Mar 7: What’s the difference between active and passive management?

March 7, 2024

We read all the time about “active” and “passive” management of investments. While it sounds like one type is for those that jog and work out, and the other is for people comfy on their couches, the actual meaning is a little different. Save with SPP had a look around to find a good explainer or two.

Writing for Bankrate via AOL, Dr. James Royal writes that “active investing is what you often see in films and TV shows. It involves an analyst or trader identifying an undervalued stock, purchasing it and riding it to wealth.”

“It’s true – there’s a lot of glamour in finding the undervalued needles in a haystack of stocks. But it involves analysis and insight, knowledge of the market and a lot of work, especially if you’re a short-term trader,” he continues.

On the other hand, he notes, “passive investing is all about taking a long-term buy-and-hold approach, typically by buying an index fund. Passive investing using an index fund avoids the analysis of individual stocks and trading in and out of the market. The goal of these passive investors is to get the index’s return, rather than trying to outpace the index.”

So the Coles Notes on this are as follows – an active management approach involves you (or an advisor) actually picking investments that you think will beat the market’s returns. Passive means you aim to duplicate the market’s returns, usually by buying index funds that consist (unsurprisingly) of all the funds on the various index.

So, is one approach better than the other?

A recent New York Times article suggests that over time, the passive approach tends to work out the best.

“Over the last 20 years, stock pickers have had a dismal record. Most haven’t come close to beating the overall stock market,” writes Jeff Sommer.

“But occasionally, there are exceptions. In some periods, stock pickers rule, and the start of this year was one of those times. In fact, it was the best January for actively managed stock mutual funds since Bank of America began compiling data in 1991. It wasn’t just that they turned in handsome returns for investors. The entire stock market did that. The S&P 500 and other stock indexes set records during the month,” he notes.

The article goes on to say that stock pickers seem to do best when markets are doing the worst – such as the 2008/9 credit crisis. Passive investing does well at most other times, he points out.

A Forbes article on the topic makes the point that active investing requires much more of an effort.

“You can do active investing yourself, or you can outsource it to professionals through actively managed mutual funds and exchanged traded funds (ETFs),” the article notes. However, the article notes, you need to be watching your holdings all the time.

“Without that constant attention, it’s easy for even the most meticulously designed actively managed portfolio to fall prey to volatile market fluctuations and rack up short-term losses that may impact long-term goals,” Forbes reports. “This is why active investing is not recommended to most investors, particularly when it comes to their long-term retirement savings.”

On the contrary, “because it’s a set-it-and-forget-it approach that only aims to match market performance, passive investing doesn’t require daily attention. Especially where funds are concerned, this leads to fewer transactions and drastically lower fees. That’s why it’s a favorite of financial advisors for retirement savings and other investment goals.”

No one likes to talk about investments unless they are winning. It’s like bingo – you hear when your friends win the big jackpot, but otherwise, you don’t. We have heard horror stories from friends who went for the home run with things like Bre-X, or Nortel, or cannabis stocks, and of late, bitcoin.

Whatever approach you personally choose for your own investments, we recommend that you seek the advice of a professional investor. The portfolio you construct on your own may be fine, but will almost always benefit from the oversight of a pro.

If you’re a member of the Saskatchewan Pension Plan, you are already benefitting from professional investment advice. The SPP balanced fund returned 7.73 per cent, on average, since its inception more than 35 years ago. While past returns are of course no guarantee of future rates of return – no one can predict the future – it’s nice knowing that SPP’s investing history has been so positive. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Mar 4: BEST FROM THE BLOGOSPHERE

March 4, 2024

Follow these tips to help get yourself out of debt

There’s no question that personal debt is a barrier for those of us wanting to put a little money away for the future. But, writes Christopher Liew for CTV News, there are a few ways that can help kick-start your drive to leave debt in the rearview mirror.

First, he writes, you have to fully understand what your total debt is, and from all sources – student loans, credit card debt, personal loans, auto loans, and mortgages.

The interest rate on these debts should help you set priorities for paying them off, he notes.

“Mortgages and student loans typically have lower interest rates, so paying them off quicker may not make as big of a difference. As long as you’re making your minimum monthly payments, I would prioritize paying off high-interest debt first, as the compounding interest can cost you a lot of extra money in the long run. This is how credit card companies trap you,” he explains.

Liew offers up five debt-reducing strategies.

