Age Wave

May 3: BEST FROM THE BLOGOSPHERE

May 3, 2021

A staggering $1 trillion in Canadian inheritance money will be transferred this decade

Writing in the Financial Post, columnist Jason Heath notes that we are headed for all-time records when it comes to inheritances in this country.

“Estimates of expected Canadian inheritances over the next decade are as high as $1 trillion,” he writes, adding that that figure could be driven even higher by stock prices and real estate values.

While articles (and books) have been written about the idea of “dying broke,” it appears most Canadians don’t follow that view. Heath notes that 47 per cent of adults over 55, in a 2019 survey by Merrill Lynch and Age Wave, feel that leaving their kids an inheritance was “the right thing to do.” Similarly, he writes, 55 per cent of millennials felt their parents had an obligation to leave them an inheritance.

The idea of leaving money for the kids isn’t always talked about in retirement planning circles, notes Heath.

“Many people spend their working years scrimping and saving to be able to afford to retire. Inheritance pressure after retiring may limit spending in retirement. It insinuates that workers need to save for not only retirement, but also their apparent inheritance obligation to their children,” he writes.

If you are going to be receiving an inheritance, Heath suggests you not be in a rush to make decisions about it.

“Some recipients see it as a windfall and spend it frivolously. Others see it as blood money and feel a great burden when they inherit,” he explains.

He recommends doing nothing with the inheritance for a time – leave it in the bank for six months, he suggests.

If you are on the giving end of an inheritance, you can consider giving money to the kids while you are still around to see them enjoy it, Heath adds.

“Some people would rather see their family enjoy an inheritance while they are still alive. Making gifts to children or grandchildren can be a great way to do so. There are no tax implications of a gift of cash to an adult child or grandchild,” he explains.

Just be sure, he warns, that you are not “passing along too much too early… so as not to risk your own financial security.”

The article goes on to look at some of the complexities of leaving an estate – “the choice of beneficiary designations, use of trusts, implementing an estate freeze, or insurance strategies can… reduce tax and probate costs.”

Did you know that benefits from the Saskatchewan Pension Plan may be payable to eligible beneficiaries upon your death?

If you die before you retire, the balance in your SPP account will be paid to your beneficiary.

If you die after you retire, any benefits payable depend on your choices at the time of retirement.

The SPP Retirement Guide provides details on the three types of annuity you can choose from when you start your SPP pension. While the life only annuity doesn’t offer survivor benefits, the refund life annuity can result in a payment to your beneficiary if you die before receiving annuity payments equal to your account balance at the time the annuity was chosen. The joint and last survivor annuity provides a pension equal to 100, 75 or 60 per cent of what you were receiving to your surviving spouse.

If you choose to transfer your benefits out of SPP when you retire, no death benefits are available from the plan.

These survivor benefits can ensure that a measure of the security SPP has been delivering for more than 35 years can continue to a beneficiary or spouse. Check out SPP 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, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Aug 24: BEST FROM THE BLOGOSPHERE

August 24, 2020

Pandemic is causing 8 million Canucks to rethink retirement

There’s no question that 2020 has been a year like no other. Its effects on the economy and our finances have been profound.

A new study by Edward Jones and research company Age Wave, reported on by Global News, shows what impacts the pandemic has had on retirement savings in particular.

The report says a whopping eight million Canadians “are rethinking their retirement timing” due to the pandemic. While one of every 10 Canucks still plans to retire early, “one third believe they will retire later,” citing financial concerns, the Global article notes.

“If many working adults were not adequately prepared for retirement, COVID-19 has thrown them even farther off course,” the article notes.

The study found that two million Canadians “have stopped making regular savings to their retirement savings.” Before the pandemic, the research shows, 54 per cent of adults were confident about retirement. Now, that confidence indicator is down to 39 per cent, Global reports.

“Those who think they’ll have to postpone retirement cited needing more income, shrunken savings, investment losses and increased uncertainty about how much they’ll need in retirement,” the article says. “The few who are considering anticipating retirement amid the pandemic, on the other hand, said they `realized that they were looking forward to retirement, or they want to spend time doing other things that are more important to them than work,’” the article states.

The article quotes financial author Alexandra Macqueen as noting that those with workplace pension plans, notably defined benefit plans, aren’t as impacted by the pandemic and can still choose to retire early.

(Save with SPP interviewed Alexandra Macqueen recently, here’s a link to the interview)

“What I’m … thinking more and more is that the difference between people with pensions and without is getting so much more stark,” she says in the Global article.

The article notes that older Canadians (boomers and the cohort that is older than them, the “Silent Generation”) are generally doing fairly well during the pandemic, while younger generations (millennials, Gen Z, and Gen X) are struggling.

The older are helping the younger financially, the article concludes, while the younger generations are making sure their elders are staying health, a “silver lining” of intergenerational cooperation amidst the pandemic.

The article underlies the disparity between those who have a workplace pension and those who don’t. When you’re in a plan at work, pension contributions are deducted from your pay – the savings is automatic, a “set it and forget it” way to pay yourself first.

The pandemic will eventually end, but if you lack a workplace pension plan, you still can set up an automatic retirement saving system of your own.

The Saskatchewan Pension Plan lets you automate your retirement savings through pre-authorized transfers from your bank account. You can start small – an affordable contribution – and ramp it up when you’re making more in the future. If there’s a trick to retirement saving, it’s to start doing it and then keep on with it. Starting and stopping won’t get you there. Pay your future self first. The money you set aside today may be missed in the short term, but in the long run you’ll have more security for the future, post-work years.

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.