A look at the best of the Internet, from an SPP point of view

Canadians need to save 11 times their salary by retirement

There are many “rules of thumb” in the world of money. One used to be that your rent should equal one quarter of your monthly take home pay. Another used to be that your house should be worth twice your annual salary.

According to research by Fidelity in the US, reported by Market Watch, people should have saved a year’s salary for retirement by age 30.

By age 40, Canadians should have saved three times their salary for retirement. And by “average retirement age,” usually early 60s, Canucks need to have saved 11 times their salary, the article says.

The article tempers the alarm it raises with these high figures by pointing out that they are just guidelines. “Everyone faces different circumstances, and therefore need varying amounts of money by the time they retire,” the article reports. “Some people may choose to rent or pay off a mortgage, while others may not have any housing obligations except for taxes and utilities. Some retirees may want to take more vacations, or have more medical bills to pay, or have intentions with their money, such as an inheritance for their children and grandchildren.”

And don’t forget that the contributions you make towards CPP and a portion of your income tax are retirement savings payments, since you will get a CPP pension one day and likely Old Age Security as well.

That said, Statistics Canada, via the CBC, reports that the average Canadian saves only four per cent of his or her income, and that there was a whopping $683.6 billion in unused RRSP room as of the end of 2011. The article notes that someone saving $2,000 a year from age 25 on would have $301,478 by age 65. That might not be 11 times his or her salary, but it is a pretty good number.

Retirement savings, like losing weight or getting out of debt, is overwhelming when you first set out to do it. But if you start small, and chip away over the years at your target, you will be surprised to see how far you’ve come when the time comes to log out of work for the last time.

If you’re not fortunate enough to have a pension plan at work – and if you do, and have extra contribution room each year – the Saskatchewan Pension Plan is a great way to build your retirement savings. You can start small, or can contribute up to $6,200 per year. You can transfer savings in from other retirement savings vehicles. The money is invested professionally at a very low fee, and when you retire, you’ll have many options for turning savings into a lifetime income stream. Check it out today.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

As 2018 rolls along to its grand finale, it’s a good time to reflect on the year that was.

Today, however, we want to look at something a little different – let’s have a look at what not to do when it comes to saving, the worst ways to save of 2018.

At the Money & Career Cheatsheet blog, there are several “worst practices” for saving outlined.

First, the blog notes, don’t always buy everything in bulk. “You’ll just end up spending more money in the long run,” the blog advises. “Let’s be realistic. Are you really going to use these bulk items in a reasonable amount of time? And where are you going to store all of this stuff?” Better, the blog advises to “cherry pick” and buy items when they are on sale at a regular grocery store.

Other tips from the folks at Cheatsheet: avoid store credit cards, which are easier to get but often have the highest interest rates, and don’t skip on retirement savings. “Don’t make excuses for why you can’t save for retirement. You’ll be sorry you didn’t start earlier. Start contributing to your retirement fund as early as possible,” the blog advises.

At the Smartasset blog, the biggest savings mistake identified is not paying off “bad” debt. “Debts such as credit card and personal loans stick with you and tend to have higher interest rates than secured debt,” the blog post explains. “Thus, the longer it takes you to pay these debts off, the more you end up paying in the long run.”

The Sweating the Big Stuff blog says eating at fast food restaurants may feel cheaper than dining at a restaurant, but the less-healthy food will cost you your health. As well, the blog says BOGO-type deals are rarely a great thing. “When you `get one free when you buy four,’” it means you’re buying four when you only wanted one; it means you’re wasting money, not saving it! Think really hard before you get that `great’ deal that’s making you think you’re such a genius,” the blog advises.

The Slice blog echoes some of these points, but adds a few more – paying only the minimum on your credit cards, and cheaping out on insurance – going for the lowest rate rather than focusing on what you want covered.

Save With SPP can think of a few more. It’s always better to save up for a vacation than to get it on credit. You’ll leave the beach and will head home to an inbox full of bills. Using credit card points must be done right. The points are great, but greater if you aren’t running a balance on your cards. Pay the card off each month or as quick as you can. Another one that jumps to mind is paying debt with debt; it seems to fix your short-term problem but creates a much bigger long-term problem.

