Tag Archives: Canada Pension Plan

Is senior poverty linked to a lack of retirement saving or workplace plans?

An interview with Chris Roberts of the Canadian Labour Congress 

These days, it’s pretty common knowledge that many of us don’t save enough for retirement, and/or don’t have a savings plan at work. Save with SPP reached out to Chris Roberts, Director of Social and Economic Policy for the Canadian Labour Congress, to see how this lack of retirement preparedness may connect to seniors having debt and poverty problems.

Is the shortage of workplace pension plans (and the move away from defined benefit plans) in part responsible for higher levels of senior poverty/senior debt?

“Certainly old-age poverty rates and indebtedness among seniors have risen over the past two decades, while pension coverage has fallen (and DB coverage in the private sector has collapsed). Seniors’ labour-market participation has also doubled over those time period.

“It’s clear (from research by the Broadbent Institute) that falling pension coverage and inadequate retirement savings more broadly will deepen the financial insecurity and even poverty of many seniors. But while there’s been considerable research linking stagnant wages and rising household indebtedness, studies linking falling pension coverage with rising poverty and indebtedness among seniors are relatively scarce.

“Both rising poverty rates and growing indebtedness among seniors have several causes. Canada’s public pensions, especially Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), provide a minimum level of income in retirement for individuals without private pensions or other sources of income. Part of the rise in the low-income measure of old-age poverty has been due to the fact that OAS is indexed to the consumer price index rather than the average industrial wage, causing seniors’ incomes to lag behind median incomes. Unattached seniors, especially women, are at particularly high risk of poverty, but so are recent newcomers to Canada who are eligible for only a partial OAS benefit.

“With respect to rising indebtedness, a declining number (according to Stats Can data) of senior-led households are debt-free. More Canadians are taking debt (especially mortgage debt) into retirement, and they’re shouldering more debt in retirement as well. At the same time, the total assets of senior-led families have also risen, and their net worth has grown even as debt levels rose. Indebtedness and net worth seems to have grown fastest (again according to Stats Can data) among the top 20 per cent of families ranked by income.

“So I think we have to be somewhat careful to avoid seeing rising senior household debt levels as driven solely or even primarily by financial hardship caused by declining pension coverage. There is certainly ample evidence (according to research by Hoyes Michalos) of a significant and growing segment of seniors that are struggling with debt and financial pressure. But rising debt levels among higher-income senior households likely have other causes besides financial hardship.”

Is a related problem the lack of personal retirement savings by those without pension plans?

“Richard Shillington’s study for the Broadbent Institute demonstrated that a retirement savings shortfall for those without significant private pension income will be a major problem for many current and future retirees. This shortfall has also been documented in the United States (see a study by the Center for Retirement Research at Boston College). While retirement contributions as a share of earnings have been rising (even as the household saving rate fell), these additional contributions have gone toward workplace pension plans; contributions to individual saving plans have declined, suggesting that those without a pension have not been able to save independently to compensate for not having an actual pension (see this article from Union Research for an explanation).”

Is debt itself a key problem (i.e., idea of people taking debt into retirement and having to pay it off with reduced income)?

“I think rising debt levels in retirement do pose risks, even if the challenges vary significantly with income. For low- and modest-income seniors, some forms of debt (e.g. consumer credit, payday lending) can be onerous and even unconscionable. For home-owners, even if mortgage debt is accompanied by rising home values and rising net worth, servicing debts while managing health-related and other costs on fixed incomes can be challenging for seniors. Debts acquired at earlier stages of the life-cycle will likely become a mounting problem in Canada, as, for instance, the student debt of family members (see article from Politico) and seniors themselves (see coverage from CNBC) is becoming an urgent problem in the United States.”

Apart from things like CPP expansion, which seems a good thing for younger people, can anything be done today to help retirees to have better outcomes?