You can consolidate all your debts into one loan, “typically with a lower interest rate. This strategy can simplify your monthly payments and potentially reduce the total amount of interest you’ll pay over time,” he notes.

Another idea is to get a side job to make higher debt payments, he explains.

Side jobs that you could consider so you can pick up a few extra bucks include food or grocery delivery companies, being a ride share driver, waiting tables or bartending on weekends or looking for freelance jobs.

You can also, Liew writes, try to negotiate better terms with your creditor.

“Approach your lenders to discuss options like lowering interest rates, waiving fees, or modifying repayment plans. Be honest about your financial situation and be ready to present a case for why the adjustment is necessary,” writes Liew.

“Successful negotiation can lead to reduced payments or interest rates, making your debt more manageable and accelerating your journey to being debt-free,” he adds.

You could look at cutting your living expenses to free up more money to pay down debt, he writes.

A whopping “51 per cent of Canadians under 35 are living beyond their means,” notes Liew, citing research from the Healthcare of Ontario Pension Plan.

You can cut costs by trading in “your newer car for a more affordable used car,” cutting back on streaming subscriptions, “your personal shopping habits,” and “eating out and ordering in.”

The dollars you save by cutting back on life costs can be redirected to debt reduction, Liew explains.

Finally, you can always go ask your employer for a raise.

“One of the simplest ways to get out of debt quicker is to increase your income, and one of the easiest ways to increase your income is to ask your employer for a raise,” Liew writes.

“While some companies give out raises on a steady annual basis, others are a bit more stingy and wait for their employees to come to them first.”

Once you have taken control of your debts, you’ll have more money to put away for the future. An ideal place to put those hard-earned dollars is the Saskatchewan Pension Plan. Find out how SPP has been helping Canadians save for retirement since 1986! Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 29: Office vacancy rates high, but many of us will be returning to office work soon

February 29, 2024

Among the many strange aspects of life during the recent pandemic was the “work from home” boom. Office buildings stood empty, nearby convenience stores and food courts closed, and there was no “rush hour” traffic update on the morning news. Everyone was at home.

But that may be changing.

A recent CTV News report sums up how different things were during the pandemic.

COVID-19 caused “a mass exodus to remote work that had never been seen before,” the broadcaster reports. In 2016, “only seven per cent of workers in Canada said they `usually’ worked from home,” the article notes. As recently as early 2022, that number had soared to 24.3 per cent, or nearly one quarter of all workers.

But people are starting to “trickle” back to the office, CTV reports. The “working exclusively at home” number dropped to 20.1 per cent in May of last year, although there were still 11.7 per cent of workers in “hybrid” work arrangements (some hours at home, some at the workplace) as recently as November.

There are a couple of issues that have arisen due to remote work, reports Global News.

First, there seems to be a disconnect between what employers want – a return to work in the office – and what employees want – to be able to continue to work from home.

“A quarter of Canadians who usually work from home would like to work from home more, while one in eight would like to work from home less — which the report says is a challenge for employers,” Global reports, citing information from Statistics Canada.

“A mismatch between employees’ preferences for telework and the hours they work from home may negatively affect employee retention,” reports Global, again citing the Statistics Canada report.

The second issue is that offices in downtown centres, such as Toronto, are experiencing record vacancy rates.

According to the Financial Post, “the vacancy rate for downtown Toronto office buildings reached a record high at the end of last year as a flood of largely empty space from newly completed projects hit the market.”

“The downtown office vacancy rate in Canada’s financial capital rose to 17.4 per cent as nearly 58,100 square metres of new space came to market during the fourth quarter, according to data released Tuesday by brokerage CBRE Group Inc.,” the Post reports.

“The poor performance of the Toronto market helped push Canada’s national downtown vacancy rate to its own record last quarter, hitting 19.4 per cent, the data show,” the article notes.

COVID-19 is cited as the chief reason for the vacancies, as well as the fact that major office construction projects can take years, the article adds.

Because office towers take many years to construct, Toronto’s still working through office projects that began before the pandemic.

“With the city accounting for nearly half of all new office construction nationwide, Canada’s net-absorption rate, or the pace that office space gets leased when it becomes available, would have been positive without the impact from Toronto’s new supply, the data show. Instead, that rate was negative in the period,” the article concludes.

Some observers fear that the business of building and leasing office space may have been permanently damaged due to the COVID-related work-from-home trend.

The Canadian Press reports that “the COVID-induced work-from-home shift has ravaged the office market as many employers re-evaluated their office footprint. Firms have also looked at reducing their real estate holdings as a way to rein in expenses to help cope with the current weaker economy.”

