If there was a money tree growing in every back yard, we wouldn’t have to worry about saving or investing for retirement. Our annual harvest of $100 bills would pay for everything.
But money doesn’t grow on trees, so once you allocate hard-earned money to retirement savings, you must decide on an investment strategy that will grow your account into the nest egg you need to retire.
Before deciding how to invest your money, you have to identify how much risk you can stomach. Your retirement goals, the number of years left to retirement and the amount of money you can tolerate losing are all factors that will influence the percentage of your portfolio allocated to various asset classes.
The Investor’s Education Fund has a simple quiz that will help you identify your risk tolerance. When I took the quiz, I found out I have a “medium” tolerance for risk which means I am most comfortable with a mix of bonds, stocks and fixed income investments.
In a Masters of Money blog on the same website, Globe and Mail financial writer Rob Carrick says one thing everyone agrees on is that you must get more conservative in your asset mix as you get older.
Carrick suggests that every five years or so you should think about ratcheting down the risk level of your portfolio. In practical terms, that would mean moving some of your stock market exposure into bonds and cash. Your evolving mix of assets in a registered retirement savings plan account might look something like this:
AGE
% IN STOCKS
% IN BONDS & CASH
25
85
15
30
80
20
35
75
25
40
70
30
45
65
35
50
60
40
55
55
45
60
45
55
65
30
70
However, financial experts do not advocate that older Canadians get out of the stock market completely. You still need some portfolio growth in the period when you are drawing down funds to pay for retirement, particularly if you live to age 90 or beyond.
Members of the Saskatchewan Pension Plan benefit from the investment expertise of independent money managers. Funds of members who have not yet retired are pooled in the Contribution Fund.
The Contribution Fund allows members to invest in a balanced portfolio or a short-term fund. The balanced fund investment strategy is to maximize earnings for members and minimize the risk, while the purpose of the short-term fund is capital preservation.
The balanced fund portfolio composition is shown below.
The average earnings of the balanced fund since inception in 1986 have been 7.86 per cent with returns of 8.45 per cent in 2012.
Accounts of members who have retired are pooled in the Annuity Fund.The Annuity Fund is invested in bonds and short-term investments. The strategy for this fund is to produce income to pay members’ pensions.
Have you checked recently to see if your investments are consistent with your risk tolerance? If so, send us an email to socialmedia@saskpension.com. Your name will be entered in a quarterly draw for a gift card.
And don’t forget March 1, 2013 is the deadline for contributing to the Saskatchewan Pension Plan and your RRSP for the 2012 tax year.
If you would like to send us other money saving ideas, here are the themes for the next three weeks:
As we contemplate retirement somewhere down the road, most of us are probably focused on how to save enough money. However, deciding how we are going to spend our time is equally important.
$he Thinks I’m Cheap blogger Andrew suggests that in addition to investing in stocks and bonds, planning how you will use your time, skills and health are three critical areas that should not be ignored when creating a retirement budget.
On Retire Happy, Donna McCaw discusses how planning retirement is a little like planning a honeymoon. You have to think about what happens after the first few months.
Guest blogger Robert writes on Canadian Dream: Free at 45 that since he retired he is busier than ever, volunteering, training for a triathlon and taking courses towards a Masters degree in Education at the University of Calgary.
And finally, readers of all ages will be interested Boomer & Echo’s 20 tips to save money on gas. But be wary of companies that try to sell you mileage-improving devices and fuel additives.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Send us an email with the information to socialmedia@saskpension.com and your name will be entered in a quarterly draw for a gift card.
SPP, RRSP, Group RRSP, TFSA. This alphabet soup of acronyms represents only a few of the most common retirement savings options available to Canadians.
Other important retirement savings vehicles beyond the scope of this blog include employer-sponsored defined benefit pension plans, defined contribution pension plans and hybrid registered pension plan designs.
Where you chose to save your money and how much you save each year is an individual decision based on your disposable income and your longer-term financial goals. Because each type of plan has different contribution levels, tax consequences and withdrawal rules, it often makes sense to contribute to more than one kind of savings vehicle.
For example, you might decide to:
Contribute to the Saskatchewan Pension Plan to ensure you have a stream of income at retirement.
Participate in the Group Registered Retirement Savings Plan sponsored by your employer to get the benefit of employer matching of your contributions.
Save your “emergency” or “rainy day” fund in a TFSA.