As we get ready to enjoy the end of 2018, let’s all think about ditching any bad savings habits we have in 2019. We can, instead, make a resolution to do what Cheatsheet advises, and direct some real savings to retirement. The Saskatchewan Pension Plan offers a very flexible way to do just that.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

A look at the best of the Internet, from an SPP point of view

Millennials “optimistic” about their finances, yet aren’t big savers

We boomers often fall into the trap of sighing and tutting about the purported problems of our millennial children. This is often the source of snide snickering around the table at major holidays.

But there’s evidence, in the form of Equifax research published in Digital Journal, that the younger generation has a better grasp than we do regarding the dangers of credit and its negative effects on saving. That poll, the magazine reports, shows 82 per cent of millennials are optimistic about their financial future, versus only 73 per cent of the general population.

A big reason for millennial glee is that they are on top of their credit cards. “This younger age group appears to have learned from the misfortune of their older peers. Establishing good credit behaviours at this stage in life and maintaining them will likely serve millennials well as they get older,” the article notes.

Millennial credit scores have gone up in the last decade, while everyone else’s have gone down, the article reports.

Interestingly, the article says 75 per cent of those surveyed save something every month. A surprising 20 per cent “are not saving at all,” the article says. Most (40 per cent) save 10 per cent or less of their income, 26 per cent save 10 to 25 per cent and nine per cent of those surveyed save an astonishing 26 per cent or more of their income.

The millennials are even thinking of retirement, which is certainly not what boomers were thinking about 30 years ago. The poll found 72 per cent of millennials felt “they would be financially comfortable… and the youngest of the millennials were the least likely to (expect to) work into their retirement years,” the survey said.

When pressed, however, the millennials said the things that would be hardest to give up in order to save more were “eating out (33 per cent), morning coffee (13 per cent)… and Netflix (11 per cent).”

It’s great to know that the younger generations aren’t falling into the same mistakes their parents have made. And for those millennials who do try to bank a percentage of their earnings each month for retirement, the Saskatchewan Pension Plan is a great place to start. You can decide how much to contribute, and when, and as one credit-savvy millennial SPP member confided to me recently, you can even make SPP contributions with a credit card and get points! Now there’s a different way of thinking!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

Wouldn’t it be great, we fifty-somethings like to ask each other, if they taught the kids about money in school?

Translation – we wish someone would warn our children about the pitfalls of easy credit, which leads to crippling debt and a dearth of savings. And we are aware that the “someone” should probably not be us, since most of us are already there.

In the UK, a charitable group called Young Money is taking steps to right that wrong and get some financial literacy knowledge out to the younger set. They’ve released a textbook called Your Money Matters, and it’s free for anyone to download. Intended for use in education, it also contains a teacher’s guide.

The clearly written, concise book walks the reader through the basics of saving. Interest, the book explains, is “a reward for saving,” but is less rewarding when you want a loan or line of credit. “It is better to save than borrow, because in effect you get paid to save, whereas you have to pay to borrow,” the book notes.

After looking at the various savings options via banks, including bonds, the book then focuses on how to save. Basically, savings can come from earnings, gifts, the sale of things you own and – importantly – “reviewing your spending,” the book advises. “Reviewing your spending and making informed spending choices can have a serious impact on the money you have left to save,” notes the book.

Ways to be an “informed spender” include price checking between stores, using coupons and discount codes, joining online cashback sites, following favourite stores on social media to be alerted to sales and “decluttering” by reducing unneeded fees, the book states.

The spending chapter defines “needs versus wants.” Needs, the book explains, are “the absolute necessities… the things you can’t do without” such as food, water, shelter; wants are “the items, services, or experiences you would buy if you have the money to do so.”

As individuals, the book warns, we have peer pressure that influences our spending – family, peers, our culture, the season, ads, and the temptation to spend “disposable” income left over after bills are paid. The better you know these often negative influences, the easier it is to manage them, the book advises.

While much of the book is focused on UK examples, the basic stuff on saving and spending is pretty universal in theme. And while the intended audience is younger people, all of us could benefit from being informed spenders, rather than uniformed splurgers.

