Many of us boomers were good at ignoring the great financial advice given to us by our more successful parents. That meant we had to learn about personal finance in the School of Hard Knocks, and may explain why most of us now owe $1.70 for every dollar we earn.

Great steps are being taken to ensure the upcoming set of young Canadians get schooled a bit about money; CNN recently reported on Ontario’s plans for financial literacy classes in the primary grades.

Save with SPP had a look around the “information highway” for some thoughts on what the top things we parents should be tell our kids and grandkids about managing money.  The folks at the Homeownership.ca blog offers a few tips from noted financial author Gordon Pape. First, Pape tells the blog, talk about money, and be open about it with the kids. Why let them grow up “in a world of ignorance” when you can instead honestly answer their money questions? The second tip is to avoid trying to teach them things you don’t know about, and to make the learning fun – make it more of a game.

Yahoo! Finance Canada adds a few more ideas. “Encourage teens to get jobs and earn money,” the site advises. “Help your children open a bank account. Show your kids how to map out a budget.” Other ideas here include using a glass jar as a piggy bank, so the young ones can see their savings grow, and talking to kids about how credit cards work.

The federal government has some ideas to share about money also (no snickering). Lead by example and use your own credit wisely, the site suggests. “If your teens see you using credit wisely, they may be more likely to follow your example,” the site adds. The key messages for younger credit users is that credit is not income – it is borrowed money that has to eventually be paid back. As well, the site notes, “if they repay the full amount they spent each month, they won’t need to pay interest.”

These last points are key, and something many of us either don’t know or don’t really want to hear. A line of credit or a credit card is a convenient way of borrowing money from a lender. While you can access money from these sources just as you would from a bank account – you can tap to pay, you can pull bills out of a machine – what is less visible is the cost of that borrowing.

Years ago, the federal government mandated credit card companies to show how many years it would take to pay off a credit card if you pay only the minimum amount. That’s another good thing to show the younger set!

If you are teaching your kids about saving, and they are old enough to start a retirement savings account, a nice option is the Saskatchewan Pension Plan. Younger people have a huge savings advantage – they may be 40 or more years away from retirement. That’s four decades for every invested dollar to grow. So starting young on retirement savings will pay off generously farther down the line.

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Canucks doing better than we think at retirement saving: report

It’s somewhat rare to see a headline saying Canadians are on track for retirement saving, but that’s the key point of new research from HEC Montreal’s Retirement and Savings Institute.

The study, funded by the Global Risk Institute, was featured in a recent Benefits Canada article.

The positive news – “more than 80 per cent of Canadians aged 25 to 64 are prepared for retirement and the vast majority have a high probability of being prepared,” the magazine notes.

According to the research, which was conducted featuring a large sample of more than 17,000 Canadians, those who are the best prepared are those whose household earnings are below the national median, and “those covered by pension plans,” Benefits Canada notes.

Those who are in the worst shape – somewhat surprisingly – are “upper-middle earners without retirement savings,” the magazine reports, adding that CPP and QPP improvements may benefit that segment of the population down the road.

The authors of the study used what they called a “new stochastic retirement income calculator,” which unlike many calculators, models “the evolution of private savings, accounting for individual and aggregate risk; taxation of savings, including capital gains; employer pensions; a realistic stochastic modelling of work income; the value of housing; and debt dynamics.”

So for those, like us, who got lost at “stochastic,” it seems that this calculation takes into account risk, taxation, future work income, housing prices and levels of debt when calculating what one actually needs to maintain the same standard of living in the life after work.

That calculation showed that on average, participants would have 104.6 per cent of the net income they need, once they are retired, to maintain their pre-retirement living costs.

We can share a personal experience here. When the head of our household decided to get an estimate of what her pension from work would be, she was at first a little dismayed to see that the gross annual pension income – despite 35 years of membership in her workplace plan – was lower than what she was making at work. But when she looked at the net, after-tax income, or take-home pay, it was actually higher. It’s because she’s paying less income tax, no longer making pension contributions, and no longer paying into CPP and EI. That all makes a big difference on the bottom line.

So, the authors of the study conclude, “on average, if (Canadians) retire at the age they intend to, maintain their saving and debt payment strategies and convert all of their financial wealth into income, Canadians have net income in retirement which is higher than their pre-retirement income.”

The reason for the high numbers may be that for those making at or below the median income  “are well covered by the public system even if they have no savings or [registered pension plan] coverage,” the authors of the report state in the Benefits Canada piece. It’s those with income above the median and who also lack workplace pensions – about 15 per cent of Canadians – who need to worry, the article concludes.