“It is likely that 10 to 15 per cent of demand has been permanently destroyed with (work-from-home) trends,” Maria Benavente, vice-president and real estate-focused portfolio manager at Dynamic Funds, tells The Canadian Press.

This strange, once-in-a-lifetime (hopefully) situation may take a while to play out. It will be interesting to see if the trickle of “in-office” workers begins to become more of a river, correcting the problem of office vacancy and breathing life into downtown businesses that are supported by office workers. Or, will people fight for the right to work from their dining rooms? Stay tuned!

Wherever you work, saving for retirement is important. If you are lucky enough to have a workplace savings program, be sure you are taking part to the maximum. If you don’t, and are saving on your own for retirement, you may want to consider joining the Saskatchewan Pension Plan.

Open to any Canadian with registered retirement savings room, SPP’s voluntary defined contribution plan delivers expert investment management at a low cost, using a pooled fund. SPP will grow your savings, and when it’s time to put work behind you, you can choose between a lifetime annuity payment each month, or SPP’s Variable Benefit program. Find out why SPP has been helping Canadians build secure retirements since 1986 – check them out today!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 26: BEST FROM THE BLOGOSPHERE

February 26, 2024

Answer these questions to see if 2024 is your year for retirement: Ibbotson

Writing in the Winnipeg Free Press, noted financial writer Christine Ibbotson outlines ways you can confirm whether or not you are ready to hit the silk, and start your retirement.

She says she is frequently asked about retirement before 65 by folks who dream of “finally being free” of work – even the at-home variety.

But, she says, there are things to ask yourself before taking the retirement plunge.

“Is all your debt paid off,” she asks – credit cards, mortgages, lines of credit and car loans?

Next, she asks, “are you really ready to give up working, or are you just tired of your current position and need a change?”

A third thought is this – is someone else depending on your current income? “Will you need to support anyone other than yourself? If so, for how long, and how much will that cost annually?”

Do you have the flexibility to “downsize your residence or move to a less-expensive area to lower your monthly expenses,” she asks.

Are you clear on what your retirement income will be, she asks. “Will you have a consistent monthly revenue stream that is long-lasting and able to sustain you during times of uncertainty? Preferably in addition to Canada Pension Plan and Old Age Security government benefits.”

She asks if prospective retirees have any upcoming “large future expenditures” they have yet to save up for – and if the expense can be cancelled.

Do you have a realistic budget for retirement income, she asks – one that is as exact as possible, is costed out in today’s dollars, and factors in inflation and taxation?

Finally, she asks about socialization – do you belong to any clubs or social organizations, and have you factored in the cost? And do you have a plan on how to fill in your retirement hours? “Does your retirement partner want the same things as you and are they willing to make the same sacrifices to retire early?”

This is one of the best pre-retirement quizzes we have ever seen, and we sure wish we had read it years ago when we planned our own retirements.

We did get estimates from our pension plan at work about how much our retirement income would be, and they advised us to do a “net to net” comparison on income. This is key, since your pension is almost always less than what your work wages were – and usually is taxed at a lesser rate. So, know your take home pay after retirement to help you plan.

If you don’t have a workplace pension plan, don’t worry – the Saskatchewan Pension Plan may be just the thing you’re looking for. SPP is open to any Canadian with registered retirement savings plan room.

You decide how much to contribute each year – contributions are tax-deductible like an RRSP – and SPP does the heavy lifting of investing and growing your savings in a large, professionally managed, low-cost pooled fund. At retirement, your choices include the possibility of a lifetime annuity, or SPP’s Variable Benefit which allows you flexibility in how much income you want to collect.

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 22: Government benefits need to be boosted to avoid senior poverty: Carole Fawcett

February 22, 2024

For Carole Fawcett of Vernon, BC, it’s time for seniors across Canada to let governments of all stripes know that the current retirement benefits available to older Canadians aren’t sufficient – and many seniors are facing poverty in their golden years.

Fawcett, a freelance writer and editor and a retired counsellor, spoke recently to Save with SPP by telephone and email.

She agrees that government programs like the Canada Pension Plan, Old Age Security, and the Guaranteed Income Supplement were, when first created, “expected to `supplement’ the pensions that people would get from their job when they retired.”

“People used to stay with one company forever, so they built up a good pension. But now… very few people have pensions or can afford to put money aside for when they retire, as they were too busy just trying to exist,” she notes.

