Despite focusing on slaying debt, Canadians still plan to retire at 60

Writing in the Financial Post, Victoria Wells reports that “more than half of Canadian investors say they’re concentrating on getting their bills paid over saving for the future.”

Yet, her article notes, despite the focus on debt reduction – brought on by higher interest rates – a CIBC study suggests “most still expect to retire around 60.”

OK, saving less, reducing debt, and still jumping over the wall of work at 60. Let’s hear more.

The focus on paying down debt, Wells reports, is “leading many to look past traditional long-term savings vehicles, such as the registered retirement savings plan (RRSP) to the Tax Free Savings Account (TFSA) instead. Indeed, 53 per cent of investors with both an RRSP and TFSA said they preferred putting their money into the latter so they could access their savings tax-free at any time. RRSPs, in contrast, may be locked-in, meaning withdrawals, which are taxable, can only be made at a future date.”

In fact, the article continues, again citing CIBC research, “one third of people with RRSPs don’t intend to make any contributions” by the annual deadline.

The fact that people seem to be preoccupied, in the present, with defeating debt seems to be impacting how they are investing generally, the article notes.

“The shift to a more conservative financial focus is also showing up in people’s investing strategies, and 42 per cent said they’re looking for predictable returns over outsized growth amid an uncertain economic environment,” the article notes.

“The preference for short-term liquidity and stable returns suggests many Canadians are focused on today and less so on long-term accumulation of wealth or retirement,” Carissa Lucreziana of CIBC states in the article.

OK, more interest on liquidity – having money available to use soon – than long-term growth. What’s driving that?

The article says anxiety may be the reason behind the switch in investment thinking.

“Inflation, higher interest rates and concerns the economy may tip into a recession have left many Canadians anxious about their finances. Worriers are spending an average of 17.7 more hours fretting about money than they were last year, according to separate research from the Bank of Nova Scotia,” the Post reports.

And some of those anxieties extend to retirement, the article adds.

Citing more data from CIBC, the Post notes that “more than half admit they either can’t afford to save for retirement or aren’t sure they’re saving enough. Another 57 per cent harbour fears they’ll run out of money in their old age, while higher inflation has forced one-third to push back their expected retirement date.”

The solution, the article concludes, is a balanced approach – focusing on debt while not overlooking long-term savings needs completely.

“Planning for both short and longer-term ambitions can help individuals move beyond their immediate needs and envision how they can live for today (and) save for the future, accumulating wealth over time to support their retirement years,” states CIBC’s Lucreziana in the article.

The article makes a great point. Of course, you should get rid of personal debt – the less you have of it in retirement, when you will probably have less income, the better. But it’s probably not a great idea to completely stop saving for retirement while battling debt. Maybe, one should consider retirement saving to be like any other bill you have to pay each month.

Members of the Saskatchewan Pension Plan can save as though they are paying bills – just set up SPP as a “bill” on your online banking, and you’re off to the races. You can also set up a “pay yourself first” pre-authorized contribution, and SPP also accepts credit card contributions. That’s one of the great features about SPP – flexibility.

Check out SPP today!

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Any of us who play golf watch with awe as better golfers blast their drive 100 yards past ours, and putt for birdies instead of bogeys. What, we wonder, are they doing differently to be having such success?

Save with SPP had those same sorts of thoughts about investing recently. After taking a boat tour of the river/canal network of Fort Lauderdale, Florida, we wondered what did folks do with their investments that brought them here – massive, waterfront houses with multi-storey crewed yachts?

Let’s see what the Interweb tells us.

An article from The Globe and Mail suggests that “the wealthy have a greater exposure to real estate and alternate investments in their portfolios – as much as a third.”

The article quotes Nancy Grouni of Objective Financial Partners Inc., in Markham, Ontario, as saying “a typical portfolio breakdown would be 25 per cent real estate – excluding their personal residences – plus 10 per cent alternative investments such as hedge funds, derivatives, foreign currency and private equity. Then a third of the portfolio consists of cash and fixed-income vehicles, and the balance is in equities.”

“I find that people with a higher net worth tend to be more comfortable with those non-traditional, alternative ways of investing,” Grouni tells the Globe. “They have invested in private equity through personally held corporations; that’s how they earned a living.”