“Increasing GIS but especially improving OAS will be important to improving financial security for seniors. For the reason discussed above, OAS will have to be expanded or indexed differently in order to stabilize relative old-age poverty. But in my view, there are also good reasons to expand it. Current as well as future seniors would benefit. OAS is a virtually-universal seniors’ benefit (about seven per cent of seniors have high enough incomes that their OAS benefit is clawed back by the recovery tax), and it’s particularly important to low- and modest earners, women, Indigenous Canadians, and workers with disabilities. It isn’t geared to employment history or earnings, so it’s purpose-built for a labour-market increasingly characterized by precarity, and atypical employment relationships (e.g. “self-employment,” independent contractors, etc). Modest income-earners with pensions would benefit from a higher OAS; these workers earn only a small workplace pension benefit, and unlike increases to CPP, their employers would be unlikely to try to offset the costs of a higher (tax-funded) OAS benefit. While growing along with the retirement of the baby-boom cohort, the cost of OAS (as a share of GDP) is projected to peak around 2033 before declining. And at a time when workplace pension plans, individual savings plans, and even the CPP increasingly depend on uncertain and sometimes volatile investment returns, the OAS is funded through our mostly progressive income tax system.”

We thank Chris Roberts for taking the time to talk to Save with SPP.

Given the scarcity of workplace pensions, more and more Canadians must be self-reliant and must save on their own for retirement. An option worth consideration is opening a Saskatchewan Pension Plan account; your money is invested professionally at a very low-cost by a not-for-profit, government-sponsored pension plan, and at retirement, you have the option of converting your savings to a lifetime income stream. Check it out today at saskpension.com.

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 and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Why some Canadians choose to retire to other countries

Let’s face it – it’s hard to find good things to say about winter in Canada when it’s 40 below with the windchill and the snow is piling up in your laneway.

Save with SPP knows a number of people who head south for the winter every year. And there are others who leave Canada for good and live out their golden years abroad. We took a look around to find out some of the reasons why some of us take this step.

Well, one reason might be finding not only warmer weather, but a lower cost of living, reports MoneySenseRetiring in North America, the site advises, means you’ll need an average of about $625,000 in the bank at age 65 (or an equivalent pension), or “annual retirement income of $55,000.”

But this amount, the site notes, is enough to let you “live in luxury” in a variety of other countries, including Colombia, Ecuador, Mexico and Malaysia, all modern countries with much lower living costs. You can, the article says, get a three-course meal at a restaurant for about $10 in some of these countries, and rents are in the low hundreds, rather than the low thousands.

The Roam New Roads site also cites lower living costs and a better climate in France, Panama, Thailand or Belize. Some offer low-cost national healthcare, the article notes, as well as lively culture, history, and wonderful culinary expertise.

However, there are other factors to bear in mind if you are moving away from your home country, notes the Escape From America blog. You can be homesick, which “leads to many expatriates returning home every single year,” often a costly process. Retirement abroad means little or no time with family and friends, a “forced loneliness,” the blog reports. Culture, language, accessibility (driving a car) are all other potential downsides in a faraway land, the article says.

The government of Canada’s website notes that living outside Canada will have an impact on your taxes, and may change how you are able to receive your Canada Pension Plan and Old Age Security benefits. If you are living outside the country for part of the year, there may be provincial or territorial requirements for your healthcare – a set amount of time you must reside in your homeland in order to keep your benefits. Or, you may have to try and arrange health coverage for the foreign country. It’s certainly a cost to be aware of.

So putting it all together, you can live on less money by moving to another country, where your retirement savings will allow you to trade middle-of-the-road living here for luxury and new adventures there. You’ll be free of snow shovelling and dark winter afternoons. But, if you get homesick, the cost of travelling back will put a dent in your now-lowered cost of living. You may find yourself isolated by language and culture. And you’ll have to figure out how to keep your healthcare or find an alternative.

It’s a big commitment, and not for everyone, but on a cold winter day, it’s nice to imagine heading down to the beach.  Any sort of retirement, be it here in the good old northland or off in some exotic sunny country, will require income. If you’re dreaming about retirement, take some time to put away a few dollars now for that eventual future. You’ll be happy you did. And a great destination for retirement savings is a Saskatchewan Pension Plan account.