For that reason, Fawcett, and her group TINCUP, hope to get the word out to politicians and citizens that current government benefits just aren’t enough.

“I am hoping that with our demonstrations and creating awareness that something might change. We can only hope,” she says. “I also plan to contact media that broadcast to all of Canada – in hopes of getting attention for seniors. We also plan to write to politicians. We will be heard!”

We asked how life is for people who are 100 per cent dependent on programs like CPP, OAS and GIS.

Fawcett said seniors living solely on benefits can manage – barely – if they own their own residence. “Seniors who have to pay rent would be in dire straits. One fellow I met said he got $1,700 a month from his pension, but his rent was $1,800 a month. He has to dip into his savings in order to live somewhere. This means his savings won’t last that long,” she explains.

She knew of another senior who had to live in her car for 14 months – including the winter – before she could be placed in emergency housing.

“I interviewed a woman who was `renovicted,’ she adds. “She had lived in the apartment for 20-plus years, is a senior, and was told she had to leave. They said their son was going to move in and that they were going to do renovations. She took them to court and she lost. I still don’t know how that happened. She found another place one year ago and now has been evicted once again. She doesn’t know what she will do.” She is 73 years old, notes Fawcett, calling it a “sad situation.”

“A lot of seniors are living ‘small’ and I’m sure there is a lot of misery behind many a door,” she notes.

While she is supportive of efforts to house refugees and the homeless, Fawcett said our impoverished seniors also need governments to increase the level of support they are given.

The goals of the TINCUP movement, notes Fawcett, are as follows:

  • Creating awareness for all as to how low senior pensions are – below the poverty line.
  • Getting attention of politicians (provincial and federal) and hope that they will increase pensions up to the level of poverty – as many seniors live below that level.
  • More medical coverage for many health issues.
  • Encourage people to treat seniors with respect.
  • Tapping into the Boomer generation’s ability to make changes.

Fawcett explains that “health care needs to be affordable for seniors. Someone who lives in Kamloops and has to have cancer treatments in Kelowna has to pay for gas in order to get to the cancer treatment facility,” she explains. Medications for cancer can be very expensive. If you are on a tight budget, that can lead to tough choices, she says, noting that “we shouldn’t have to choose between healthy food or hearing aids.”

Fawcett adds that seniors should have better access to allied health services like massage, physiotherapy, and chiropractic care.

On respect, Fawcett says that whenever she gets called “dear, sweetie, or honey” by a younger person, that person gets a short lecture on why such names are condescending and disrespectful to seniors. “They get a little talk from me,” she says with a laugh.

On the power of Boomers, Fawcett notes that her generation “made a lot of changes – and we can do this again. Look at the women’s movement, the Viet Nam war, control over our bodies, and nuclear war. If we join together, we will be heard once again. We are tired of being unheard, invisible, and ignored, and given barely enough money to live with respect.”

“We are angry, and we won’t be silenced anymore,” she says.

Fawcett says her movement is focused on retirement income adequacy.

“There are many seniors who are living below the poverty line. The poverty line is approximately $25,750, and lots of seniors don’t even get that. It would be great if the government would top up the very low-income seniors,” she notes.

“It’s not like we are asking for trips to the Caribbean. We just want enough money to live on with respect. So that we can afford a cup of coffee or a lunch out occasionally with a friend. Everyone is more than horrified by how many seniors are living belove the poverty line,” she concludes.

A TINCUP website and social media presence are both in development; anyone interested in finding out more can contact Fawcett at Ca*****@sh**.ca.

We thank Carole Fawcett of TINCUP for taking the time to speak with us.

The Saskatchewan Pension Plan has been helping Canadians save for retirement since 1986. SPP is designed for those of us who don’t have a retirement program through work. Find out how SPP can help individuals save for retirement – or how it can be deployed as a pension plan in the workplace! Check out SPP today.

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 19: BEST FROM THE BLOGOSPHERE 

February 19, 2024

Childcare workers in Nova Scotia get pensions, wage hikes

Licensed childcare workers in Nova Scotia are about to receive not only pay raises, but pensions and benefits, reports Global News.

The Nova Scotia Minister of Early Childhood Development called the move “a milestone in the professionalization” of the sector, Global reports.

“We understand that having a strong, stable early-learning … system means implementing programs and benefits that support the recruitment, retention and recognition of staff,” Minister Becky Druhan tells Global.