To help you understand and prioritize your retirement savings, here are some key features of each of these program. SPP and RRSP contributions for 2012 must be made by March 1, 2013 to be eligible for a tax deduction.
In all cases, you should consult your financial advisor and obtain more detailed information about each type of program before making savings and investment decisions.
SPP is the only pension plan of its kind in Canada. It is a voluntary defined contribution plan open to anyone between the ages of 18 and 71. Employers who wish to make SPP available as an employee benefit can set up a group plan. Often employers with group plans match employee contributions up to a specified amount selected by the company.
SPP Key Features
Savings objectives:
Retirement savings.
Contributions:
Maximum contributions of up to $2,500/year if RRSP contribution room is available. Up to $10,000/year can be transferred in from another RRSP. No minimum payment. Contribution schedule and payment method at the member’s option.
Tax treatment:
Contributions are tax deductible. Tax is paid on benefit payments after retirement.
Investments:
Active members can invest in a professionally-managed balanced portfolio intended to maximize earnings and minimize risk or a short-term fund geared to capital preservation. Investment returns in the balanced fund have averaged 8% over the last 26 years and annual fees have been around 1%.
Withdrawals:
SPP contributions are locked-in within 6 months of joining and earn interest until the member retires.
Portability:
Membership in SPP can continue regardless of where the member resides or works throughout his career.
Retirement:
SPP members can elect to retire (start receiving benefits) as early as age 55 and no later than the end of the year they reach age 71. Members can elect to receive a pension from the fund, transfer the lump sum in their account to another locked-in account with a financial institution or a combination of both.
Any person currently working in Canada is eligible to open and contribute to an RRSP until the year he/she turns 71 providing the individual has contribution room and files Canadian taxes. An RRSP account can be opened at any financial institution such as a bank, credit union and most investment houses.
RRSP Key Features
Savings objectives:
Retirement savings. Home purchase, education (see “withdrawals” below)
Contributions:
Until the year the taxpayer turns 71, contributions of up to 18% of earned income from the previous year can be made up to $22,970 in 2012 ($23,820 in 2013.) RRSP contribution room can be found on line (A) of the RRSP Deduction Limit Statement, on taxpayer’s latest income tax notice of assessment or notice of reassessment.
Tax treatment:
Contributions are tax deductible. Tax is paid on the full amount of withdrawals before or after retirement.
Investments:
RRSPs can be self-directed, or administered by a bank or financial institution. Generally, the types of investments permitted in a in a RRSP include:
Cash
Mutual funds
Securities listed on a designated stock exchange
Guaranteed investment certificates (GICs);
Bonds; and
Certain shares of small business corporations.
The earnings record and investment fees charged will vary and investors must do their own due diligence.
Withdrawals:
RRSP contributions are not locked in. However, when funds are withdrawn from an RRSP, the contribution room is lost. The Homebuyer’s Plan and Lifelong Learning Plan allow RRSP withdrawals and repayment in specified circumstances.
Portability:
Membership in an RRSP can continue regardless of where the member resides or works throughout his career.
Retirement:
Funds in an RRSP can be withdrawn at any time and tax is payable on the full lump sum. Funds that are not withdrawn by the end of the member’s 71st year can be used to purchase an annuity or transferred into a registered retirement income fund. There are provincial pension and federal income tax rules about the maximum/minimum amounts that must be withdrawn each year.
Group RRSPs
Some employers establish Group RRSPs as an employee benefit. Often employers with Group RRSPs match employee contributions up to a specified amount selected by the company. They also may be able to negotiate lower fees for similar investments than fees charged to individuals by retail financial institutions.
Employers may restrict withdrawal of RRSP contributions by active employees except in extenuating circumstances, by withholding employer contributions for some period of time after a withdrawal is made.
An employee who changes jobs will not be able to continue in the group plan but the funds can be transferred to an individual RRSP with no tax consequences. However, the available investment options and the investment fees may not be as attractive as in the Group RRSP.
TFSA stands for Tax-Free Savings Account. Like an RRSP, a TFSA can be set up at a financial institution such as a bank, credit union, trust or insurance company.
TFSA Key Features
Savings objectives:
Saving for any short or long term objective including retirement.
Contributions:
Up to $5,500/year beginning in 2013. Previously, $5000/yr
Tax treatment:
Contributions are not tax deductible but investment earnings accumulate tax free. Any funds withdrawn are also tax free.