The book talks about the UK retirement system which is different than ours here in Canada. It does point out that joining a pension plan at work is a great idea because “your employer will also contribute to it.”

If you don’t have the option of a pension in your workplace, the Saskatchewan Pension Plan offers a “do it yourself,” end-to-end pension system you can join on your own. Your savings are invested professionally with very low fees, and at retirement time, SPP can convert your savings into a lifetime annuity, meaning you’ll get a cheque every month for as long as you live. It’s a wise step to take for any informed spender.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

A look at the best of the Internet, from an SPP point of view

Is retirement at age 65 priced out of most people’s range?
For decades, 65 has been the age when we are all expected to get the golden handshake. After all, it’s also the age when government pensions kick in.

But new research from Chartered Professional Accountants of Canada (CPA Canada), reported in Wealth Professional magazine, suggests many of us won’t be able to afford to hang it up at 65.

CPA Canada found a 42 per cent of working, unretired Canadians “think they will still be working past 65,” the magazine notes. Twenty per cent of respondents cited saving for retirement as “their most substantial financial concern,” with 17 per cent saying paying off debt is their top financial priority, the magazine notes.

On the plus side, 41 per cent of those surveyed think their finances will improve over the next year, reports the magazine. Forty-five per cent think things will stay the same, and 11 per cent worry their finances will get even worse, Wealth Professional notes.

Other findings noted in the article: 74 per cent of those surveyed said they save monthly, with 63 per cent having a savings account and 52 per cent having TFSA savings. Eleven per cent admitted they had no savings of any kind, the magazine noted.

CPA Canada’s Doretta Thompson, director, corporate citizenship, told Wealth Professional that while it is “welcome news” that so many Canadians feel their finances will improve, there needs to be “more financial literacy education, particularly around retirement saving and debt management.”

A final note from the article – most surveyed were concerned that rising interest rates would make it harder for them to save, as the cost of servicing their debts would go up.

It’s important to make savings automatic and regular, a “pay yourself first” scenario. An excellent way to achieve this goal is to set up automated savings with the Saskatchewan Pension Plan. You can contribute up to $6,000 a year to SPP, and you can do it at your own speed. And when you retire, SPP can help you turn those savings into a monthly income stream.

Perhaps the dream of retirement at 65 is harder than it used to be, but SPP does provide you with the tools you need to make it happen.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

For Derek Dobson, the fact that Canadians “are struggling to put money toward their retirement goals” is a “monumental issue” that needs to be addressed.

Dobson is CEO and Plan Manager of the Toronto-based Colleges of Applied Arts & Technology Pension Plan. At the end of 2017, the CAAT Plan had $10.8 billion in net assets and served more than 46,000 working and retired members.

Dobson tells Save With SPP that the statistics show that “there has been a decline in the percentage of working Canadians who have access to a pension savings program” in most Canadian workplaces. He says that the decline of workplace pensions started in the 1960s when the Canada Pension Plan started, a trend that has continued for decades.

But that trend can and should be reversed, he says. These days, it is harder to attract and retain valuable employees, and workplace pensions play an important role. “Employers are competing for workers again,” he explains. He says CAAT’s new defined benefit (DB) plan design, DBPlus, open to any organization, is getting inquiries from large and small employers. “We had a tree service company owner, with a staff of four, call us up about joining, because he found his people would leave to get jobs where there is a pension.”

Both CAAT and another Ontario jointly sponsored DB plan, OPSEU Pension Trust, have developed pensions that expand access to well-run defined benefit pensions that are easy for members and employers. Recently Torstar and its employees joined CAAT Pension Plan’s DBplus. When the matter was put to a vote, 97 per cent of the members of the Torstar plans voted in favour of the merger.

“Along with other pension plans, we are trying to get the message out that a measure of the health of Canada is how good its standard of living is in retirement,” Dobson explains.

People, he says, visualized getting old around age 75 and then passing away soon after. “Their jaw drops when we show them that it is highly likely they will live until their high 80s or early 90s,” he says. “They could easily live for 25 years of retirement. With improving longevity people need to think more about their financial security in retirement.”