In Nova Scotia, the total cost of the wage/pension/benefits package is estimated to be $111 million, with the province providing $75.7 million and Ottawa providing the rest, the article notes.

Wage increases of “$3.14 to $4.24 per hour” will begin in April, and follow wage increases rolled out in 2022. The goal, reports Global, is “making working in childcare a more attractive option for those considering a career.”

The wage increases, reports the CBC, will help employees with their share of contributions to their new pension plan, operated by the Colleges of Applied Arts and Technology Pension Plan (CAAT).  The benefits plan is operated by “the non-profit Health Association of Nova Scotia,” the CBC article notes.

“Once they’re enrolled, (early childhood educators) will contribute five per cent of their pay to each plan. Full-time child-care workers will see between $66 and $124 deducted for the new health benefits each paycheque, and another $80 to $100 for the pension plan,” the CBC reports.

CAAT’s DBplus pension plan is open to any Canadian employer. Save with SPP spoke with CAAT’s Derek Dobson on the progress of the new plan a couple of years ago.

Offering pensions and benefits to employees has long been viewed as a great way to attract and retain employees.

Did you know that the Saskatchewan Pension Plan’s voluntary defined contribution pension plan is not just for individuals, but can be offered as a company pension plan by Canadian employers?

With SPP, there are multiple options for employers who want to offer a pension plan for their team.

Employers can set up a “start up” pension plan, where a one-time employer contribution is made to individual employee SPP plans. Alternatively, you can set up a “employer match plan” where any contributions made by employees receive a matching employer contribution. There’s the “basic pension plan” option, where the employer offers the plan, and the employees contribute (no employer match), and the “performance pension plan,” an incentive-based retirement program.

Full details can be found here. Find out how SPP can help your employees save for retirement, with a flexible array of plan designs! Check out SPP today.

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 15: You can turn the clutter invading your home into cash

February 15, 2024

There’s a room in our basement that we rarely ever enter, which we euphemistically call the “storage room,” that has 50 or more boxes full of accumulated clutter from past dwellings in Toronto, Waterloo, Barrie and beyond. There are also old books, toys, games, records, cameras, Palm Pilots, and other once-cool stuff that now is unneeded and unwanted.

Save with SPP, finding the prospect of going through each box overwhelming, took a look around the Interweb for ideas on how to convert some of this clutter into easier-to-store cash, while reclaiming some floor space.

Over at the Go Banking Rates blog, a number of clutter-cashing ideas are on offer.

The blog recommends a “triage” of your clutter collection to sift out any items of value.

“Go through each room and sort items into categories like clothing, electronics, books, and collectibles. Be ruthless in your selection; if you haven’t used it in a year and it doesn’t hold sentimental value, it’s likely clutter,” the blog advises.

Next, look up online to find the value of your potential “sellables,” the blog adds. See what similar items are going for on Facebook Marketplace, eBay, or (in Canada) Kijiji.

List your items on a suitable platform – the blog recommends eBay for collectibles, and Facebook for furniture and electronics “as you can avoid shipping costs.”

Anything you plan to sell online should be cleaned, repaired, and captured via a good, clear photo and well-written, clear description, the blog notes. Be sure, the blog concludes, that you are offering your items at a fair price, account for any fees your platform charges (example – shipping outside Canada) and be willing to negotiate. With Facebook sales, arrange to meet the buyer “in well-lit public places and consider bringing a friend,” the blog advises.

“With a little effort and savvy, you can turn your unused items into a valuable resource. Whether it’s an old guitar, a stack of vintage comics, or a designer dress you never wore, there’s likely a market for your once-loved items,” the article concludes.

The Frugal Farm Wife blog provides a few more ideas.

While it takes a bit of effort to cash in on your junk, it’s a sound idea to trade “a pile of stuff you no longer want or need for cash to spend on things you DO want or need,” the authors note.

Yard or garage sales, the article says, are the number one way “to get rid of stuff… they’re great!”

Set low prices for the bargain-minded yard/garage shopping set, advertise (via flyers or community Facebook, including some photos of what’s going on sale), and make your sale “easy to navigate” by grouping like items together, having tables to lay out clothes and larger items, etc.

Another approach, the article continues, is to “sell to consignment shops.” This is good for name-brand clothing that is in excellent shape, the article advises, and your clothes must be spotless.

Consider bringing any unwanted antiques to an antique store, the article notes.

At the Thrifty Frugal Mom blog, a lot of the same ground is covered, but the blog notes there are also online yard sales that can be set up via Facebook.