If you don’t have a retirement program through work, and don’t really want to take on saving and investing on your own, an excellent option is the Saskatchewan Pension Plan. The plan will invest your contributions at a very low investment cost, thanks to the fact the SPP is not operated on a “for profit” basis. Since its inception in the late 1980s the SPP has grown the savings of its members at an average annual rate of eight per cent. And when the time come for you to convert those savings into a lifetime income, the SPP has flexible annuity options to turn your hard-saved dollars into a lifetime income stream.

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We often focus most of our planning on things like building wealth, paying off debt, transitioning to retirement, and taking care of ourselves physically and mentally.

All these worthy projects should be joined by another – estate planning. It’s important to think about what your loved ones will need once you’re gone.

Save with SPP took a look around the Interweb to see what the experts advise about estate planning for Canadians.

At the Advice for Investors blog, the main tips are having an updated will, naming powers of attorney and jointly holding assets.  The blog cites a recent RBC study that found that only half of Canadians had a will and “one in three had done nothing at all to prepare for passing on wealth to the next generation.”

Without a will, the blog warns, “provincial bureacrats will determine how the estate is distributed,” rather than you. Having powers of attorney in place for legal/financial matters and health will be of critical importance should you suddenly lose the ability to manage your own affairs, the blog notes.

And when you make your assets joint with your spouse, “the interests of a deceased owner automatically gets transferred to the remaining surviving owners,” the blog notes.

The MoneySense blog adds in a few more ideas – life insurance, the idea of giving away money to family while you are still alive and setting up trusts for kids and grandkids.

Insurance, notes Lorne Marr of LSM Insurance in the MoneySense blog, “may be used as an estate planning tool – an opportunity to leave a legacy or pay taxes so your heirs don’t have to.” The article suggests insurance is best taken out at a young age, when your health is at its best. You should buy enough insurance to cover all your debts and replace what you earn, the article notes.

Giving gifts to adult children while you are still alive “may reduce the overall tax burden on your estate when you die,” notes Lawrence Pascoe, an Ottawa attorney, in the MoneySense article. “Gifting money is a good way to help out your kids while you’re still alive and can watch them enjoy it,” he states in the article.

For younger kids, the article notes, you can set up a trust account that provides them with income at a later age. “You can stipulate what the funds can be used for, such as educational expenses, a new home, retirement savings,” the article notes.

The Manulife Financial website devotes an entire web page to one thing – beneficiary designation for insurance and/or a retirement plan.

If you don’t name a beneficiary – or name minor children as one – your estate may get tied up in probate, the article warns. In some provinces your spouse is automatically your beneficiary – check before you sign, the article suggests. If there’s a way to name a contingent beneficiary – someone to pay out the assets to if your chosen beneficiary dies before the payout – do so. And be sure to review your beneficiary designations regularly, the article concludes.

If you’re a member of the Saskatchewan Pension Plan you can look after your survivors in several ways. Your SPP beneficiary will receive any assets in your account if you die before collecting a pension and a variety of different options are available for your spouse and beneficiary upon your death after retirement. Check out SPP today.

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Pandemic a bigger challenge to retirement saving than Great Recession: report

Unless all your retirement savings are invested in low-risk securities like GICs or government bonds, you’ve probably spent a lot of time watching the pendulum swings in the market since March.

A new report from Fidelity Investments Canada says it’s clear that today’s pandemic-influenced markets are worse for savers than the shaky markets of the “2008-2009 Great Financial Crisis.”

“Data shows Canadians near and in retirement are more negatively impacted by COVID-19 than the Great Financial Crisis,” states Peter Bowen, Vice-President, Tax and Retirement Research in a media release from Fidelity. “However, we are in this together and there is help. By seeking financial advice and writing down an action plan, Canadians can feel better and navigate the uncertainty,” he states in the release.

The data was gathered for Fidelity Canada’s annual Retirement 20/20 survey, which gathered data from Canadians “already in and approaching retirement.”

Here are some of the key findings mentioned in the media release:

• 40 per cent of retirees reported “a negative outlook on their life in retirement,” the worst score in this category since 2014.
• 40 per cent said their earnings had decreased owing to the pandemic, and 50 per cent said that fact, in turn, means they are “reducing the amount of money they are able to save.”
• Those (80 per cent of pre-retirees and 92 per cent of retirees) with a written financial plan felt “positive about their (future) life in retirement.”
• Eighty-five per cent of those with a plan said they worked with an advisor.

What’s different about this market rollback from the 2008-09 crisis?

According to Nicolas Samaan of Manulife, interviewed by Wealth Professional, this crisis has a different element to it.