Yet, he notes, those without pensions at work aren’t saving much on their own. The average RRSP balance in the country is only around $65,000 at age 65. That’s not going to be sufficient to keep people at a reasonable standard of living for 25 years, Dobson says.

Saving for retirement on one’s own is not easy, he says. While financial literacy courses help, retirement savings is a complex challenge for most. Canadians already are having to manage their debts, so “having a picture of what they want their future to be like” is difficult. “They want a good standard of living in retirement, but they don’t know where to start, or where to find value across so many choices.” And that can be so overwhelming that people “are not getting started putting money toward their retirement goals.”

Pensions in the workplace work because it is an automatic savings program, Dobson explains. “Your contributions come off your paycheque, so you don’t have to think about it,” he says. But decades later, he says, CAAT members notice that they are receiving a pension comfortably and the value is strong as they receive about $8 in benefits for every dollar they contributed, a fact that “resonates” with them, Dobson says.

The importance of having an adequate pension is something Dobson is passionate about; it is his hope that more and more employers will take advantage of the new and easy defined benefit offerings available to extend retirement security to more Canadians.

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

If you are saving on your own for retirement and want someone else to do the heavy lifting of retirement asset management and decumulation – turning savings into lifetime monthly income — the Saskatchewan Pension Plan may be the plan for you. Check it out today.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

A look at the best of the Internet, from an SPP point of view

The fear of outliving your savings
The old proverb, “live long and prosper,” popularized by Star Trek’s Mr. Spock, may be taking on a new meaning given some recent research.

According to recent research on aging from BMO Wealth Management, the possibility of a very long life, in the late 80s and beyond, is starting to scare Canadians over 55.

BMO found that 51 per cent of those surveyed “are concerned about the health problems and costs that come with living longer.” Forty per cent worry about “becoming a burden for their families,” while 47 per cent worry about outliving their retirement savings.

It’s clear that the spectre of long-term care costs near the end of life is a haunting one for those close to or early into their retirement years.

According to The Care Guide, the cost of long-term care – which is normally over and above the costs of renting a unit in a care facility – can range from $1,000 to $3,000 a month depending where you live in Canada.

That’s a big hit, considering that the average CPP payout in Canada  for a 65-year-old is only about $670 a month (as of July 2018) and the average OAS payment is only about $600. These great programs will help, but you may need to augment them with your own pension or retirement savings.

According to the CBC, citing data from 2011, the average annual RRSP contribution is only about $2,830. The broadcaster says someone saving $2,000 a year from age 25 to age 65 would have a nest egg of more than $300,000 at retirement. That sounds like a lot until you consider living on that for another 20 to 25 years.

A good way to insure yourself against the risk of running out of money is to buy an annuity with some or all of your retirement savings. An annuity will pay you a set amount, each month, for the rest of your life – no matter how long you live. The Saskatchewan Pension Plan not only provides you with a great way to save towards retirement each year you are working. It also provides a range of annuity options; check out SPP’s retirement guide for an overview.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

At the office, where we were involved in pension plan communications, we used to joke (as 30-somethings) about what our future retirement would look like.

One theory at the time was that where you would be in retirement would depend on your future income. If you had a big income, you’d be in the Big Smoke. If you didn’t, you’d be shopping for a double-wide trailer in rural New Brunswick.

While that’s an extreme example, our predictions from the ‘90s are coming true. Sometimes your retirement income will impact where you’ll live.

“If retirees could take their pick,” notes an article in Pay Day, posted on Yahoo! Finance, “most would probably want to spend their golden years somewhere warm, beautiful and affordable.” However, if a retiree is relying only on CPP and OAS, the article says, the list gets a little shorter.

The article suggests Moncton, NB; Lacombe, AB; Stratford, ON; Brandon, MB and Halifax, NS as places where limited dollars go the longest. These cities are selected because real estate is affordable, they have great services and healthcare, and the quality of life is high. Taxation rates and value for the dollar are also factors.

A similar list can be found in MoneySense.ca. The top seven retirement destinations are Moncton; Joliette, QC; Ottawa, ON; Winnipeg, MB; Canmore, AB and Victoria BC.

The MoneySense list looked for places that had “a thriving arts scene… a strong sense of community… easy access to airports… and pleasant weather.” Good transit is also important, the article notes.