“To find one, simply search Facebook with your area’s name and either yard sale or resale and likely something will pop up. If not, create one yourself- but be prepared for it to become a hopping, popular place,” the blog notes.

“While you can sell big-ticket items here, I’ve found these groups to be a great place for selling smaller items and kid’s clothing. In fact, two groups that I’m part of are specifically for kid’s stuff.”

We can add a couple more thoughts from family experiences. The market for used 35 mm film cameras seems to have ticked up of late, and many camera stores will purchase your old cameras and lenses for a few bucks. There are several local stores that will pay cash for old vinyl records. And if you have any old collectible cards, there are card shops that will help you convert them into cash.

Depending on how serious your clutter addiction is, this is a process that could take time. But at the end of the day, you’ll have less clutter and more cash.

A nice place for some of that extra cash to be stored is the Saskatchewan Pension Plan. Any Canadian with registered retirement savings plan room can join SPP, and take advantage of its low-cost, professionally managed and pooled investment fund. And when you retire, your options include converting savings to a lifetime monthly annuity payment, or the flexibility of SPP’s Variable Benefit option, where you decide how much income to withdraw – and when!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 12: BEST FROM THE BLOGOSPHERE

February 12, 2024

Avoid key mistakes that can cramp your style in retirement

When we’re slaving away in our cubicles (or, more often these days, from our dining room tables), retirement can seem a far-off, almost imaginary time when work won’t be necessary.

But CTV’s Christopher Liew warns that to enjoy a long and financially stressless retirement, there are several key planning mistakes you need to avoid.

He begins his article by noting that one in four Canadians will be over 65 by 2043, and that our country “is home to an increasing number of centenarians (those 100 and older) as well.” As recently as 1990, he continues, Canucks could expect to live to age 77. Today that number has jumped to 83.

“Canada’s senior population is growing larger and living longer,” he writes. “While this is great news, it also means the younger generations need to pay more attention to retirement planning.” So, what are the things we need to avoid?

First, writes Liew, don’t start saving for retirement too late.

“If you want to build a substantial retirement fund, time is your greatest ally. The longer your retirement savings have to grow and earn compounding interest, the more you’ll have when it’s time to step back and start your retirement,” he explains.

He then gives an example – Person A, who “opens a retirement account at age 25… deposits $1,000 and contributes $500 a month,” and Person B, who at 45 opens an account, deposits $10,000, and contributes a grand per month.

“By the time these individuals turn 65, Person A will have $731,838.63 and Person B will have just $423,324.43,” Liew explains, all thanks to the “magic of compounding returns.”

Another error to avoid is failing to diversify your investments, writes Liew.

“Putting all your retirement eggs in one basket can be a risky game. Diversification is key to balancing the risk and returns in your investment portfolio. Failing to diversify can expose your retirement savings to market volatility and specific sector risks, potentially derailing your long-term plans,” he notes.

A third mistake is underestimating your retirement expenses.

“Retirement often brings its own set of financial demands, ranging from healthcare costs to leisure activities. Underestimating these can lead to financial strain, potentially forcing you to dip into savings faster than you anticipated,” he warns.

Be aware – in advance – of “all potential retirement expenses, including healthcare, travel and hobbies,” he recommends. Plan for things like “home repairs or health emergencies,” and “consider the impact of inflation on your future expenses.”

Fourth on the list is not having a clear plan for your retirement.

“Without a defined strategy and vision for your retirement, you risk running out of funds, missing out on investment opportunities, or failing to account for expenses. A clear retirement plan helps you stay focused and make informed decisions,” he suggests.

Last, but not least, is not accounting for inflation.

“Failing to account for the gradual increase in prices over time can significantly impact the purchasing power of your retirement savings. What seems like a sufficient nest egg today might fall short in the future, especially with the rising costs of living,” he concludes.

Diversification is a key strength of the Saskatchewan Pension Plan’s Balanced Fund. All the eggs are in different baskets, including Canadian and U.S. equities, non-North American equities, real estate, infrastructure, bonds, mortgages, private debt and short-term investments. Check out SPP today – a made-in-Saskatchewan retirement program that’s open to all Canadians with registered retirement savings plan room!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 8: Control spending and debt, and you’ll free up money to save: Gail Vaz-Oxlade

February 8, 2024

The classic book Never Too Late, by Gail Vaz-Oxlade, is absolutely brimming with great saving advice that still stands up today.