Investments:
Generally, the types of investments that will be permitted in a TFSA are the same as those permitted in a RRSP. This would include:
Cash
Mutual funds
Securities listed on a designated stock exchange
Guaranteed investment certificates (GICs);
Bonds; and
Certain shares of small business corporations.
The earnings record and investment fees charged will vary and investors must do their own due diligence.
Withdrawals:
Funds can be withdrawn at any time. Withdrawals will be added to the member’s TFSA contribution room at the beginning of the following year.
Portability:
Membership in a TFSA can continue regardless of where the member resides or works throughout his career.
Retirement:
Federal income-tested benefits and credits such as:
Old Age Security (OAS) benefits, Guaranteed Income Supplement (GIS), or Employment Insurance (EI) benefits will not be reduced as a result of the income earned in a TFSA or amounts withdrawn from a TFSA.
Have you made your 2012 SPP contribution yet? Are you also contributing to an RRSP or a TFSA? Send us an email to socialmedia@saskpension.com and tell us about how you are saving for retirement and your name will be entered in a quarterly draw for a gift card.
If you would like to send us other money saving ideas, here are the themes for the next three weeks:
When I blogged for moneyville, one of the mantras that appeared over and over in the best-read stories were “if you don’t ask, you don’t get.” This week on Give me back my five bucks, moneyville alumni Krystal Yee makes a great case for negotiating salary in a new job instead of simply accepting the first amount you are offered.
And I’m REALLY glad I didn’t read Mark Goodfield’s blog on the The Blunt Bean counter about how much it costs to own a dog before we got our darling cockapoo Rufus – even if he does wake us up at 5 AM.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Send us an email with the information to socialmedia@saskpension.com and your name will be entered in a quarterly draw for a gift card.
St. Valentine’s Day began as a liturgical celebration of one or more early Christian saints named Valentinus. However, the celebration of Saint Valentine did not have any romantic connotations until Chaucer’s poetry about “Valentines” in the 14th century.
Today Valentine’s Day is a huge marketing opportunity for florists, jewellers and the candy industry. As soon as the Christmas decorations come down, malls are decorated with hearts and flowers.
It’s actually rather nice to have something to celebrate when spring is till several months away in most of the country. But if you want to give your loved one roses, chocolates or dinner out at the local hot spot, you may have to pay premium prices in mid-February.
When I was researching romantic, inexpensive Valentine’s Day gifts, I found Sheryl Kurland’s list of 50 Valentine’s Day Gifts for Your Sweetheart (without looking cheap). I’m not much of a “do-it-yourself” person so many of her ideas exceed the time and skills I possess. But here is an edited list of the 10 suggestions I like best:
Make a framed group of photos (or photo collage) of memorable occasions you have celebrated together, in chronological order.
Burn a CD with meaningful music like the first dance at your wedding, songs from musical you saw on your honeymoon and the lullabies that were the only thing that put your baby to sleep.
Leave a love note on your partner’s pillow along with a chocolate truffle or two and a single rose.
Create an in-home spa day for your mate. Put together a basket filled with inexpensive candles, bubble bath, rose petals, facial mask and scrub. Hand her towels warmed in the drier when she is done.
Make a marvellous dinner for two. A home-made steak or lobster dinner is much less expensive than a pricey restaurant meal. And you can never go wrong with traditional cherry cheesecake for desert.
Give your lover Valentine’s Day IOU coupons: I will make dinner. I will do the laundry. I will walk the dog for a week.
Write new “updated” wedding vows, both serious and humorous and share them with each other over a glass of wine in a candlelit room.
Make homemade chocolate-covered strawberries: 1) Melt a package of chocolate chips in a double boiler and add a small amount of oil; 2) Remove from heat and quickly dip the strawberries into the chocolate; 3) Place on wax paper and refrigerate for several hours until chocolate is firm.
Get the kids involved. Help them make cards or print them off the internet. Make a special breakfast including pancakes, waffles or even buttery croissants from the local bakery.
If you don’t have a special sweetheart, focus on bringing a smile or laughter to everyone you come in contact with on Valentine’s Day.
Can you suggest other inexpensive romantic ways to celebrate Valentine’s Day? Send us an email to socialmedia@saskpension.com. If your idea is posted, your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you use one of our money-saving ideas.
If you would like to send us other money saving ideas, here are the themes for the next three weeks:
With RRSP season in full swing, you may be reviewing your budget projections to ensure you are saving enough for retirement. But are you factoring in the future cost of health care?
