual members decide how much they want to contribute – so you can start small. You can have money automatically deposited in SPP from your own bank account, and as you work to free up money, you can increase that amount when possible. SPP will invest your hard-saved dollars in a low-cost, pooled investment fund, and when you are ready to retire, you’ll have options like a monthly lifetime annuity payment or the more flexible Variable Benefit.

Check out SPP today!

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Four tips to help avoid running out of money in retirement

An alarming stat from south of the border – 45 per cent, or just under half of Americans retiring at age 65 “risk running out of money.”

That grim fact was recently reported by Markets Insider through the MSN network. Markets Insider was reporting on research from Morningstar.

Morningstar also found out that single women are even more likely to run out of money in retirement, at a rate of 55 per cent.

Who’s at the biggest risk for running out?

“The group most susceptible to ending up in this situation are those who didn’t save toward a retirement plan,” states Spencer Look, associate director of the Morningstar Center for Retirement and Policy Studies, in the article. But, the piece continues, “retirement advisors say even those who think they’re prepared aren’t.”

While the article talks about a U.S. experience, the concepts seem to apply here. A top risk is – not surprisingly – spending too much of your savings too quickly.

“After retiring, most people’s spending habits either remain the same or go up. When you have more leisure time on your hands, more money goes toward entertainment and travel, especially in the first few years of retirement. The outcome is a higher withdrawal rate, which can push you into a higher tax bracket,” states JoePat Roop of Belmont Capital Advisors in the article.

Money saved in a tax-free vehicle (in Canada, this would be a Tax Free Savings Account) is not taxed as income when withdrawn, and is a way around the problem, the article notes.

Using registered funds to pay off big debts, like a car loan or the remainder of a mortgage, is also a bad idea and a way to run out of money early, the article notes. Consider the tax consequences of using registered funds to pay down debt, the article suggests.

A third problem is what the article calls “sequence risk.” That’s the risk of withdrawing money when the market is down, effectively creating a “sell low” problem. Diversification is the antidote here – be sure some of your investments are in “principal-protected” investments such as (we will Canadianize here) guaranteed investment certificates (GICs), annuities, or government bonds.

The final problem is “lack of appropriate risk-taking” in investments, the article notes.

“People don’t take into account how expensive things get over time, not realizing that they can live another 40 years in retirement. You can’t get rich investing your money at five per cent,” Gil Baumgarten of Segment Wealth Management tells Markets Insider.

So, let’s sum up what we’ve learned here.

• First, understand the tax consequences before withdrawing from your savings.
• Don’t withdraw large sums from registered accounts to pay debts (tax consequences).
• Diversify, so you won’t only have stocks to sell when you have to withdraw savings.
• Don’t try to avoid investment risk entirely by going all-in on GICs and interest-bearing accounts.

Now that we are seniors, we can attest to the fact that you have to worry way more about taxes than you ever did at work. That’s because you are getting income from multiple sources instead of one paycheque. If you are having trouble managing all this, consider getting professional help.

Did you know that the Saskatchewan Pension Plan is open to both individuals and companies? SPP is scalable, so it works for businesses both large and small as your company pension plan. Here’s a more detailed look at how SPP can help you deliver retirement security for your employees.

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Christine Benz uses an interview approach in her fine book, How to Retire, to really dig into some retirement-related dos and don’t.

And while there are a few sections that focus chiefly on U.S. tax rules, the bulk of the book is still very helpful for a Canadian reader.

The book begins by asking Michael Finke about what people should be thinking about when it’s time to contemplate retirement. Being happy, he explains, is crucial – it’s not just a math problem. “Of course that’s a very important part of living well in retirement – not feeling like money is a barrier to doing the kind of things that actually make us happy,” he begins. “But you also have to develop the skills to figure out how to be happy in a time of leisure, if that’s what you’re doing. And that’s a big question. Is this just a long weekend? Is this just a big vacation? And are you set up to be able to live?”

On how to pick a retirement date, Fritz Gilbert tells Benz “what I encourage people to do is take that last year (of work) and think about all the non-financial aspects of retirement, to make sure you’re emotionally and mentally ready for the transition as well. If you get the financial piece in order, and you’ve spent some time thinking about the non-financial piece, the “when” is going to become fairly obvious between the two of those combined.”

Laura Carstensen talks about the important of keeping up social connections – different than those you had at work. Recalling vacations when she was constantly in touch with the office via her mobile phone, she said you can’t completely disconnect when you retire.

“Going from that to a complete sense of `Nobody wants me. I’m not obliged to do anything,” is just as bad. People think about retirement as a way to break out of that pressure. What we really need is to change the way we work throughout our working lives. But certainly, as you get older and you start to have some ability to work less and to be more flexible in your work, keep in mind that doing some work is good for most people.”

David Blanchett talks about buying annuities, the “a” word. “If you want more guaranteed income, you want to first exhaust your options with respect to (government benefits).” He suggests claiming your government benefits as late as possible so that you get more. “After that, it might be worth considering annuities, given the potential economic benefits, which is something I’ve focused on for most of my career.”

Another important thing for retirees to think about is “spending money meaningfully” suggests financial author Ramit Sethi. You also need to talk about death benefits. “So many of us are afraid to talk about death. I told my wife, “Here are the conditions under which I don’t want to live anymore. Here’s what going to happen one day if I get hit by a bus. Let’s talk about it.

“There’s no virtue in hiding from something that’s going to happen to all of us. We might as well be open about it, When we acknowledge that eh average person like us lives to X age, suddenly we get very honest with ourselves. `Wow, I have a limited time window to actually use this money. What am I going to do with it?’”

Wade Pfau talks about investing strategies for retirees, including the “4 per cent” withdrawal rule, and the danger of “sequence of returns risks,” which is the danger of taking out investment money before the big returns start to hit.

He suggests four steps to mitigate sequence risk – “the first is to spend conservatively. That’s the logic of the four per cent rule.” Alternatively, spend flexibly. “If I can adjust spending along with market performance, that manages the sequence of returns risk because I’m not having to sell as much from a declining portfolio.” Other tactics include mitigating volatility by diversifying into less risky assets, like bonds, and having “buffer assets,” something outside the portfolio that you treat as a temporary spending resource to spend from after market downturns, to help avoid selling from the portfolio at a loss.”

In a chapter on choosing where to live after retirement, Mark Miller notes that “most people don’t move when they retire. That’s a media myth. And when people do move, they generally don’t move very far.” But if you are considering a bigger move, he recommends that you see what the healthcare services in your new area are like, as well as “transportation, walkability, and the like.”

Carolyn McClanahan suggests you need to “make certain your home is aging friendly. If it’s not, then figure out how you’re going to make it aging friendly, or where you’re going to move so you can live at home.”

This is a very well-thought-out book that covers off most aspect of retirement in a factual, friendly way. It’s well worth being an addition to your retirement library.

Annuities are a way to turn some of your retirement savings into a lifetime income stream. The Saskatchewan Pension Plan offers a full range of annuities. Be sure to check out this option when the day comes to convert your savings into retirement income. There’s also the flexibility of the Variable Benefit option to look at!

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