In the past, she begins, no one worried about saving for retirement, and for good reason. “You got to 40 or 45 and you died. No problem there. But then life got easier, health care got better, and people started living longer. A lot longer. And a new industry was born: the retirement-planning industry,” she writes.

This book, she continues, is for anyone who has “been avoiding the whole issue of planning for your future… and (who thinks) your current approach might not really be the best way to have a happy life down the road.”

Her four key points are to “stop worrying, start saving,” to “be sensible” and avoid bad plans, like carrying debt into retirement, to take action (actually doing something) about saving and to “take control” of your finances.

Vaz-Oxlade presents her “four basic rules for managing money,” which are:

  • Don’t spend more money than you make.
  • Save something.
  • Get your debt paid off.
  • Mitigate your risks.

You need to figure out, to the penny, how much you own (bank accounts, registered retirement savings plans, TFSAs, etc) versus how much you owe (mortgages, car or other loans, lines of credit, credit cards, investment loans, student loans, etc.), notes Vaz-Oxlade.

“Subtract what you owe from what you own. That’s your net worth. If you have a positive number, it means you own more than you owe and you’re on your way to building up an asset base. If your number is negative, it means you owe more than you own and you must get busy paying down your debt and building up your savings,” she writes.

To start saving, Vaz-Oxlade introduces the concept to the personal savings rate, or PSR, “a measure of how much money you save out of the money you make.” To get to this number, add up your monthly income from all sources, then tote up what you are spending each month. Subtract what you spend from what you make.

“If you come up with a positive number it means that you’re not spending more than you make and have some savings. Good for you. If you spend every penny you make, your personal savings rate will be zero… if you end up with a negative number, you’re spending more than you make,” she explains.

No matter how pressing things are with your finances, Vaz-Oxlade stresses the importance of starting to save.

“If there is a single message I want you to hear it is that YOU MUST SAVE…. You don’t have to start by saving a whack of money. If you’ve never set a penny aside, making just a small commitment today can make a huge difference to your financial future. So, it doesn’t matter how little you have to start, the important thing is to start,” she writes.

On government retirement benefits, Vaz-Oxlade warns that “if all you will have access to are government benefits because you don’t have access to a company pension and you don’t plan to save anything while you’re working, you’ll have to lower your expectations about what retirement life will look like… in all likelihood you’ll just be making ends meet.”

At the time the book was written, Vaz-Oxlade said 11 million Canadians lack a company pension plan, “in which case you’re on the hook for all the money you’ll need to set aside for the future.”

She notes that 20 per cent of those who are eligible for a workplace retirement program “don’t participate. Really? Your employer wants to give you more money and you won’t take it?” Get to HR tomorrow and sign up if you can, she urges.

She says that a lot of what’s written about retirement focuses on the idea that “we’re gonna need a bazillion dollars if we ever hope to retire,” an argument that makes many folks depressed, or scared into “sticking their heads into the sand” on retirement saving.

All saving will be of help. She gives the example of Frank and Jeff, twins who are both 20, who know they need to save for retirement. Frank “opens up an RRSP right away, contributes $2,000 a year for 14 years, and then stops.” Jeff procrastinates, starts at 30, and puts $2,000 a year away until age 64. Both get compound gains of six per cent annually.

At 65, Frank has $283,400 and Jeff, despite having put in more than twice as much money, has just $139,200. Because “the interest he earned on the interest he earned” happens over a longer time period, he ends up with more, explains Vaz-Oxlade.

So, don’t be fazed, and start saving. “If retirement is rushing towards you like a speeding truck, do something. Find a way to cut $5 a day from your spending. Drop coffee, lunch at work…. Skip a take-out meal or night out and enjoy some good ol’ home cooking…. Invest that five bucks a day – just five bucks – using an automatic monthly savings plan in either an RRSP or a TFSA, and in 20 years at a return of five per cent, you’ll have over $61,655.”

In a section on retirement living, Vaz-Oxlade reassures us that for most people, retirement will consist of “the simple pleasures that make your life lovely to live. Think of sleeping in. Think having time to spend with friends you were always too busy to see. Think time with the grandkids or with your church pals.” Don’t expect to “completely revamp your lives” at the end of work.

A nice idea, once you have figured out what your retirement income will be from all sources, is to practice by living on that amount prior to actually living on it.

“Practising living in your future retirement circumstances lets you develop a feel for what it will be like and get ready to make the adjustments necessary. By simulating your retirement life, you not only see how you will feel, you’ll get some experience with what you’ll have to do to make it work.”