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

Feb 11: Best from the blogosphere

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

When it comes to retirement saving, how much is “enough?”

There’s no question about it – saving for retirement is a moving target. We are frequently told to save more for retirement, but it’s not often anyone lets us in on the secret of how much “enough” is, retirement-wise.

A new poll by Ipsos, conducted for RBC and reported on in the Montreal Gazette, gives us some specific answers to this age-old question.

On average for Canada, the article says, the savings target is $787,000. The article says Ontarians feel they need $872,000. In BC, respondents think retirement savings should top $1.05 million, the highest total in the country. In Quebec, which has the lowest average, the target is $427,000 to “have a comfortable financial future,” the article reports.

Save with SPP reminds those reading these daunting numbers that all working Canadians will get Canada Pension Plan or Quebec Pension Plan benefits, plus other government benefits like Old Age Security and, if applicable, the Guaranteed Income Supplement. So those will account for a significant chunk of that total savings amount, even though you don’t get these benefits as a lump sum, but as a lifetime payment.

However, those without a pension plan at work will have to do some saving to get to these average totals. The survey asked people how confident they were about reaching the finish line on savings. On average, just 16 per cent said they were confident. An alarming 32 per cent of Ontarians (least confident) and 39 per cent of Quebecers said they “will never build up enough of a nest egg,” the article says. The article says the lack of a financial plan may be part of the problem here.

“The survey… found 53 per cent of respondents from Quebec had no financial plan. Only Atlantic Canada had a higher rate of respondents with no plan, at 54 per cent. Of the 47 per cent of respondents who have a financial plan, 34 per cent said that plan is in their head,” the article notes.

“Across the country, 54 per cent of respondents said they have a financial plan,” the Gazette reports.

If there’s a takeaway here, it is that if you can – despite the rising cost of household debt and other life costs that get in the way – you need to plan to put a little away for retirement. If you start small you can increase your commitment later when the bills calm down.

A little effort today will pay off handsomely in the future, when your savings will turn into retirement income, and you’ll theoretically have paid off debts, raised your kids, and downsized so that you can enjoy your extra time. Don’t be intimidated by the multi-hundred-thousand dollar-targets – a little bit here and there will get the job done. And if you’re looking for an excellent home for your hard-earned savings dollars, look no further than the Saskatchewan Pension Plan.

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

Feb 4: Best from the blogosphere

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

Just six per cent of Canucks plan to save for retirement in 2019

A mere six per cent of Canadians intend to make retirement saving a top financial priority in 2019, according to research from CIBC published in Benefits Canada.

The reason? They’re swamped with debt, the magazine notes. Paying down debt was the top priority in the research, followed by “keeping up with bills and getting by, growing wealth, and saving for a vacation,” the magazine reports.

CIBC’s Jamie Golombek, who was interviewed by Save with SPP last year,  says debt can be a useful tool, but if you are using it for day-to-day expenses, “it may be time for cash-flow planning instead.”

Golombek, who is Managing Director of Financial Planning and Advice at CIBC, says despite the fact that paying down debt is a legitimate priority in any financial plan, retirement savings can’t be totally overlooked.

“It boils down to trade-offs, and balancing your priorities both now and down the road. The idea of being debt-free may help you sleep better at night, but it may cost you more in the long run when you consider the missed savings and tax sheltered growth,” he states in the article.

Obviously, paying off debts in the short-term does feel more like an imperative than saving for the future. After all, the telephone company and the credit card folks will certainly let you know if you’re late with a payment with helpful, blunt little emails and terse phone messages. No such calls come from your retirement savings team.

But even if retirement savings isn’t a squeaky wheel today, you’ll depend on it one day. A Globe and Mail article from a couple of years ago noted that half of Canadians, then aged 55 to 64, did not have a workplace pension plan, and of that group, “less than 20 per cent of middle-income families have saved enough to adequately supplement government benefits and the Canada/Quebec Pension Plan.” The Globe story cited research from the Broadbent Institute.