“You’ve seen on LinkedIn people posting about losing their job and people helping each other,” Samaan tells Wealth Professional. “You see that human interaction, not just financially but in general, people making sure others are okay.

“It’s more about wellness – that is so much more important. I’ve always said to people, if you don’t have the health to do your (personal projects), it’s not going to work. In that sense, this crash was very different than what we’ve seen in the past,” he states in the article.

Samaan is right. The last crisis was scary but on a strictly economic basis – will banks fail, will the economy tank? This one has the overlay of a worldwide health crisis – will we find a way to cope with, or become immune from, this virus, and will the economy be able to hold on until that happens?

Picking stocks when markets are uncertain is not something for the faint of heart. Having professionals handle the investing is especially valuable at times like these. It’s nice to realize that the Saskatchewan Pension Plan has averaged an eight per cent rate of return since its inception in the 1980s, a period of time that included the Tech Wreck in 2000-2001 and the Great Financial Crisis a decade or so ago. The pros can make adjustments when markets take an unexpected turn, and can look at alternative ways to grow your money. Check out the SPP today.

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We often hear how scarce good workplace pensions are, and how many employers, notably those in the private sector, have given up on offering them altogether.

But, according to Derek Dobson, CEO and Plan Manager of the Colleges of Arts and Technology (CAAT) Pension Plan, there is an option for any Canadian employer that doesn’t want to go through the effort and expense of managing a pension plan for their employees. That option is CAAT’s DBplus plan.

Dobson tells Save with SPP that there are three main themes as to why some employers – with or without their own pension plan – might want to look at DBplus.

Running what is called a “single employer” defined benefit (DB) plan means the risk of ensuring there’s enough money invested to cover the promised benefits rests on the shoulders of one employer. In a multi-employer plan, however, many employers are there to shoulder the load – the risk is shared.

As well, he notes, it might be a chance to upgrade pension benefits. “A lot of organizations want to have access to something better for their people… some employers offer nothing, or a group RRSP. Now they can move to a modern DB plan,” Dobson explains. One study by the Healthcare of Ontario Pension Plan (see this prior Save with SPP post) found that most Canadians would take a job with a good pension over one that pays more, Dobson notes.

A final benefit, he says, is the ability that DBplus has to move all employees to a common retirement benefit platform. “In many organizations, you may find that one group of employees has nothing, one has a defined contribution plan, others have a DB plan that is now closed to new entrants… DB plus allows you to put everyone on the same platform,” he says.

Noting that another large pension plan – Ontario’s OPSEU Pension Trust – has launched a similar program for non-profit organizations, Dobson says the idea of leveraging existing pension plans to deliver pensions to those lacking good coverage “is great…the long and the short of it is that there’s a general belief that these larger plans want to put up their hands to help where they can.”

“It’s the right thing to do,” he says.

Why are pensions so important?

Dobson points out some key reasons. “The average person these days will live to age 90, and on average, they retire at age 64 or 65,” he explains. “That’s 25 years in retirement. So having a secure, predictable income, one with inflation protection and survivor pensions, and that is not being delivered for a profit motive – that’s why these plans are so powerful.”

Another great thing about opening up larger plans to new employers is that it addresses the problem of “pension envy,” Dobson says. Instead of pointing out who has a good pension and who doesn’t, now “everyone has access to one, to the same standard.”

Those without a pension have issues to face when they’re older, he warns. “The Canada Pension Plan and Old Age Security systems weren’t designed to be someone’s only source of income,” he explains. “We had a three-pillar system in the past – CPP, OAS, and the third pillar, your workplace pension plan and your private savings,” Dobson says. But a large percentage of Canadians don’t have pensions at work, and a recent study by Dr. Robert Brown found that the median RRSP savings of someone approaching retirement age is just “$2,000 to $3,000,” Dobson says. Yet the same study found Canadians are willing to try and save 10 to 20 per cent of their income for retirement.

Dobson says he is energized by the goal of bringing pensions to more Canadians. “It’s a way of making Canada better,” he concludes.

Here’s a video about how the CAAT pension plan delivers on benefit security.

We thank Derek Dobson for taking the time to speak to Save with SPP.

If you don’t have a workplace pension, or the one you have offers only modest benefits, don’t forget the Saskatchewan Pension Plan. SPP allows you to decide what your savings rate will be, grows those dollars at a very low management rate, and can convert the proceeds to a variety of lifetime pensions when you retire. Check them out today.

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New research from the World Economic Forum, reported by Corporate Advisor, suggests the “savings gap” between what we should set aside for retirement, and what we actually have, is on track for monumental growth.