Writing for Business Insider, Peter Syme tries to find out the investing preferences of what he calls “ultra high net worth individuals,” or UHNWIs.

His research breaks it down as follows – 26 per cent is invested in equities, 34 per cent is in commercial property (21 per cent of the total commercial investment is direct, meaning owning the property, while the rest comes through real estate investment trusts or REITs), 17 per cent goes into bonds, private equity (again this means direct ownership of something, such as a business) gets nine per cent, “investments of passion” get five per cent and gold, three per cent. Seven per cent is invested in “other” investments, and the final two per cent is invested in cryptocurrency, the article concludes.

What’s an investment of passion? “Art, cars and wine – which may be bought for enjoyment or simply as an investment,” the article notes.

The Medium blog looked at folks in the U.S. who were millionaires, but perhaps not yet UHNWIs, and got a different asset mix.

“On average, the portfolios of the wealthy are heavily weighted toward equities, which make up 53 per cent of assets. The remainder is largely divided amongst bonds (15 per cent), cash (11 per cent) and CDs/money market funds (nine per cent). Real estate, excluding the primary residence, comprises just six per cent of their net worth,” the article notes, citing research from the National Bureau of Economic Research in the U.S.

There’s much more emphasis on owning stocks in this group, the article notes.

“Take it from the best: Warren Buffett’s will dictates that 90 percent of his wealth be invested in stock market index funds when he dies, with the remainder in government bonds,” concludes.

An article from Forbes offers a look at the investment habits of the wealthy, noting that they tend not to “sit” on their money, but keep it mostly invested.

As well, their focus is on “a year-over-year increase in net worth,” so “they don’t waste a considerable amount of time on the details.” They “live below their means,” avoid debt and paying interest, and are very aware of their income and expenses.

We once read a quote from Mark Cuban, well-known U.S. entrepreneur, who said that once you begin investing, try not to dip into that money – let it grow. It is certainly interesting to take a short look at how the richer half invests!

Members of the Saskatchewan Pension Plan don’t have to sweat out an investment strategy for their savings. SPP’s asset mix is currently 10 per cent Canadian equities, 16 per cent U.S. equities, 15 per cent non-North American equities, 11 per cent real estate, 18 per cent infrastructure, 13 per cent bonds, six per cent mortgages, and 10 per cent private debt, with the balance (small) in short-term investments. SPP isn’t sitting on its cash – it’s carefully growing its members’ contributions to help fund their future retirements!

Check out SPP today!

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Canadians “gotta giddy up on saving for retirement,” warns the Free Press

Despite the many benefits that registered retirement savings plans have – including tax-deductible contributions, and creating a nest egg for your future you – Canadian RRSP balances are declining, reports the Winnipeg Free Press.

According to the Free Press, citing information from BMO and Statistics Canada, “the average RRSP account was about $113,000 in 2023. That’s actually down from about $144,000 in 2022.”

While the newspaper reports that a recent market correction in 2023 may be behind the drop in the average account balance, another reason could be “a likely disconnect between retirement goals and action.”

The Free Press notes there is a “under-saving” problem in the land.

“Canadians 50 and older are coming to grips with under-saving for retirement, too,” the article notes. “The National Institute on Ageing, based in Toronto, released its annual survey in January and found only one-third of working Canadians aged 50 and older say they can retire at their desired time. It further revealed four in 10 Canadians in this age group stated they are not in a position to retire at all,” the Free Press adds.

“All of this is to say that working Canadians gotta giddy-up on saving for retirement,” the newspaper warns.

What’s causing people to save less?

Debt, reports the Free Press, is a definite barrier to saving.

The article quotes Natasha Macmillan of Ottawa’s Ratehub.ca as saying “If you have high-interest debt, the best use of your money is to pay that off first.”

The newspaper adds that while Macmillan is specifically referring to high-interest credit card debt, “even additional mortgage payments in this high interest-rate environment may be a better use of extra cash than contributing to retirement savings.”

The Free Press goes on to note that retirement savings is just one type of savings vehicle. There is the Tax Free Savings Account (where there’s no tax on the money you invest, and no tax consequences when you take money out), registered education savings plans (RESPs) for kids and grandkids, and the new First Home Savings Account for prospective home buyers.

The article suggests you seek financial advice on which savings vehicle is best for your situation.