Government pensions won’t usually replace all of your workplace salary, so if you don’t have a pension at work, you really need to find a way to save. An excellent choice is the Saskatchewan Pension Plan, where you can start small and build your savings over time. You can set up automatic deposits, a “set it and forget it” approach. All money saved by the SPP is invested, and when it’s time for you to start drawing down your savings, they have an abundance of annuity options to produce a lifetime income stream for you.

Be a six per center, and make retirement savings a priority in 2019!

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

Jan 14: Best from the blogosphere

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

Blogger sees CPP expansion as helping hand for retirement saving

While many politicians and financial think-tanks like to refer to Canada Pension Plan (CPP) contributions as a tax – one they say is being increased through expansion of the program – at least one blogger sees it as a positive step towards retirement saving.

The Michael James on Money blog recently took a look at the issue of CPP expansion.

In his post, James notes that many observers say CPP expansion is “unnecessary,” and cite average saving figures as proof that a bigger CPP is not needed.

“But averages are irrelevant in this discussion,” writes James. “Consider two sisters heading into retirement. One sister has twice as much money as she needs and the other has nothing. On average, they’re fine, but individually, one sister has a big problem. CPP expansion is aimed at those who can’t or won’t save on their own.”

And while there are many programs – CPP, Old Age Security, and the Guaranteed Income Supplement – designed to ensure “we don’t… see seniors begging for food in our streets,” the CPP is something that working Canadians and their employers pay into, rather than a taxpayer-funded program, he explains.

He makes the point that CPP should not be an optional savings program, like an RRSP. “If CPP were optional, too many of those who need it most would opt out. The only way CPP can serve its purpose well is if it’s mandatory for everyone,” he writes.

These are excellent arguments. The days when everyone had a pension plan at work, and the CPP was a sort of supplement to it, are long gone. According to Statistics Canada, the number of men with registered pension plan coverage dropped from 52 per cent to 37 per cent between 1997 and 2011. For women, coverage increased to from 36 per cent to 40 per cent during the same period. That means more than 60 per cent of us don’t have a pension at work.

CPP expansion helps fill that coverage void. If workplace pension plans were on the increase, certainly CPP expansion wouldn’t be necessary – the statistics show that’s simply not the case.

If you don’t have a pension plan at work, you can self-fund your retirement through membership in the Saskatchewan Pension Plan. Any Canadian can join and contribute up to $6,200 annually to an SPP account. When you retire, SPP takes the headaches out of the process for you and converts your savings into a lifetime income stream. You can start small and build your contributions as your career moves forward.

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

Dec 31: Best from the blogosphere – Retirement system OK

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

Retirement system OK, but more needs to be done: study

It’s a classic “good news, bad news” situation, this Canadian retirement system of ours. The good news, according to OECD research published recently in Wealth Professional, is that the developed world’s pension systems are much more stable.

The bad news is that they’re not necessarily delivering an adequate retirement benefit, the magazine notes.

“Governments are facing growing challenges from an aging population, low returns on retirement savings, low growth, less stable employment careers and insufficient pension coverage among some groups of workers,” the article notes. “These challenges are eroding belief that pensions will provide enough income for comfortable living in retirement,” the article adds.

While Canada’s system is ranked sixth best among those studied, the article points out that Canadians contribute about 10 per cent of their earnings towards government retirement programs. By comparison, Italians contribute about 30 per cent of earnings, the article notes.

There’s no question that the CPP is on much more stable footing than in years past. The giant CPPIB fund, as of mid-2018, had $366 billion in assets and had an investment rate of return of 11.6 per cent, according to a media release.

But the CPP payout, while being improved, is currently quite modest. The maximum monthly amount as of July 2018 was $1,134.17, and the average amount paid out to new CPP retirees was $673.10. The great thing about CPP is that it continues for the rest of your life and is inflation protected.

Most of us will also get Old Age Security payments, which are currently around $600 a month. This is also a lifetime benefit.

What the studies are telling us, however, is that if we don’t have a workplace pension, we need to be saving on our own for retirement. CPP and OAS were designed to supplement your workplace pension and personal savings. Many of us don’t have pensions at work, and a surprising number of us don’t have any retirement savings either.

If you are in that situation, there is still time to take action. If you don’t have a pension at work, you can create your own by joining the Saskatchewan Pension Plan. You can determine how much to contribute up to a maximum level of $6,200 a year.

If you have dribs and drabs of RRSP savings in other places, those can be consolidated in the SPP (up to $10,000 a year).

Not only will SPP invest that money for you, but at the time you want to retire, they’ll convert it into a lifetime monthly pension. By creating your own retirement income base, those helpful government benefits waiting for you in your future will be icing on the cake, rather than the cake itself.

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

 

Why some people don’t retire

 

We were chatting about retirement with a salesman at the local car dealership when he rolled out a bombshell – in his early 70s, he had no plans for retirement. He loved what he does and wants to keep on doing it for as long as he can. Maybe in his mid- to late 80s he might get a cottage, he says.

That made Save with SPP wonder if others aren’t retiring – and why.

The Wise Bread blog says there are five types of people who don’t retire – the “broke non-retiree, the workaholic, the successful investor, the life re-inventor and the mega-successful lifers.”

The article notes that “a startling 47 per cent” of Americans “now plan to retire “at a later age than they expected when they were 40.” The reason why – 24 per cent of Americans 50 and older have saved less than $10,000 for retirement.

For workaholics, the article notes, “it can be devastating to face retirement,” with many fighting it “tooth and nail.” Successful investors, the article notes, may have bought real estate, gold, or stocks early and now have enough money that they don’t need to work. Life re-inventors retire from one job and take on a new, totally different one, and the “mega-successful” tend to be CEOs, actors, star athletes, folks who have sufficient wealth to not worry about a formal retirement.

The New York Times reports that there are 1.5 million Americans over the age of 75 who are still working. Judge Jack Weinstein, age 96, still gets up for work every day at 5:30 a.m., the newspaper reports. “I’ve never thought of retiring,” he tells the newspaper. “If you are doing interesting work, you want to continue.” The paper says that those who are employed in jobs “in which skill and brainpower matter more than brawn and endurance” often keep going past usual retirement age, as do the self-employed and industry stars, like Warren Buffett.

An article in Market Watch picks up on another point – there are many people who don’t like the sound of retirement. “The idea of a retirement where a person has little responsibility, and, worst of all, interacts with very few people, just isn’t appealing to the current crop of pre-retirees,” the article notes.

A more Canuck-friendly view comes from Canadian Living, which lists the main reasons for not retiring as “you need the money, you like working, you hate retirement,” and significantly, “you’ll collect bigger benefits” and “you’ll lose your RRSP later.”

“If you collect your CPP at age 70,” the article points out, “you’ll get 42 per cent more than if you retired at 65.” Similarly, if you collect CPP at 60, you get 36 per cent less than if you collected at 65, the article states.

On the RRSP front, since you must convert your RRSP to a RRIF (or buy an annuity) by age 71, delaying retirement means you will have more money in retirement, the magazine notes.

These are all good points. Save with SPP notes that there are many folks who simply live in the now and won’t think about retirement until they must. The idea that we can all keep working forever is a nice one but tends to be an exception, rather than a rule.

We may not want to retire, but the vast majority of us probably will. Even if you’re in the group that has saved very little up until age 50, there is still time to augment your life after work with some retirement savings. The Saskatchewan Pension Plan is quite unique in that it is open to all Canadians and provides an end-to-end retirement vehicle – your savings are invested and turned into a lifetime pension at retirement time. It’s a wise choice, even for those who don’t want to retire.

 

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

Dec 17: Best from the blogosphere – Canadians need to save 11 times their salary by retirement

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

 

Nov 26: Best from the blogosphere – The fear of aging

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

 

Home is where the hat is – unless it’s cheaper somewhere else

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