“Globally, experts are concerned many people could be sleepwalking into retirement poverty. The World Economic Forum (WEF) highlighted that the gap between what people save and what is needed for an adequate standard of living in retirement will create a financial black hole for younger generations,” the Advisor’s Emma Simon reports.

The WEF looked at the some of the world’s largest pension markets, including Canada, the U.K., Australia, the U.S., the Netherlands, China, India and Japan, and concluded “the gap” could reach a staggering $400 trillion U.S. in 30 years.

But, the article says, there is still time to do something to avert a crisis.

“With ageing populations putting increasing pressure on global pension and retirement plans, employees, employers and governments need to take more responsibility and act to prioritise pensions and savings,” Simon explains.

Countries around the world have done some interesting things to boost retirement savings.

In the U.K., the article notes, “automatic enrolment” was rolled out in 2012. This means that new employees are automatically signed up for their workplace pension plan, with an option to opt out. Thanks to this, there are 10 million more pension plan members in the U.K., although there are concerns about 9.3 million who aren’t in plans because they were too old for auto-enrolment, the article explains.

In Australia, the Superannuation fund system was made mandatory “in 1992 for all employees older than 17 and younger than 70 earning more than $450 (AUD) a month.” So this means everyone is saving on their own – but with the current maximum contribution of 9.5 per cent (soon to rise to 12 per cent), there are questions as to whether they are saving enough.

A Benefits Canada article from a couple of years ago raised the same question – are Canadians saving enough for retirement on their own? While Canadians had accumulated an impressive-sounding $40.4 billion in RRSPs as of 2016, the article notes that the median contribution annually was just $3,000.

As of 2018, reports the Boomer & Echo blog, the average Canadian RRSP was an impressive sounding $101,155. But if someone handed you $100 grand and then said “live off this for 30 years in retirement,” it wouldn’t sound quite so great.

There’s no question that saving needs to be encourage in Canada and around the world. The Canada Pension Plan and Old Age Security both provide a pretty modest benefit, and most of us don’t have a workplace pension. So steps should be taken to encourage more access to pensions, to look at increases to government benefits, and to encourage more saving.

If you don’t have a workplace pension plan, the Saskatchewan Pension Plan may be just what you’re looking for. The SPP is a defined contribution plan. You can contribute up to $6,300 a year, and your contributions are carefully invested at a very low fee. When the day comes that work is no longer a priority, the money you’ve accumulated through growth and ongoing contributions can be converted to a lifetime pension. Check them out today.

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It’s not what you save, but how you manage money, writes Catherine Brock

Is there some sort of magic solution that will help us gear up for our eventual retirement?

Writing for the Magic Valley blog, Catherine Brock says you don’t necessarily need magic. She sees four specific things that you need to have locked down before entering life after work.

First, she writes, you need to be able to “budget confidently.”

“Budgeting doesn’t mean you know generally how much you spend each month. It means you know exactly how much you spend,” she explains. This will force you to live within your means, and if you want to buy something that’s over your budget, you will have to save up for it, Brock notes.

The next thing is to have “control over spending.”

Once you are following a budget, you can focus on your spending, and if you can save a few dollars, those savings are real. “You’ll probably find that focusing on your spending naturally creates savings by eliminating mindless purchases. And then you can get creative, cut back, price shop, and even freeze spending temporarily to uncover additional savings,” she explains.

An emergency fund is a third “must” for retirement readiness, Brock writes.

“Experts recommend keeping at least three months of living expenses on hand in a cash account. Heading into retirement, it’s a good idea to target more than that, say six or 12 months of expenses,” she points out. Without an emergency fund, you’ll need to tap into your retirement savings for your emergencies, a losing strategy that can cause trouble later, Brock notes.

The last category is a big one – eliminating revolving debt.

She says that if you are on course for the first three categories, then getting rid of debt should be your focus. A good approach is, after you have paid off one debt (credit card or line of credit), to use the money you were paying on it to help target the next one. Repeat the strategy until you are debt free, she advises.

She concludes by saying that mastering these four skills is as important as what the balance is in your retirement savings account. In plainer terms, it’s not what you save, it’s how you manage it that wins the retirement race.

If you haven’t heard how the Saskatchewan Pension Plan can help grow your retirement savings, you should check them out today. This professionally managed open defined contribution plan can invest your contributions, grow them over time, and convert them to a lifetime income stream when you turn in your ID badge at work.

SPP is especially helpful if you don’t have a pension plan at work – if you work part-time, casual, or via the so-called gig economy, you can contribute at a rate that works for you. You can turn SPP into your own personal retirement savings system.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

As we glide along, waiting for things to be “normal” once again on the health front, it’s interesting to see the changes in how Canadians interact with restaurants.

Until very recently, restaurants were restricted to take out or delivery. Now we’re seeing them reopen, usually with limited seating, perhaps expanded patios, and so on. Things are still not back to where they were in early March, and may not be for a long time. Save with SPP took a look around the Internet to see what people are making of this.

There’s no question that the restrictions have been very, very tough on Canada’s restaurants, reports Retail Insider. Citing research from Restaurants Canada, the magazine reports that “seven out of 10 restaurants in the country are either worried or extremely worried that they won’t have enough liquidity to pay vendors, rent and other expenses over the next three months.”

While the many restaurants still open “for takeout and delivery have demonstrated an exceptional level of responsiveness and innovation while continuing to ensure the health and safety of their staff and everyone they serve,” notes Restaurants Canada’s Shannon Munro in the article, their efforts may not be enough to stave off “insufficient cash flow and insurmountable debt.”

Some provinces are realizing that restaurants have been placed in a very tough spot. In Ontario, reports CTV News, provincial officials plan to get rid of the usual red tape so that it is easy for restaurants and bars to expand their patios, so long as social distancing rules are accommodated.

“We want to make sure we get rid of as much red tape and as much cost as possible to allow people to serve their patrons,” Ontario Attorney General Doug Downey tells CTV.

Many jurisdictions that previously restricted or prohibited alcohol delivery and take-out (the latter is known as off-sales in Western Canada) have dropped those rules. In Ontario, Blog TO reports that Premier Doug Ford is considering making alcohol delivery and takeout from restaurants a permanent thing – one that benefits restaurants. “There’s going to be a lot of things, as we say, the new way of doing business — and not only in government, but in the private sector, too,” Ford states in the article.

If there’s a takeaway from all of this, it is the need to support our local businesses as much as we can during a very tough period. Besides ordering for yourself, another great idea is to get gift cards from restaurants to give out as presents to friends and family. Like other parts of the economy that have been slammed by this healthcare crisis, every dollar we spend on local dining helps a local business to stay afloat until better times return.

While you can’t buy gift cards for the Saskatchewan Pension Plan, you do have a lot of flexibility as to how you can contribute. With SPP, you can either set the plan up as a bill and contribute via online banking, can set up direct deposit from your chequing account, or you can use SPP’s online form to contribute via your credit card. Check them out today!

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

What to do when the markets tumble

Every once in a while, the financial markets will throw you a curve ball. That’s the nature of investing – what goes up can come down. But what should one do during a downturn?

A recent article in the Financial Post  says the “days of turbulence” this year may have some folks thinking of giving up on stocks altogether, and stuffing “money into a shoebox under your bed” instead.

But, the article advises, that would be the wrong approach. Markets tend to bounce back after setbacks – they are resilient.

Quoted in the article, investment professional Dan Tersigni says staying the course, rather than bailing on stocks, is the wisest approach. “The odds are overwhelmingly in your favour,” he tells the Post. But patience is a must, the article says, as it can take four or five years for markets to fully recover from a slide.

The next tip from the Post is to remember what your investment goals are. If it’s retirement down the road you’re saving for, “the worst thing is to go off track by ditching investments when stocks take a dive,” the article notes.

“You still have time on your side, and you really don’t want to be making short-term decisions,” Tersigni tells the Post. Retirement can be a multi-decade journey with time to make up short-term losses, the article states. If you are up at night fretting about volatility in your investments, perhaps should look at a more diversified portfolio, the Post reports.

Finally, remember that down markets can often be a good time to buy, the Post tells us.

“Normally when the stock market takes a pounding, you shouldn’t focus on what you’re losing but instead on what you could be buying. A market plunge or `correction, makes stocks cheaper,” the article notes. However, the Post says, getting it exactly right on timing – buying at the lowest point – is extremely difficult. A better plan is to automate the process, and buy a set amount of investments every month, the article says.

“That way, you’ll get the best performance from your money – even during the worst of times,” the Post concludes.

So to recap – don’t panic and sell everything at a loss. Focus on the longer term goals – you may have more time than you think until you are actually dipping into those savings as income. And making regular investments, a practice called “dollar cost averaging,” lets you take advantage of dips without getting into the risky business of timing the market.

A nice feature of the Saskatchewan Pension Plan is that you can automate your savings by setting up a periodic direct withdrawal from your bank to SPP. This accomplishes two goals – as discussed, you are now doing dollar cost averaging. And as well, you are paying yourself first, and directing money into your savings before you start paying the bills. Win win.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22