But, the article concludes, retirement savings is always an important priority.

“But just to keep things simple: if you have extra cash, contribute to your RRSP — tax efficiency considerations aside — because fattening up retirement savings is never a bad thing,” the article notes. “Even if you contribute more to your RRSP than is optimal for your 2023 taxes, you can still carry that deduction forward to use for tax years to come,” Yannick Lemay of H&R Block Canada tells the Free Press.

This is a good, thorough article that provides the perspectives of a number of experts. We can add this, from the perspective of a semi-retired senior – if you don’t have a pension plan at work, it is imperative that you save for retirement, because once you get to the age where you can’t work, you’ll need something to augment the rather modest benefits we get from the Canada Pension Plan, Old Age Security, and even the Guaranteed Income Supplement.

Your future you will be very thankful for any savings you are able to put away now, in your younger years.

If you’re saving on your own for retirement, a great partner is out there waiting to help you. The Saskatchewan Pension Plan is a provincially run, not-or-profit retirement savings program open to any Canadian with RRSP room. SPP will take the money you save and invest it for you in a low-cost, pooled, professionally managed pension fund. When you retire, your options including receiving a lifetime monthly annuity payment, or SPP’s Variable Benefit option, where you decide how much you want to take out of your nest egg, and when.

Check out SPP today!

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Back in the day, when colour TV was a new thing and there was no Internet, a “charge card” was a way to pay for things instead of using cash or a cheque.

You didn’t get anything extra in those early days – just a bill in the mail.

But over the intervening decades, credit cards (as they have been rebranded) now offer a dizzying array of extras – points to help you pay for travel, coffee, and other perks, or cards that offer you cash back on purchases.

Save with SPP decided to take a harder look at cash back cards in particular.

They are very popular, reports The Motley Fool blog.

Over 56 per cent of Americans have cash back cards, the blog notes.

“Cash back cards offer a straightforward deal. Pay with your card and earn a percentage back on your purchase. It’s a valuable benefit, easy to understand, and consumers love it,” the blog reports.

Strategically speaking, The Motley Fool lays out two ways you can go with cash back cards.

“If you want to keep it simple, you could use one cash back card for all your regular spending. There’s nothing wrong with this method, but there’s also a way you could earn much more: carrying multiple cash back credit cards. Because when you don’t mind adding another card or two to the mix, you could potentially double your cash back,” the blog suggests.

Most cash back cards, the article continues, allow you to select two or three categories (say, gas, hotels, groceries) where you get extra cash back on top of the typical rate (between one and two per cent). So, The Motley Fool suggests getting a couple, so you can max out on more categories.

OK, either try to put everything on one cash back card, or have a couple and use them for the “bonus” categories.

It’s important to remember that like any credit card, the benefits of cash back only matter if you pay your card in full each month, reports The Points Guy blog.

“As long as you pay your bills on time and in full, you’ll likely avoid any sort of fee altogether and be able to focus on earning more cash back for the purchases that matter to you,” the blog advises.

The blog makes the point that getting cash back is easier to manage than having to figure out how and where to cash in points.

What cash back cards are available to us Canucks?

According to MoneySense all the major banks, Tangerine Bank, MBNA and American Express offer cash back cards.

The magazine reports that if you were to spend $2,200 a year on a cash back credit card in Canada, you would “earn” between $331 and $1,256 per year.

Those amounts are net of annual fees, which ranged from zero to $139 per year.

MoneySense urges Canadians to shop around before they decide which card to choose.

“Cash back credit cards are an extremely popular type of rewards card in Canada. Each cash back credit card has its own features and benefits, so you’ll want to compare the annual fee, earn rate and any additional benefits before you apply,” reports MoneySense.

The best cards, the article notes, have a two per cent earning rate on all categories, “so that you can get the most out of every dollar spent.” Some connect to other benefits offered by the credit card company, also a plus, MoneySense notes.

Some cards are not as widely accepted as others, the article notes, so that should factor into your research. Also, how the cash back is paid can vary from seeing a deposit in your chequing account each month, or to getting a monthly statement credit (not really cash back but credit back), or even only an annual credit.

Read the fine print before you sign up, advises MoneySense.

This type of credit card – in fact, any credit card – should get paid off in full every month, MoneySense notes.