She offers a number of savings steps for those of us who haven’t started. Get started, even if you are putting a toonie away in a jar each week.

When you get a raise, “live on your pre-raise income,” and bank the raise. Tax yourself on spending – “every time you pick up a coffee, grab a burger, or hoe through a muffin, drop a buck in your bank.”

When you finally pay off a debt, put half of what you were paying each month into savings.

If you save $10 on groceries, put that $10 in the bank. Consider using a cash back credit card, as long as you pay off the balance in full each month, and bank the cash back.

There’s a rich section on how to invest on your own covering fixed interest and equity investments, mutual funds, and exchange traded funds. When investing, Vaz-Oxlade writes, pay attention to the fees you are being charged, as they “will eat into how much you end up investing.”

Vaz-Oxlade also talks about annuities, which provide monthly income for life. “During periods of high interest rates an annuity can really make your hard-earned money sing since you’re locking in that high rate for the life of the plan,” she observes.

Make sure you have thought about what you are going to do with all your newfound time before you retire, she concludes.

This is a truly great book for any of us who have yet to get started on saving for retirement. There’s lots of humour and the tone is one of a supportive coach’s advice. Definitely worth adding to your collection.

With the Saskatchewan Pension Plan, it’s you who decides how much you want to contribute. Contributions can be made automatically, and you can bump them up in future when you get a raise. And when you retire, among your choices are a lifetime annuity payment each month, or the flexibility of SPP’s Variable Benefit

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 5: BEST FROM THE BLOGOSPHERE

February 5, 2024

Start off the New Year on the right foot – savings-wise

As the snow flies, signaling the true start of another winter, there’s an opportunity (as well as some time) to put your savings hat back on.

So writes Dale Jackson for BNN Bloomberg.

Jackson notes that he is pretty optimistic about 2024. “Canadians who invest for retirement have a lot to feel good about,” he writes, citing recent positive trends in both the U.S. and Canadian stock markets.

He offers up four “risk free ways to boost portfolio returns in 2024.”

First, Jackson says, it’s time to address debt.

“A massive five-per-cent hike in the Bank of Canada benchmark interest rate in less than two years has more than doubled monthly debt payments for some Canadian households,” he writes.

“For many, the best investment for 2024 is to pay down debt, starting with the highest rates. Balances owing on credits cards, for example, can top 25 per cent. There is no comparative investment that can produce a 25 per cent risk-free return,” he explains.

Next, he continues, is the opportunity to shore up (or create) a fixed-income portfolio.

“A big silver lining from higher borrowing rates is higher lending rates,” he writes.

“After three decades of lacklustre yields, fixed-income options such as guaranteed investment certificates (GICs) are returning more than five per cent annually.

Higher fixed-income yields bring an opportunity for investors to lower overall portfolio risk without sacrificing returns by shifting assets away from the volatility of equities,” Jackson explains.

His third strategy for boosting income is to “take advantage of tax perks.”

“Some experts say a good investment tax strategy can boost returns by 25 per cent over the lifetime of an investor. For most Canadians, that requires utilizing their registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs) and any other tax perks available,” Jackson notes.

This year, he continues, “Canadians will be permitted to contribute an additional $7,000 to their tax-free savings accounts (TFSAs). As it stands, the current limit for those who were 18 years or older when the TFSA was launched in 2009 is $88,000, but it can vary among individuals depending on withdrawals made over the years.”

He also notes that contributions to a registered retirement savings plan (RRSP) made before the end of February are tax-deductible for your 2023 taxes.

His final piece of advice is to pay very close attention to investment-related fees.

“Most Canadians invest for retirement through mutual funds, which can charge annual fees above 2.5 per cent. That means the fund would need to generate a return higher than 7.5 per cent to give investors a five per cent return,” he writes.

“Many mutual funds outperform the broader market after fees but most don’t. Consider less expensive alternatives such as basic market-weighted exchange traded funds (ETFs) with much smaller fees,” he concludes.

If you’re a member of the Saskatchewan Pension Plan, you’re already taking advantage of lower fees. SPP’s pooled, professionally managed Balanced Fund operates with a fee that is typically less than one per cent! Not a member? SPP is open to any Canadian with RRSP room, so check out SPP today and see how we can get your retirement savings plans back on track!

Join the Wealthcare Revolution – follow SPP on Facebook!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.