In Planning for health care in retirement, a guest post on Retire Happy, Sun Life Financial AVP Kevin Press suggests that some combination of disability insurance, critical illness insurance and long-term care insurance can help fill the post-retirement health care gap.
Understanding your family’s life insurance needs is another important element of financial planning. The blog Riscario Insider links to a LIMRA Quizz which you can take to test your life insurance literacy.
Finally, if you’ve decided that this is the year you will finally buy a smartphone or trade your old one in for a newer model, on Engadget, Tom Stevens explains and evaluates the new features found in the BB10 which was released with great hoopla this week.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Send us an email with the information to socialmedia@saskpension.com and your name will be entered in a quarterly draw for a gift card.
SPP posted a return of 1.22% to the balanced fund (BF) and 0.057% to the short-term fund (STF). The year to date return in the BF is 8.45% and in the STF is 0.52%.
Whether you plan to spend spring break on a beach or on the ski slopes, the only thing worse than losing your luggage is discovering your credit card has been lost or stolen. And discovering unauthorized charges on your credit card statement when you get home ranks a close second.
Here are 10 ways to protect your account information and resolve unauthorized card use whether you “staycation” close to home or travel abroad.
Don’t send card information by email or text: If you are booking travel or changing travel arrangements when you are away, remember most email and texts are not secure. All it takes for someone else to charge to your account is your card number, expiry date and security code. Even your name and address can be enough information for identity theft.
Don’t lend your credit card: Do not give even family members your credit card number or the card to use on your behalf. If you are prepared to authorize a family member to use your account on a regular basis, get a separate card with the appropriate credit limit.
Don’t share your PIN: Protect your PIN at all times and don’t write it down on a slip you keep in your wallet. If you can’t remember your PIN, go into your bank and choose a new one before you leave. Don’t use obvious numbers like your birthday or your telephone number.
Call before you leave: Financial institutions issuing credit cards have software that recognizes unusual patterns of behaviour. For that reason, on several occasions my card has been refused when I was travelling outside Canada. Now I always call to tell my credit card company where I am going and how long I will be in each city.
Check your credit limits: Make sure you know when your card expires and the withdrawal/credit limits on your debit/credit cards. I typically pay off my cards completely before leaving on a major trip, particularly if a payment is due in my absence.
Put the card company on speed dial: Make a note of your credit and debit card numbers, as well as issuer phone numbers, and keep them in a safe place in case your card is lost or stolen. Because I had CIBC VISA’s toll free number on speed dial when my card disappeared in a Peking market several years ago, I was able to immediately report the loss and cancel the card.
Carry only what you need: When travelling outside the country, I leave my rewards cards, hospital cards and other miscellaneous wallet contents at home. However, my husband and I usually bring several different credit cards and bank cards as back-up and keep all but one in the hotel room safe. A friend who recently visited Russia had his debit card “eaten” by an ATM. Fortunately his wife had her own debit card and was still able to withdraw the cash they needed for the balance of their trip.
Keep receipts: Review credit card receipts before you sign, and monitor both credit card and bank account statements carefully on your return. On a trip to St. Martin, I tried to withdraw money from a generic ATM machine to pay cash for a pair of earrings. The machine refused my card but spit out a receipt. When I got home I realized my account had been debited, but I never received the funds. It took months for CIBC to trace the transaction, but I did eventually get my money back.
Currency conversion: When using an unfamiliar currency, what looks like a deal, may turn out to be very expensive. Smart phone apps are available that will allow you to do on the spot calculations. VISA also has a currency calculator that can give you an indication of the rate you will pay when using your credit card. But remember, this converter uses a single rate per day with respect to any two currencies and rates apply to the date VISA processes the transaction, which may differ from the actual date of the purchase.
Beware of contactless credit cards: Many newly-issued credit cards and other important documents pose major fraud and privacy concerns because they are designed to be scanned through the air. “Contactless” credit cards have an embedded computer chip called a radio frequency identification, or RFID tag. When waved near a payment terminal in a store or by an unscrupulous individual using a manual unit, the chip supplies the card’s number and expiry date through radio waves, avoiding the need to swipe or insert the card. RFID blocking wallets or passport holders can be ordered online.
And finally, never let the card out of your sight when you make a purchase. In the few minutes that a clerk or gas station attendant has your card it can be swiped through a skimming device. This is less of a problem as more merchants are using portable wireless terminals, but this technology is not universally available in some parts of the world.