“The payoff with a cash back credit card is the cash—a reward that is easily cancelled out by the penalties and interest accrued if you carry a balance. Like all rewards credit cards, cash back cards tend to carry annual interest rates at the higher end, usually around 19.99 per cent. At this rate, unpaid debt will rapidly accumulate interest charges that eat up any gains you’ve made. As long as you pay off your balance in full every month, you’ll avoid this pitfall, but if you find you regularly carry a balance, you might consider a low interest credit card instead,” the publication adds.

This is very sensible and important advice. If you aren’t planning to pay off your credit card balance each month, you are going to be paying more in interest than you are going to receive in “free” cash back. If you are disciplined, and pay off your entire credit card statement each month, then the cash back approach may actually work for you.

We used our cash back money to make Saskatchewan Pension Plan contributions! SPP members can fund their accounts in multiple ways – you can set SPP up as a bill and “pay” yourself online, or you can have amounts withdrawn automatically from your chequing account. You can even make a contribution with a credit card – so cash back on retirement savings is a possibility.

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In this age of paying by tap, using credit cards, bank cards, or even your phone, we just aren’t using as much cash as we used to.

While cash – bills and coins – is still accepted everywhere, it’s more common to pay other ways. So, wondered Save With SPP, what do people do with the change that used to go back into their pockets?

According to the Wealth Awesome blog, many people have old jars of change, including pennies, sitting around the house – money that still holds value.

“If you’re like many Canadians, then you’ve likely got a jar or piggy bank packed with loose change that you’re saving for a rainy day,” the blog begins.

The “old school” way to go would be to get some coin wrappers, wrap up your old pennies, nickels, dimes, quarters, loonies and toonies, and then take them to the bank, the article advises.

Alternatively, you can “put them in a coin-to-cash machine” without having to sort them. Such machines, the article advises, can be found “in grocery stores nationwide,” and “allow you to dump your coins in exchange for a receipt, which you can bring to customer service to receive the value in cash or store credit.”

Save with SPP will add that there is fee charged when you use these machines, typically a percentage of the value of the coins you put in. So be sure you are aware of this, and OK with it, before you dump your coins in.

Even though pennies became extinct in Canada more than 10 years ago, the article notes that you can still turn them in at the Royal Canadian Mint.

You can also donate them to charities. The Royal Canadian Legion’s annual Poppy Campaign accepts coins, and you’ll see coin jars on the counter at your favourite coffee shop, pet store, and mall.

The Credit Karma blog says that a way to avoid the high fees at coin-to-cash machines is to buy a “coin separator,” which sorts coins by size and makes it simpler to roll them.

The blog also says a good option for coins is to simply spend them.

Coins are also necessary in some situations — like using coin-operated laundry machines or car vacuum cleaners,” the blog advises.

The Penny Hoarder blog expands on the idea of just spending your coins.

When you pay for items at a store, you can dip into your wallet or change purse to pay the full price using exact change, the blog notes.

“Having change on you can also come in handy if you need to pay a parking meter or get an emergency snack out of a vending machine,” the article adds.

Why, the article asks, should you have to break bills into change “when you have a jar full of change just sitting in your house?”

The folks at Penny Hoarder have another interesting suggestion – designating a specific use for your change.

“Instead of just depositing your change into your savings or checking account, deposit all of your change into your retirement fund or your child’s (university) savings account,” the blog suggests.

“It may not seem like much, but these little contributions can add up over time. Plus, your college or retirement fund may have higher interest rates than your savings or checking account, and this helps you maximize your return on your coins,” the blog adds.

We used change as part of our drive to get as much money into the wife’s Saskatchewan Pension Plan account as possible before she retired. She’s now getting a lifetime annuity payment from SPP each month. It’s nice to think that a chunk of that pension paycheque originated from pocket change.

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South of the border, Americans are saving for retirement – they just don’t know how much they need

The good news south of the 49^th is that our American friends have generally opened retirement accounts and started saving.

But the bad news, reports the TIAA Institute via a media release, is that many Americans “don’t know how much they’ve saved.”

“Large majorities of Americans of all races and ethnicities think about retirement in similar ways, calculating how much money they’ll need and how long they have to save it. But the similarities end there, as gaps emerge in savings rates, confidence in their retirement plans and other key measurements of retirement readiness,” the release notes.