We see many of our friends selling their big houses in Toronto and moving to smaller, more affordable communities elsewhere in the province. The idea here is that the proceeds from the sale of the house in the city are more than enough to buy a house in a smaller town, and you can bank the difference.

An important step you can take today to deal with tomorrow’s retirement living decisions is to bank a bit of your salary for life after work. The Saskatchewan Pension Plan provides you with an end-to-end system that turns your savings into investments, and those investments into future income.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

A look at the best of the Internet, from an SPP point of view

Employers need to help their employees save, says Ontario car dealership
An Ontario car dealership believes they, as an employer, need to play an active role in helping employees prepare for their golden years.

Bruce Dumouchelle is co-president of St. Thomas Ford-Lincoln in St. Thomas, Ont. Speaking to Automotive News Canada he notes that in the old days, retiring long-service employees got “a handshake and a set of golf clubs.”

“I just never felt that was enough,” he tells the magazine. “I felt, as an employer, we have to help employees save for retirement.”

To that end, the magazine notes, the dealership joined the Canadian Ford Dealers’ Pension Plan. Employees now make pension contributions that are matched by the employer, the magazine reports.

Having a pension plan is a great way to attract employees, the article notes.

“Employees feel they have a say over their future. I think the difference between working here and working somewhere else is that when retirement day comes, they’re going to have some money set aside,” Dumouchelle states in the article.

Eight habits are killing your retirement dreams
According to the Boomer & Echo blog, eight bad habits are impacting the retirement savings of Canadians.

First, the article notes, we don’t watch our spending. Second, we “want the newest everything.” Third is our collective need to upgrade, followed by item four, “treating credit card debt as a fact of life and not a hair-on-fire emergency.”

The fifth item is taking on “low-interest debt” to finance assets that depreciate – “weddings, vacations, furniture and vehicles.” Rounding out the list are complacency, putting off retirement savings until “a later that never comes,” and not investing long-term savings, but keeping it all in cash.

“The good news is that it’s never too late to take control of your finances and start saving for retirement. Start by fixing bad habits that have a negative effect on your finances,” the article concludes.

It’s easy to get started on your retirement savings with the Saskatchewan Pension Plan. Visit their site today and see how easy it is to begin putting away today’s dollars for tomorrow’s adventures.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

For most of us, retirement is a time when we are expected to make do with less income. That led us to wonder what, if anything, people give up when they decide to take the retirement plunge.

The news isn’t all that bad.

According to CNBC, via Yahoo! Finance, it is recommend that – by age 40 or so – you begin to give up “mindless spending, lifestyle inflation, excess living space, and a willingness to wait and see.” You won’t, the article suggests, be able to afford these things when you are retired.

The “wait and see” advice refers to your expected future spending, the article says. You’ll give up commuting and being stuck in traffic “and will probably spend more in other categories, like entertainment, recreation and travel,” the article states. You should factor these expected future changes in expenses into your savings plan, the article advises.

An article in the Globe and Mail offers a slightly less rosy viewpoint.

When you retire, the article notes, citing findings from a CBS Moneywatch article by Steve Vernon, we can lose our “engagement with life” when we stop working. “You can get engagement with life from working, but you can also get it from taking up causes, volunteering, pursuing hobbies, and contributing to your family and community,” the article notes. Failing to do that can, in some cases, actually shorten your life – so it’s an important thing to avoid giving up.

Another thing we often give up, notes Casey Research, is our active income from working. Not working means we lose our work contacts, and giving up on active income means “your ability to make smart investment decisions drops because of your dependence on passive income.”

On balance, however, there are more things that are good to give up than bad, suggests US News and World Report. You can, the article says, give up on “the drug of ambition,” and can stop worrying about promotions, better titles, or offices with a window.

You can give up not having time for movies, books and TV shows, and can still choose to not give up working altogether, the article adds. Never again will you not have time to volunteer, travel, and spend time with family – you will be “living the dream” in retirement, the article concludes.

You’re in charge of that future dream, both the financial and lifestyle side of things. A great way to save for retirement on your own is through the Saskatchewan Pension Plan, which is open to all Canadians. Be sure to check it out today.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22