Can you suggest other ways to protect your credit cards on vacation? Send us an email to socialmedia@saskpension.com. If your idea is posted, your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you take steps to improve credit card security in 2013.
If you would like to send us other money saving ideas, here are the themes for the next three weeks:
Andrew is also a guest blogger on our perennial favourite Boomer & Echo. If you made a New Year’s resolution to eat less and work out more, you will be interested in his contribution this week about mobile technology that can improve your health.
For fans of passive investing, in Revisiting the Couch Potato Model Portfolios Dan Bortolotti discloses how and why he recently tweaked his holdings, although generally he does not advocate jumping from fund to fund.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Send us an email with the information to socialmedia@saskpension.com and your name will be entered in a quarterly draw for a gift card.
So your guy finally popped the question at Christmas and now you are sporting a shiny new bauble on your left hand. I hope after you called your parents, your next call was to your insurance company.
Whether Santa brought you a sparkling engagement ring, a stunning piece of art, a new set of golf clubs or a fast new bike, it is important to to make sure the items are properly insured.
When my husband and I got engaged he was still a student. The ring he gave me cost $300 and I almost got run over crossing Bloor St. in Toronto because I was so busy admiring it. In spite of its sentimental value I never worried about insurance for that ring, but 25 years later he bought me a much more costly replacement for our anniversary.
We are insured with TD Insurance through Security National. TD’s entry level gold policy limits recovery for theft or loss of jewellery to $4,000. Although we have the platinum policy which covers jewellery up to a value of $12,000, by the time I added up the bits and pieces I’ve acquired over the years including my newest acquisition, I realized our coverage wasn’t nearly enough.
So I decided to bite the bullet and purchase an additional floater (also called an endorsement) to cover my ring at the annual cost of $18.78/$1,000 of coverage. And I’m very glad that I did.
Several years later we were in Stratford for the weekend and went to a local gym on Sunday morning. I looked down at my right hand as we left the parking lot and was horrified to see the pear shape solitaire was missing from my ring. Even after searching in all the obvious places including a bin of wet, dirty towels, it was nowhere to be found.
I reported the loss to my insurance company and within a few weeks they calculated the replacement value of a stone of similar size and quality and paid that amount to my jeweller, inclusive of taxes. If I hadn’t intended to replace the stone, I could have received a personal cheque minus the taxes.
Prices for floaters and endorsements vary depending on the item, the insurance company you choose, where you live and where the item will be kept. There are no deductibles and frequently you get the option of having the insurance company replace the item for you.
To make sure your recently acquired valuables are adequately protected, the Insurance Information Institute (I.I.I) makes the following five suggestions:
Contact your insurance company immediately: Let the company representative know that you now own a new piece of jewelry or other expensive item. Find out how much coverage you have under your current policy and whether additional insurance is needed.
Keep a copy of the store receipt: Forward a copy of the receipt to your insurer so that the company knows the current retail value of the item. Keep a copy for yourself and include it with your home inventory.
Have jewelry appraised: New jewelry should come with an appraisal. Heirlooms and antique jewelry will have to be appraised for their dollar value. It is important that expensive items be appraised properly because if you purchase a floater, you will pay a premium based on the appraised value and, in the event of a claim, be compensated for this dollar amount.
Take a photo or video of the item: With a camera in every smartphone, keeping a visual record of all of your personal possessions is easier than ever. If you use a video camera, you can also provide a verbal description of the item or collection. This helps to document your loss and speed up the claims process. It is also useful for documenting antique and unusual items.
Add the item to your home inventory: A home inventory can help you purchase the correct amount of insurance and speed up the claims process when there is a loss. To make creating your inventory as easy as possible, you can use the I.I.I.’s free Web-based home inventory software, Know Your Stuff® – Home Inventory. You can also download the free app for iPhones and Androids.
Store valuables in a secure location: Protect your jewellery by storing it in a secure location in your home. If you don’t wear the item regularly or are saving it for a family member, consider keeping it in a safe deposit box. You may save money on the cost of insuring it, as some companies offer “in vault” coverage.
Do you have any other ideas how to protect your valuables? Send us an email to socialmedia@saskpension.com. If your idea is posted, your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you take steps to ensure your valuables are properly documented and stored in accordance with the suggestions above.
If you would like to send us other money saving ideas, here are the themes for the next three weeks:
