Tag Archives: CPP

Time to use realistic yardstick to measure senior poverty: John Anderson

It’s often said that Canadian seniors are doing fairly well, and that the rate of senior poverty experienced back in the pre-Canada Pension Plan days has dropped considerably.

However, says Ottawa-based union researcher John Anderson, the yardstick used to measure senior poverty levels needs to be updated to international standards. He took the time recently for a telephone interview with Save with SPP.

Currently, says Anderson, a “Market Basket Measure” (MBM) system is used to measure the cost of living, a “bizarre” system that factors in the cost of housing, clothing, food and other staples by province and region. By this old system, it is reckoned that 3.5 per cent of Canadian seniors live in poverty, although recent tweaks to the measurement process will see this number jump to 5.6 per cent.

The intricate MBM system – unique to Canada — goes into arcane details such as “what clothes you should have, how many pairs of long underwear, what kind of food you should buy, how many grams of butter. And there’s a sort of built-in stigmatization of rural living; it’s assumed that you don’t need as much money to live in a rural area as you do to live in Toronto,” Anderson says. The opposite is often true, he points out.

LIM system a better comparator

Anderson says the rest of the world uses a different measurement, one that’s much simpler, Anderson explains. The low income measure (LIM) scale defines poverty as being “an income level that is less than 50 per cent of the median income in the country,” he says. “This gives you a very clean comparison.”

By that measure, a startling 14 per cent of Canadian seniors are living in poverty, which is more than triple that figure that MBM currently quotes. “When you think about it, it means they are making less than half of what the average Canadian earns,” he explains. “They are not earning a lot.”

Why are today’s seniors not doing so well? Anderson says there has been a decline in workplace pensions over the years. “The numbers are way down,” he says. As recently as 2005, there were 4.6 million Canadians who belonged to defined benefit plans through work. By 2018, that number had dropped to 4.2 million, “at a time when we have seen a significant increase in the population, and more seniors than ever before.”

Defined benefit plans are the kind that guarantee what your monthly payment will be. About two million Canadians belong in defined contribution plans, which are more like an RRSP – money contributed over a working person’s career is invested and grown, and then drawn down as income in retirement.

“Only 25 per cent of workers have defined benefit plans now. And only 37 per cent have any kind of registered pension plan. Most have nothing,” says Anderson. This lack of pensions in the workplace, and the tendency towards part time and “gig” work that offers no benefits, is a primary reason why senior poverty is on the upswing, he contends.

“The kinds of jobs people are in today have changed,” Anderson explains. “People are working more non-standard jobs, gig jobs, contract work. Many are not even contributing to the CPP.” They tend not to be saving much on their own with these types of jobs, so it means that “when they retire, if they work that way, they don’t get much of a pension.”

That will leave many people with nothing in retirement except Old Age Security and the Guaranteed Income Supplement, Anderson says. Neither the OAS or the GIS has “really kept up” with increases in living costs. The most anyone can get from these two programs is about $1,500 a month, for a single person, he says. “These major government pension plans have not yet taken a leap forward,” he says. “The government has improved the Canada Pension Plan, and people will benefit from that (in the future),” he explains, but these other two pillars should get a look too.

Looking forward

Anderson says by moving to a LIM-based measurement of poverty, governments could have a more realistic basis on which to make program improvements.

“We already have a form of universal basic income for seniors through the OAS and the GIS,” he says. “The monthly amounts these pay out need to be raised.”

The goal should be to raise income for seniors to the LIM target of 50 per cent of Canada’s median income which is $30,700 per person based on median after tax income for 2018.

He also thinks that the OAS should be an individual benefit, rather than being designed for couples or singles. “You get less per person with the couples’ benefit; people should get the same amount,” he explains.

He says seniors today face an expensive retirement, with possible time spent in costly long-term care homes. “Can I survive when I retire – this isn’t a question that our seniors should have to worry about,” he explains.

Anderson remains optimistic that the problem will be addressed. The Depression prompted governments of the day to begin offering OAS; experience during and after the Second World War led to the introduction of EI and the baby bonus. CPP benefits started following a serious period of senior poverty in the 1950s. “We have to do better, but maybe there’s a silver lining with the COVID-19 situation, and maybe government will take a closer look at this issue again,” he says.

We thank John Anderson for speaking with Save with SPP. John Anderson is the former Policy Director of the federal NDP and now a union researcher.

If you don’t have access to a workplace pension, consider becoming a member of the Saskatchewan Pension Plan. It’s an open defined contribution plan – once you’re a member, the contributions you make are invested and grown over time, and when you retire, you have the option of turning your savings into a lifetime monthly pension. Check them out today.

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

Apr 6: Best from the blogosphere

With CPP, the longer you wait, the more you’ll get

For quite some time now, the Canada Pension Plan (CPP) has been available as an early retirement benefit – you can get it, with a reduction for taking it early, at age 60.

But is taking it at 60 the “no brainer” many seem to think it is?

An article in the Flin Flon Reminder suggests otherwise.

The article, quoting financial advisers, says it rarely makes sense to take CPP at 60, and “there are even fewer reasons to start drawing retirement funds while you’re still working.”

“I don’t advise taking CPP until you’re actually retired,” states Willis Langford, a Calgary-based investment planner, in the article. He adds that CPP, along with Old Age Security (OAS), “form the very base of a retirement income plan and you shouldn’t tap into it until you’re ready to start accessing all of your sources of income in retirement.”

Yet, the article notes, about 12.6 per cent of all CPP beneficiaries are taking their benefit early, and face a reduction in the benefit of 36 per cent – “0.6 per cent per each month… before you turn age 65,” the article explains. Those who can wait until age 70 to start CPP get an increase in their benefit of 42 per cent – 0.7 per cent for each month after age 65 that they are not collecting the CPP.

The article explains this with a couple of examples. Someone earning $50,000 a year would get $10,760 in CPP benefits ($897 per month) if he or she starts at age 65. If the same person starts at age 60, they would get “just $551 per month – about $6,600 a year.” As well, if the early collector continues to work while they receive CPP, they would have to make $2,300 a year in CPP contributions.

These extra contributions would boost the CPP benefit at age 65 to $658 a month ($7,896 a year) – still much less than what you get if you start at 65, the article notes. And if the person waits until age 70, he or she would get $1,422 per month ($17,064 a year).

Why, the article asks, do some folks take it early, given all this?

“If you knew you were going to live for a very, very long time, generally you would wait. The longer you wait, the more you would get,” Brad Goldhar of BMO Private Wealth tells The Reminder. “But if you knew at age 60 that your family history suggested not many years of longevity, you might take it early,” he states.

The bottom line – be sure you know the rules for CPP when you’re thinking about taking it.

Similarly, if you are a member of the Saskatchewan Pension Plan, and decide on a life annuity when you retire, be sure to get an estimate. Just like with CPP, the later you start your annuity, the more you will get per month. And generally speaking, more is usually a good thing when it comes to retirement income.

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

The New Retirement’s views stand up well a decade later

A decade ago, Save with SPP was in the audience to hear Sherry Cooper present the chief findings of her then-new book, The New Retirement.

A lot has happened since then, but the noted financial writer’s thoughts stand up well a decade later.

Cooper was among the first to predict that boomer retirements would be different from those of their parents. “Boomers see retirement as a period of regeneration rather than degeneration,” she notes.

However, she adds, boomers are far less frugal than their parents. “Early boomers were the first in their generation to enter schools, the job market, and the housing market,” she explains. Late boomers “had very different life experiences and have found it tougher to amass wealth.”

Cooper noted early that women generally are in better health than men, and as a result, will live longer – a key retirement income consideration. That fact, she writes, “is all the more reason why women should understand their household finances and have a large-enough next egg and long-term insurance to assure comfort and security in later years.”

The author, an economist, correctly notes that people would tend to work later than expected. “Older workers have higher productivity and deal with problems more effectively than younger workers,” she writes. At the event Save with SPP attended, a slide showing Mick Jagger popped up when this point was raised, and it’s interesting to note that Sir Mick is still rocking his way into yet another decade.

She anticipated the need to expand the CPP, noting that back in 2008, CPP was “far less generous than Social Security. In today’s dollars, maximum annual CPP payments are only $10,365.” She pointed out that Old Age Security provided about half as much at maximum and is subject to clawbacks for some.

Other correct prophecies – increased private spending by boomers on healthcare, such as the “considerable burden of long-term care,” plus costs to society for the increasing number of retired boomers needing medical care – are made.

Cooper advocates pre-retirees to adopt a “lifestyle plan for retirement,” indicating that knowing how you want to live will tell you how much you need to fund that particular lifestyle. She says we should think of retirement as a “multi-stage” event, decades long, so planning ought to consider what you’ll be doing in your 60s versus 70s, 80s and 90s.

She talks about the “financial nightmare” of longevity risk, the danger of outliving your savings, and was one of very few financial experts at that time period who talked about the value of having annuities as part of your retirement plan.

The book also sets out a “default” investment portfolio for retirement savers – 15 per cent of the nest egg should be invested “in high quality stocks and real return bonds,” and 85 per cent equally invested in stocks and bonds. This, she says, should get you to age 85, and at that point, you can annuitize what’s left for lifetime income.

This book was one of the first Save with SPP added to our retirement library, and it stands up very well today. It’s a well-recommended read, beautifully and clearly written with frequent recap sections to make sure you’re following along.

It’s true that government benefits, while improving over the years, still don’t provide much more than a basic retirement income for Canadians. If you have retirement savings of your own, or through a workplace pension plan, you’ll have more income for the decades-long retirement phase of life. A good way to augment your retirement savings is by joining the Saskatchewan Pension Plan, a do-it-yourself open defined contribution plan. You provide the money, SPP will grow it over time and provide you the option of a lifetime pension at retirement. All good.

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

Unless it’s mandatory, most people can’t or won’t save: Gandalf’s David Herle

Much is said and written about the need to get more people to save for retirement, particularly younger folks who typically lack a retirement program at work.

According to David Herle, Principal Partner at research firm The Gandalf Group, and a noted political and retirement commentator, it’s not just younger people who aren’t saving for retirement.

“We know that young people do not think about the end state of their lives,” he tells Save with SPP in a recent telephone interview. “They are focused on their more immediate needs.” Those needs include the cost of education, housing, and consumer debt.

When talk turns to millennials, the Saskatchewan-born Herle points out that their ability to save is hampered by the fact that there are “less jobs, and specifically, less good jobs with pensions and benefits” in today’s “gig economy.”

So not only are young people not saving, neither are old people. No one, he explains, has any extra money kicking around to save for retirement.

Herle says his firm’s research has shown repeatedly that the best way to get people to save is to make it mandatory, with no way to opt out. That way, he says, ensures money is directed to their long-term savings without the individual “having to think about it.”

Otherwise, he notes, getting people to save is challenging. “There’s not a lot of benefit from lecturing people,” he explains.

Asked if there are any public policy options to increase savings, Herle noted one idea from the past that could be revisited – payroll Canada Savings Bond purchases.

In the recent past, you could buy a Canada Savings Bond and pay for it via payroll deductions, a sort of “pay yourself first” option that did encourage some savings. “It might be worth considering bringing it back,” he suggests.

He points to the expansion of the Canada Pension Plan as “the most significant public policy development” in the retirement savings space. Ontario considered bringing in its own pension plan to supplement CPP, but the Ontario Retirement Pension Plan was shelved when CPP expansion got the green light a few years ago, he says.

The other trend he calls “troubling” is the lack of good pension plans in the workplace. For many years most people had a decent pension plan at work, the defined benefit variety which spells out what your retirement income will be. But employers “have started cutting pension plans,” moving to other arrangements, such as group RRSPs or capital accumulation plans where future income is not guaranteed.

He cites the recent labour dispute over pensions involving Co-op Refinery workers in Regina as an example of an employer trying to cut pension benefits for their employees. “If this happens, we could be seeing the end of the line for pensions,” he warns.

“Most people have lost the security of having an employer-sponsored pension plan,” Herle explains. There’s a large chunk of “middle and low-income earners” who are being expected to compensate for the lack of a plan at work with their own private savings.

“Our research found that those aged 55 to 65 – and this is not counting real estate – have more debt than savings. So this is people in the 10-year run-up to retirement,” he says. The lack of savings will force people to use home equity lines of credit, and the “reverse mortgage business is going to take off.”

Debt is restricting the ability to save, and CPP changes “won’t kick in in time for many people.” Herle says he has not heard of any plans to fix the other pillar of the federal retirement system, the taxpayer-funded Old Age Security program. Recent governments have tried to raise the age of entitlement, and a clawback program is already in place to reduce OAS payouts for higher income earners.

The outlook for retirement saving is “a very gloomy picture,” Herle concludes. He blames “a systematic societal failure… where the risk (of retirement investment) has been transferred to employees from employers.”

We thank David Herle for taking the time to speak to Save with SPP, and encourage readers to check out his podcast, The Herle Burly.

It’s true that paying yourself first – directing something to savings and then spending the rest – can work, especially if it is an automatic thing and the money moves before you can spend it. The Saskatchewan Pension Plan has flexible contribution options that include a direct deposit program; you can set it and forget it. SPP also has an option for employers to set up an easily administered pension plan for their employees. Check them out today!

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

Feb 24: Best from the blogosphere

Old “rule of thumb” retirement planning go-tos may need adapting: Shelestowsky

A great interview with Meridian’s Paul Shelestowsky in Wealth Professional shows that some of the old standard tenets of retirement planning may not translate as well here in the 21st Century.

An example, Shelestowsky tells Wealth Professional, is the idea that saving $1 million in your retirement kitty is a target we should all be aiming for. But that figure may not be the right target for everyone, he explains in the story.

“StatsCan has reported that close to 40% of Canadians are still working between the ages of 65 and 69,” he states in the article. “Some Canadian adults have their 75-year-old parents living with them; sometimes that means they get help with the finances, but a lot of times they don’t. Similarly, you can’t just assume that your kids will move out when they’re 25 anymore.”

Another rule our parents told us was never to take debt into retirement.

But that’s increasingly difficult to do, Shelestowsky explains to Wealth Professional, in an era where it is common to continue mortgage payments in retirement, and where household debt has reached levels where Canadians are “owing $180 for every $100 they bring home.”

“How can you retire when you’re having troubles getting by with your regular income, and then have to live on 60% of that?” he asks in the magazine article. High levels of debt may explain the greater-than-ever reliance on home equity lines of credit, Shelestowsky tells the magazine.

Planning for retirement is still of critical importance, he says. “Failing to plan is planning to fail,” he notes in the article. Without some sort of savings, he warns, you could be living solely on Canada Pension Plan (CPP) and Old Age Security (OAS) payments, which he says works out to only about $1,700 to $1,800 a month, or $42,000 a year for a married couple.

“The government never meant for OAS and CPP to serve as people’s sole retirement income source,” he states in the article. “Back in the day, people could comfortably sock away an extra $200 a month when they’re 20 or 30 years old; now you could say debt is the new normal. And to have a defined-benefit pension plan you can count on in your old age … that’s almost unheard of nowadays. Companies are shifting toward defined-contribution plans, but even that’s not a staple perk anymore.”

Shelestowsky says a solution is to get the help of an advisor to figure out a pre- and post-retirement budget. For those in poor financial shape, the budget process can turn things around; for others, it is a much-needed source of retirement reassurance, he tells the magazine.

If you have a workplace pension plan or retirement savings arrangement, you have a leg up for retirement. But if you don’t, and aren’t sure how to invest on your own, be sure to check out the Saskatchewan Pension Plan. Through this open defined contribution plan, you can contribute up to $6,300 a year towards your retirement – your money will be grown by professional investors at a very low fee, and when the day comes when you are logging off for the last time and giving back your building pass, SPP can turn those savings into a lifetime income stream.

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

Old Age Security reform has come full circle in the past decade or so

Most Canadians understand the Canada Pension Plan (CPP) – we pay into it, as does our employer, and we can start collecting a lifetime pension from it as early as age 60. But what about the other “pillar” of the federal government’s retirement income program, Old Age Security (OAS)?

The federal government says OAS is available to any Canadian who has lived in our country for 40 years after reaching age 18. If you don’t meet those conditions, you may still qualify under complex “exception” rules.

Currently, the maximum OAS payment  is $613.53 per month, for life. It starts at age 65, but you can choose to defer it for up to 60 months after reaching that age – and if you do, you will receive a payment that is 36 per cent higher.

There is, of course, a big catch to this. If you make more than $75,910, the government will charge what they call an “OAS recovery tax,” or clawback. If you make more than $123,386, you have to pay back all of your OAS payments for the year.

The “conditional” yet “universal” benefit has prompted many to come up with ideas on how to fix it, particularly during the Stephen Harper years.

Back then, a Fraser Institute opinion column in the National Post explained one key problem with OAS. “Unlike the CPP, there is no dedicated fund to pay for OAS,” the column notes. “Benefits are funded with current tax revenues.” Put another way, everyone who pays taxes contributes to OAS, but not everyone gets it – and should higher income earners get it at all, the column asks.

The Fraser Institute recommended lowering the income at which OAS begins to be cut off to around $51,000, with the full clawback moving to $97,000. This, the article suggests, would save the government $730 million per year, since fewer people would receive the full amount.

Another solution – the one that the Conservatives planned to implement – was moving the starting age for OAS to 67 from 65. However, the current Liberal government reversed that decision in 2016, notes Jim Yih’s Retire Happy blog.

But in the intervening years, we have seen debt levels increase dramatically, preventing many of us from saving for retirement. So there are now some arguing for an expansion of the existing system, on the grounds that it doesn’t provide seniors with sufficient income. Indeed, the Liberals campaigned last year on a plan to increase old age security “by 10 per cent once a senior reaches age 75,” reports Global News.

Without getting political, it appears we have come full circle from talk of reforming the OAS and making it harder to get, to talk of increasing its payout for older seniors. Let’s hope governments take a longer-term view of the problem, and focus on ways to better fund OAS – perhaps creating an OAS investment fund similar to what CPP has, one that would make this benefit more sustainable and secure for those who rely on it.

If you are one of the many hardworking people who lack a workplace pension plan, there is a do-it-yourself option that you should be aware of. It’s the Saskatchewan Pension Plan (SPP). They’ll grow the money you contribute to the plan over time, and when it’s time to retire, can pay it out to you in the form of a “made-by-you” lifetime pension. The SPP also has options for your employer to use this plan as an employee benefit.  Check them out today.

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

If you can’t join a workplace pension plan, PPP lets you build your own: Laporte

As a Bay Street pension lawyer, Jean-Pierre Laporte often wondered why some people – public sector workers, union members – had access to great pension plans at work when many other hard-working people didn’t.

“That’s when I got the idea of taking the existing pension laws, and repackaging them at a micro level so people in the private sector got access to a good pension too – what’s good for the goose is good for the gander,” Laporte, CEO of INTEGRIS Pension Management tells Save with SPP.

The result is the Personal Pension Plan (PPP®), a design that offers a tailor-made pension plan for participants. The PPP® is essentially a pension plan where the individual running the plan is also a plan member, he explains. It is a “combination pension plan” that offers both a defined benefit (DB) pension and a defined contribution (DC) pension – and “the ability to move between the two options,” he explains.

It runs just like a big public sector pension plan would, with a statement of investment goals, actuarial filings, regulatory compliance, and even an additional voluntary contribution (AVC) feature for consolidating existing RRSPs with pension assets, he explains. Its combination design “allows one to shift away from the… DB mode of savings and into a money-purchase, or DC mode every year, if necessary.”

This could be ideal for situations where an entrepreneur is running a PPP® at the same time as a business – if sales are down, the company can “gear down” and shift into a less expensive DC pension mode, and can “gear up” when better times resume, he explains.

This design “optimizes tax deductions across a number of dimensions” that can’t be done with other savings vehicles, such as RRSPs or conventional DB plans like the Individual Pension Plan (IPP).

PPP® contributions can be much, much higher than RRSP contributions, which are capped at 18 per cent of earned income. This can allow PPP members to transfer hundreds of thousands more dollars into their PPP than they could to an RRSP in the run-up to retirement, he notes.

Other PPP® features include a wider range of investment options (including direct ownership of real estate), the ability to top up the PPP® with special payments if returns from investments are lower than expected, the deductibility of investment management fees, interest if borrowing, the ability to “turn on” the PPP® early for early retirement, and more.

As well, while the PPP® may be funded by an individual’s company, the PPP® assets are separate – so they are creditor-proof and not factored into a corporate (or individual) bankruptcy. Those setting up a PPP® for a family business can sign up family members as members, transferring the pension savings along to future generations without any “wealth transfer” taxation, he explains.

“It is for all of these reasons that the PPP® crushes the RRSP as the option for saving for retirement,” Laporte says.

While the PPP® is not intended for everyone, it is an option for a fairly broad group, Laporte explains.

“The pool of potential clients is broader than just self-employed professionals and business owners.  This also works well for highly compensated key employees of larger corporations where the T4 income paid is well above $150,000 per year. This includes CEOs, CFOs, and COOs of large companies,” Laporte explains.

Laporte says he has long advocated for better pension coverage for everyone, particularly those who don’t have workplace pensions and may have to rely solely on funding their own retirement via RRSPs. He advocated 15 years ago for an expansion of the CPP, which he says is a step in the right direction. He says he got his idea for CPP expansion after learning about the goals of the Saskatchewan Pension Plan (SPP).

He says the goal of making retirement “fair for all Canadians” would be like an effort to “rise all boats” to a higher level.

We thank JP Laporte for taking the time to talk with Save with SPP.

The Saskatchewan Pension Plan is non-profit, low-cost defined contribution plan that can help you grow your retirement savings, and provides a variety of annuity options at retirement. Get in the know today!

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

Well-written book identifies – and help fixes – retirement mistakes

A recent headline shouted out the fact that an eye-popping 40 per cent of Canadians “think they’ll be in debt forever.”

The article by Anne Gaviola, posted on the Vice website, cites data from Manulife. The article goes on to note that the average Canuck has $71,979 in debt – up from $57,000 five years ago. These figures, the article says, come via Equifax.

It wasn’t always like this, was it? Why are we all willing to live with debt levels that are approaching record highs?

Save with SPP had a look around for answers – why are we so comfy carrying heavy debt loads?

According to the Advisor, it may simply be that paying the way with debt has become so common that no one gets worked up about it anymore.

“Living with debt has become a way of life for both Generation X… and baby boomers as the stigma of owing money is gradually disappearing,” the publication reports, citing Allianz Life research originally published by Generations Apart.

The research found that “nearly half (48 per cent) of both generations agree that credit cards now function as a survival tool and 43 per cent agree that ‘lots of smart, hardworking people who are careful with spending also have a lot of credit card debt,’” the article reports. Having debt is making people plan to work indefinitely – the article notes that 27 per cent of Gen Xers, and 11 per cent of boomers “say they are either unsure about when they plan to retire or don’t plan to retire at all.”

Why the comfort with debt? The Gen Xers got credit cards earlier than their boomer parents, and half of Gen Xers (and nearly a third of boomers) never plan to pay anything more than the minimum payments on them, the article notes.

“Over the last three decades, there has been a collective shift in how people view debt – it’s now perceived as a normal part of one’s financial experience and that has fundamentally altered the way people spend and save,” states Allianz executive Katie Libbe in the article. “If Gen Xers continue to delay saving for retirement until they are completely out of debt, their nest egg is clearly going to suffer. For Gen Xers who are behind on saving, better debt management, with a focus on credit card spending, should be the first issue they address to get back on track,” she states.

To recap, it almost sounds like there’s a couple of generations out there who have never worried about debt.

What should people do to get out of debt?

According to the folks at Manulife, there’s a five-step process that will get you debt-free.

Manulife cites the fact that Canadians owe about $1.65 for every dollar they make. That suggests they aren’t ready to “make a budget and stick with it,” and always spending more than they earn, the article says.

In addition to getting real about budgeting, the other tips are paying off credit cards by targeting those with the highest interest rate first, considering debt consolidation, earning extra money, and negotiating with creditors.

Tips that Save with SPP can personally vouch for in managing debt include giving your credit cards to a loved one, and instructing that person not to hand them over even if you beg; paying more than the minimum on your credit cards and lines of credit; and trying to live on less than 100 per cent of what you earn, so that you are paying the rest to yourself.

While a country can perpetually run deficits and spend more than it earns – and most do – the math doesn’t work out as well for individuals. The piper eventually has to be paid. And if you only pay the minimums, that piper will get paid for many, many years.

Getting debt under control and paid off will help you in many ways, including saving for retirement. Perhaps as you gradually save on interest payments, you can direct the savings to a Saskatchewan Pension Plan retirement account, and watch your savings grow.

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

Dec 16: Best from the blogosphere

First wave of retiring boomers finding retirement disappointing

Retirement has always seemed like the light at the end of the tunnel for hard-working Canucks. But new research suggests that retiring boomers are finding it a little disappointing.

Writing in the Ottawa Citizen, noted financial journalist Jonathan Chevreau reports that new research from Sun Life finds “almost three in four retirees – 72 per cent – say retirement is not what they were expecting, and not in a good way.”

The 2019 Sun Life Barometer, he notes, found 23 per cent of retirees reported life after work was a tight money environment, where they were “following a strict budget and refraining from spending money on non-essential items.”

And those not yet retired are delaying their plans, Chevreau notes. A whopping 44 per cent of Canadians “expect they’ll still be employed full time at age 66,” and it’s because they “need to work for the money, rather than because they enjoy it.”

Why the strict budgeting? Chevreau notes that about half – 47 per cent – of those still working believe “there’s a serious risk they could outlive their retirement savings.”

The article says the lack of defined benefit pensions – the type where the retiree receives a pension equal to a percentage of what they were making at work – is one of the reasons for these concerns. Everyone without such plans is either saving in RRSPs or in defined contribution plans. In both these types of savings plans, you save as much as you can, and then turn that lump sum into retirement income, normally on your own.

This tendency for retirement plans to be savings plans designed to build a lump sum is, the article says “devolving responsibility onto the shoulders of individuals,” making the RRSP unit holder or DC plan member the person handling the risk of outliving the savings, known as longevity risk in the industry.

The article offers a couple of ways people can improve their retirement security.

Be sure, the article warns, that you are fully taking part in any retirement program your work offers. “Canadians are leaving up to $4 billion on the table,” the article notes, by not taking full advantage of plans where the employer matches some or all of any extra money they put in.

There’s also a worryingly large group of people who don’t have a workplace pension and aren’t saving on their own via RRSPs or TFSAs, the article reports. That group, the article says, will probably have to work well beyond age 65, but at least they will get more income from CPP and OAS if they take them at a later age.

The article concludes by noting that running day-to-day finances is “hard enough” for Canadians, which may explain the savings shortfall.

If you have a pension plan or retirement savings benefit through your work, consider yourself lucky, and be sure you are getting the most you can out of it. Can you consolidate pension benefits from other workplaces into the plan you’re in now, rather than retiring with several small chunks of savings? Are you eligible for a match, and if so, are you signed up for it?

If you are saving on your own, the Saskatchewan Pension Plan may be of help. You can save on your own through SPP, much like an RRSP, except SPP has the added advantage of offering a variety of annuity products when you retire – these turn your savings into a lifetime income stream that never runs out. As well, you can often transfer pension funds from past periods of employment into your SPP account – contact SPP to find out how.

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