The findings of TIAA’s State of Financial Preparedness report “raise questions about whether coming generations of retirees will enjoy financial security, particularly as lifespans continue to lengthen and a retirement crisis already exists,” the release notes.

Here are some of the key findings, via the media release – all figures are in U.S. dollars.

• “Overall, two thirds of Americans (67 per cent) have at least some money invested in retirement accounts, but close to one in four don’t know how much they’ve saved. That’s true for 24 per cent of retirees and 22 per cent of those planning to retire.
  
  More than seven in 10 whites (76 per cent) and Asian Americans/Pacific Islanders (71 per cent) have retirement accounts, but that’s true for only about half of Black (49 per cent) and Hispanic (52 per cent) Americans. Many Hispanic (37 per cent) and Black Americans (28 per cent) who have not yet retired are unsure of how much they’ve saved, underscoring the significance of the uncertainty.
• Fewer than half (47 per cent) of those not yet retired are “very” or “somewhat” confident they’ll retire when planned. Those with the lowest confidence rates are Hispanic Americans and people ages 22-34 (each 37 per cent).
• Roughly 30 per cent of whites and Asian Americans/Pacific Islanders have saved at least $250,000 for retirement. That’s almost twice as many as the number of Hispanic (17 per cent) and Black Americans (16 per cent). 
• One-fourth (26 per cent) of Black Americans expect they’ll need some kind of paid employment for income during their retirement. That’s at least 10 percentage points higher than any other race or ethnicity.

“We’ve long talked about retiring inequality, but this new data does more to identify gaps, challenges and opportunities,” states Surya Kolluri, head of the TIAA Institute, in the release. “If most people are planning for retirement but can’t follow their plans, that’s a call to action for employers, policymakers, financial advisors, retirement services providers and others. We need to better identify the steps we must take to give people the resources they need,” states Kolluri.

The release notes that a worrying “40 per cent of U.S. households already risk running short of money in retirement.” Forty-four per cent of those surveyed have less than $50,000 saved for retirement; 19 per cent have saved at least $500,000, the release adds.

If there’s a takeaway from this research that’s helpful for all of us here in Canada, it may be the idea that you should know how much you’ve saved, and then as well have a general idea of what you’ll need as income when you’re retired. That means having a sense of how much you’ll want to receive from government retirement benefits, workplace pensions, and your own savings.

If you haven’t got started on the whole retirement savings thing, check out the Saskatchewan Pension Plan. With SPP, you can contribute in many ways – via online banking, pre-authorized contribution, and even via credit card. The money you send SPP is then carefully invested in a professionally managed, low-cost pooled fund with an enviable track record.

At retirement time, you can convert your savings into monthly income for life via an SPP annuity. Alternatively, you can take advantage of SPP’s Variable Benefit and take out what you need when you need it. Check out this made-in-Saskatchewan solution for Canadian retirement savings today!

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Having a will is something that we seem to know is very important, yet don’t seem to find the time or money to get rolling on.

According to the CBC, citing research from 2017, “more than half of Canadians don’t have a last will and testament,” with 18 per cent saying they can’t afford one, and five per cent feeling they don’t have time to make one.

Another reason given by some, the article continues, is that they don’t think they have “enough assets to make the process worthwhile.”

But, points out the Savvy New Canadians blog, having a will is very important.

“Thinking of your own mortality can be scary, but death is an inevitable part of life and being prepared is one of the best ways to bring you and your loved ones some financial peace of mind,” the blog advises.

The blog offers five key reasons why we should get a will done:

• A will “protects your financial assets and investments.”
• It “ensures your relationships are recognized,” meaning it sets out who you want to inherit your money and possessions, instead of leaving it up to the government to figure out.
• It “guarantees a plan” for any minor children.
• While there is no estate tax in Canada, having a will can help minimize “estate administration taxes,” such as your final income tax returns and, in some cases, a probate fee.
• It lets you leave “legacy gifts” to charities or non-profit organizations.

Writing for Waterloo News, published by the University of Waterloo, estate planning lawyer Keith Masterman talks about the problems that can crop up when someone dies without a will.

“If you die without a will, you are said to die intestate. The ramification can be dire. You do not choose your beneficiaries; your estate will be distributed according to a government scheme. The scheme is set out in provincial legislation and what your loved one will receive depend on the province where you reside,” he warns.

As an example, he notes that “in all provinces, a surviving spouse will inherit at least a portion of an intestate estate,” but what they get depend on what province they live in.

“British Columbia, Alberta, Saskatchewan, Nova Scotia, Quebec, Nunavut and The Northwest Territories all recognize a common-law partner as a spouse. In the other provinces—Manitoba, Ontario, PEI, Newfoundland and Labrador and the Yukon—only a married survivor is recognized as a spouse,” he writes.

This can be complicated for those of us who marry, separate, and then live common-law with a new partner, he explains. Depending on where the individuals involved live, the common-law partner might be disinherited if their partner dies without a will, notes Masterman.

While most think getting a will is prohibitively expensive, the CBC article suggests that it doesn’t always have to be.

“These days, we have more and arguably easier options than ever before when it comes to will preparation: will and estate lawyers, businesses that offer fixed prices on lawyer-provided services, will kits, will-preparation sites and even DIY legal forms that are available for free online,” the CBC suggests.

So, what’s involved in doing up a will?

According to Canadian Living, you need to have an executor in mind, someone who “carries out the directives in the will, making sure whatever you decided upon happens.” It’s typical, the magazine reports, for “a trusted friend or relative” to be chosen as executor, or a lawyer.

You also need to appoint people who can act on your behalf if, in the future, illness or injury prevents you from making decisions. One such “power of attorney” should be appointed/named to look after your finances, and another for your health. The article says it is typical for two different people to be picked for these roles.

If you have young kids under 18, Canadian Living notes that a will can be used to “name a guardian” for your kids. Without this guardianship being set out in a will, it would be up to the courts to decide where your kids will live.

As for divvying up your estate, “if you don’t have a will, the government will decide who gets what,” the article advises. “In most cases, the surviving spouse inherits the first $200,000 of an estate and the rest would be split between living parents and children,” the article adds.

Other advice from Canadian Living includes the fact that “only an original will” is valid – not a photocopy, and that once you do your will, you should update it after “any major live event, such as divorce, death, birth, or change to your economic status.”

While getting a will done can by a lawyer can costs hundreds of dollars, and up to $1,000 if you have a complicated situation, Canadian Living concludes that “whatever the cost, it’s worth it. You don’t want a judge deciding your estate’s fate.”

Just as having a will is important, so too is saving for retirement. Not many of us have a retirement savings program at work. If you’re saving on your own for retirement and have some registered retirement savings plan room, why not kick the tires on the Saskatchewan Pension Plan?

SPP can be a do-it-yourself retirement savings for you. You decide how much to contribute, and SPP does the rest – investing your contributions in a professionally managed, low-cost pooled fund. And when it’s time to retire, you can choose such options as a lifetime monthly SPP annuity payment, or the Variable Benefit, where you decide how much to take out, and when! Check out SPP today!

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Those taking CPP at 60 worry about their health, finances: Wealth Professional

We frequently hear or read that waiting to take the Canada Pension Plan (CPP) later in life – say, age 70 – will lead to a greater monthly payment.

Yet, reports Wealth Professional, most people choose to start CPP at age 60, despite the fact that they will get a 36 per cent reduction on their payments.

“An informal survey conducted by The Globe and Mail found that the most popular age to take one’s CPP benefits is 60, with 34 per cent of the respondents saying so. This was followed by those aged 65 with 19 per cent and those aged 70 with 16 per cent. This coincided with the data from Statistics Canada that also found that nearly 40 percent of Canadians who were born between 1940 and 1950 began to take their CPP benefits at the age of 60,” Wealth Professional notes.

That’s despite having payments at age 60 decreased by “0.6 per cent every month (before age 65), amounting to 7.2 per cent annually and a maximum reduction of 36 per cent at age 60,” the magazine continues.

The article quotes recent research from Toronto Metropolitan University’s National Institute on Ageing (NIA) as saying “those who take their pensions at 60 instead of waiting until they turn 70 can possibly lose a total of $100,000 (in) retirement income.”

The NIA report found that a mere one per cent of us wait until age 70 to get the maximum benefit, which represents 42 per cent more than what you would get at age 65, Wealth Professional reports.

There are plenty of good reasons why people don’t wait for a greater benefit, the article continues.

“The Globe and Mail survey found that the reasons behind this included the need for financial coverage of living expenses, having health problems or family history of health issues with the expectation of not having a long retirement, as well as the uncertainty of life. Some were also concerned about the possibility of the CPP being compromised in the future, with many citing the departure of Alberta from the CPP for the Alberta Pension Plan,” the magazine reports.

Some used the “why turn down money on the table” argument, taking CPP at 60 and then hoping “they will be able to make more than the government will be providing them down the line,” the article notes.

Some felt taking a lower CPP payment would keep them in a lower tax bracket, the article adds. Those waiting to start CPP at age 65 and beyond “stated that the reason behind this was to increase the payout of their benefits.”

If you don’t have a workplace pension plan or personal retirement savings, you would have to keep working until 65 or 70 to get the greater benefit. If you aren’t working after 60 one would think the CPP would be an immediate need.

Since, as the article says, the maximum CPP benefit in 2024 is $1,364.60 per month at age 65 (that’s before taxes), you might want to be able to bolster that modest amount with your own savings. If you’re not sure how to grow your savings, fear not – the Saskatchewan Pension Plan is ready to help. You decide how much to contribute, and SPP does the heavy lifting of investing your hard-saved dollars in a professionally managed, pooled fund run at a very low cost.

When it’s time to collect, you have the options of choose a lifetime annuity payment each month, or the flexibility of SPP’s Variable Benefit, where you decide how much to take out in income.

Check out SPP today!

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For many of us, running our household money can be a “learn as you go” stumble, as we find out that not paying off credit cards, or spending more than we earn all the time, are bad things.

Victoria Botvinnik’s How To Adult Money offers up insightful information on every phase of the complex world of personal finance. It’s like having a friendly accountant coaching you through.

On credit cards, she writes that “credit cards are a great thing to have if you know how to use them without being used and abused by them.” She warns that credit spending “hurts a lot less… than (to) hand over hard-earned cash,” and that making only the minimum payment each month means “you’re not really paying down the debt much, if at all.”

We should have two credit cards, not a bunch, she adds.

On pension plans at work (such as defined benefit or defined contribution plans), Botvinnik makes the point that if there is an employer match to your pension contributions, it’s definitely worth joining up. “The employer match happens when your employer helps contribute to your retirement. It’s generally done in the following way: you promise to contribute a certain percentage of your salary to this plan and your employer will match it up to a point. This is fantastic and you should take advantage of it as soon as you’re allowed to.”

Looking at accommodation, she raises the interesting point that renting is not always “throwing money away” as some contend. She backs that up with a chart, showing that buying a condo for $350,000 is not necessarily better than renting it for $1,800, because renters don’t pay a down payment, mortgage interest (possibly for up to 30 years), property taxes, legal fees and home inspections (this cost is incurred when you buy and when you sell), maintenance, and condo fees. Renters just pay rent and renter’s insurance.

“In this scenario, as long as the rent was under $2,350, renting is the better option,” she concludes. She says you need to think about whether you plan to stay in your current job and current community for a long time, or not, before buying. If you think you’ll be there for at least 10 years, she says buying can make sense.

She takes a look at the “whys” of debt, which when the book was written, worked out to $1.67 of debt for every dollar Canadians earn.

We go into debt, she explains, for necessities, such as “somewhere to live, a car to get you places, and potentially schooling to get a job.” Fine. But, she notes, there are other causes of debt, such as “eating out and going on expensive vacations” we can’t afford. “Some of these actions may be small but add up over time, like buying lunch every day.”

Getting married or having kids can “create higher than normal expenses for a year or so, which many households handle with debt.” Finally, “legal issues” like not paying taxes or parking tickets “can turn into a real issue if you don’t pay attention or accidentally make a mistake,” she warns.

To get out of debt requires a plan. You can use the “snowball technique,” paying minimum payments on all debts and adding extra to the lowest one. When that’s gone, apply more extra to the next lowest one.

Alternatively, you can target debt with the highest interest first, the “Avalanche technique.” Pick one, and develop a plan, a “timeline for becoming debt free using current budgeted savings per month.”

In a chapter on the 10 per cent rule (spend 90 per cent of what you earn and save the rest), she notes that the “rule of thumb” amount might not be enough for lower income earners, and may be too much for higher-income earners. “If you’re planning to retire on an income similar to the one you have right now, you’ll likely need to save more than 10 per cent. If you’re happy to retire on less than your current income, you’ll need to save less than 10 per cent.”

No matter what your retirement savings number is, the earlier you start, the better, she writes.

The book is filled to the rafters with great information. There’s a section on how to set up a budget, which looks at the “envelope system,” where you put cash aside to cover specific expenses, or the 50/30/20 system, where 50 per cent of your budget is for necessities, 20 per cent is for debt repayment/savings, and “no more than 30 per cent of the cash you take home should be spent on non-essential lifestyle items like eating out, shopping, etc.”

The very detailed investment section helps you determine your appetite for risk, and gives a detailed look at all the various savings vehicles (registered retirement savings plans or RRSPs, TFSAs, non-registered accounts) and investment types (stocks, bonds, mutual funds, ETFs, and more).

Do you want to be an active investor – picking your own investments? Or passive – someone who buys index-related investments? The book fully explains the pros and cons of each approach.

There’s a summary section near the end of the book, titled Six Months To Being Awesome With Money, that puts it all together for you.

This is a great book, highly recommended, and fully Canadian, that would make a great addition to your financial planning library.

If you don’t have a retirement savings program at work, the Saskatchewan Pension Plan may be the plan for you. Any Canadian with unused RRSP room can join, and you decide how much to contribute – less when you are facing tight times, more when times are better. SPP will invest your contributions in a pooled fund, professionally managed at a low cost. When it’s time to retire, you can collect monthly lifetime SPP annuity payment, or move to our Variable Benefit option, where you decide how much to take out, and when!

Check out SPP today!

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Do our brains work against us when it comes to saving?

Writing for CNBC, Jasmine Sukanin reports that our barriers to saving for the future may be all in our head.

What now?

“There are the many psychological pitfalls our minds are subject to when it comes to saving, investing and taking the actions that will benefit us long-term,” she notes.

If, she writes, retirement is something that is far away for you – maybe 30 or 40 years from now – “many would rather treat themselves to things they can enjoy right now instead of socking away money for a future that’s decades away.”

This, she explains, is called hyberbolic discounting, and refers to the fact that most of us prefer decisions leading to immediate rewards rather than decisions leading to future rewards.

Another factor that can cause our brains to reject a new plan, like starting to save, is that “people often have a tendency to stick with their current situation, since it is easier to keep things as they are than it is to take steps to make a change,” she writes.

This, she writes, is called the status quo bias.

“People tend to say, `yeah, whatever’ to situations where sticking with their default or current circumstance doesn’t immediately hurt them or cause a large loss. So they continue paying $10 for a gym membership they don’t use, let the dirty clothes pile up in the corner of their room and let the package sit until it’s past the return date,” she explains.

Summing up this one – it’s easier to do nothing than it is to start something new, even if that new thing is saving for retirement.

A related condition identified in Sukanin’s article is called the planning fallacy.

“We tend to underestimate how long it will take to complete a future task, often despite knowing that previous similar tasks have taken longer to complete than planned,” she explains.

In a retirement saving scenario, this results in people who “put off saving for retirement until their 30s and 40s, thinking that they should be able to amass as much as they’ll need for their golden years in just two decades.”

So, we think we can play catch up on retirement saving. But, Sukanin continues, that “catch up” thinking is joined by another problem, which is not knowing how much we need to save for retirement.

“According to the Journal of Accountancy, 54 per cent of (American) people underestimate how much money they will need to retire. Underestimating how much money you need for retirement and how long it will take you to save that money can be a recipe for an underfunded nest egg,” she warns.

So, we tend to live in the now with money decisions, don’t like making changes (like saving) and/or put our saving off until our middle years, making it hard to save enough. Phew!

It’s important to start saving for retirement, at any age. If you have a retirement program at work, be sure you are contributing as much as you can.

If you don’t, take a good look at the Saskatchewan Pension Plan. Once you join SPP, you decide how much to contribute, and SPP does the rest, providing low-cost, pooled investing with professional management and a sparkling track record.

And when you actually do retire as an SPP member, you can choose to receive a lifetime monthly annuity payment, or take advantage of SPP’s Variable Benefit, where you decide how much to take in income, and when!

Check out SPP today!

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