A look at the best of the Internet, from an SPP point of view
Taking debt to the grave – reverse mortgages catching on
What can you do if you’re old, not working, and don’t have enough income to make ends meet?
Well, according to the Edmonton Journal, one option – if you are also a homeowner – is the reverse mortgage.
“If you’re 55 or older, you can borrow as much as 55 per cent of the value of your home. Principal and compound interest don’t have to be paid back until you sell the home or die. To keep the loan in good standing, homeowners only need to pay property tax and insurance, and maintain the home in good repair,” the article explains.
In the article, Equitable Bank spokesman Andrew Moor says reverse mortgages are a booming market. “We’ve only been in this market for the past 18 months, but applications are jumping,” he states. Moor tells the Journal that he expects the market will grow by a whopping 25 per cent annually. “Canadians are getting older, and there is an opportunity there,” he states in the report.
The article notes that the explosive growth in reverse mortgages demonstrates “how some seniors are becoming part of Canada’s new debt reality. After a decades-long housing boom, the nation has the highest household debt load in the Group of Seven.”
Critics of the growing sector warn there can be downsides. Reverse mortgages “are a high-cost solution that should only be used as a last resort,” the article says, quoting industry experts who worry about the practice.
“When they think of their cash flow, they’re not going to get kicked out of their house, but in reality, it really has the ability to erode the asset of the borrower,” states Shawn Stillman of the Mortgage Outlet in the Journal article.
Another thing that can happen is that your home may continue to appreciate in value during the period of the reverse mortgage – so you will miss out on growth, the article states.
The sector has grown to an incredible $3.12 billion, the article notes. That’s more than double what the balance was on reverse mortgages just four years ago, the story reports. And while reverse mortgages are a relatively small sliver of the overall $12 trillion Canadian residential mortgage pie, the reverse mortgage share is up 22 per cent in the last year, the article reports.
Let’s think of what this means in the overall retirement savings picture. Canadians are grappling with high debt, largely caused by the high price of housing. This debt is a savings restrictor – there often isn’t money left over to put away for retirement. Good workplace retirement plans are scarce. So we shouldn’t be surprised to see some folks, unable to make ends meet on government retirement benefits, having to cash in the value of their homes.
The reverse mortgage trend underlines the need we all have to save for retirement on our own – whether or not we have benefits for retirement via work. The cost of living rarely, if ever, goes down, so money tucked away today and invested over time will be very handy in your costly future. An easy way to get going on retirement savings is through membership in the Saskatchewan Pension Plan. It’s open to all Canadians, and offers low-cost, professional investing to grow your money, and a full-service annuity program to convert those savings into retirement income once you’ve slipped the bonds of work. You owe it to your future self to 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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22
Today we are continuing with the savewithspp.com 2014 series of podcast interviews with personal finance bloggers by talking to Edmonton-based financial educator and author Jim Yih.
Jim’s blog Retire Happy was recognized as the 2011 Best Personal Finance Blog in Canada by the Globe and Mail. He is very active in social media and also made MoneySense’s 2013 list of the top 10 financial tweeters.
While he has been blogging for just over three years, Jim is well known as a personal finance columnist in the Edmonton Journal and other Canadian media for the last 14 years. He also has written eight books.
His company Retirement Think Box consults with innovative employers to incorporate financial education and wellness into their benefit programs using the full spectrum of communication tools including workshops, web-based learning, audio/video presentations and electronic newsletters.
Thank you so much for joining me today Jim.
Thank you very much for having me. I’m excited about this Sheryl.
Q. Jim, you are well known to Canadians as a result of your column in the Edmonton Journal for over a decade, your books and your speaking engagements. Why did you also decide to also start a blog?
A. Good question! Originally, the blog was simply a place to host all of the articles that I have written over the past 17 years. I never realized what blogging would evolve into and how interactive it can be. At the end of the day, the reason for RetireHappy.ca is to help Canadians retire to a better life and make retirement the best years of your life. I hope that does not sound too cheesy but RetireHappy is a major Canadian resource for retirement, investing and personal finance. We really focus on timeless information.
Q. Tell me the topics that are covered in your blog?
A. Retirement is a big topic and we try to cover issues around things like investing, taxes, money management, estate planning, government benefits (very misunderstood) and really any issues around general finance. We even cover lifestyle issues like health, working in retirement and psychological issues.
Q. How often do posts appear? How frequently do you personally post?
A. We publish new content 3 to 4 times a week. I used to write 2 to 3 times a week but it got to be too much. I have a fulltime business as you mentioned. Now I only write once a week and I have brought on a team of other writers to provide opinions and content.
Q. Tell me about the group of other bloggers who post regularly and the added dimension they bring to the blog on a day to day basis.
A. I’ve been around for over 23 years in the financial industry. I’ve got lots to say and opinions to share but I also believe there are many different ways, ideas and strategies to achieve success. So I’ve brought on some great writers in the last 18 months with lots of experience and ideas and I think it makes for a better experience at RetireHappy.ca.
Donna McCaw is retired and travelling the world and sharing practical retirement experiences. She has also written a retirement book called “Its Your Time”
Sarah Yetkiner has built a nice following with her articles on money personalities and the psychology of personal finance.
Doug Runchy is very active and specializes in writing about government benefits. He responds quickly to all comments and he’s just a tremendous resource for our readers.
I’ve assembled some successful great financial advisors like Scott Wallace and Wayne Rothe. And we’ve got some other writers coming aboard this year like Chad Vinimitz, Sean Cooper and Meagan Balaneski. So we’re increasing our contingent of writers and I think it’s proven to be a good strategy.
Q. How many hits does your blog typically get?
A. We get 5000 to 10000 page view per day. We have thousands of people on our newsletter and email list and following us on Twitter. I’m humbled by how quickly this has grown and the size of our following.
Q. What have some of the most popular blogs been?
A. Since inception, my articles on CPP and taking CPP early have been consistently popular. And now with the addition of Doug Runchey talking about it, all the articles on CPP and OAS continue to grow in popularity.
But we also have some Online guides that are designed to be great resources for readers. The most popular is our Online Guide on RRSPs, next would be the one on RRIFs, others include one on RESPs, Government Benefits and Financial Advisors. We are currently trying to update all of these.
Q. If someone is checking out your blog for the first time, should they just dive in, or do you recommend a place to start?
A. There is so much there. We often talk about how to make it easy for readers when there is 17 years of content on the site. So I have 3 suggestions:
Use the search bar at the top. Type in anything related to retirement and personal finance and we’ve probably written about it.
There’s also archive page where we’ve organized every article by category.
Or if you have no idea what you are looking for, start at the bottom of the home page with the must read articles and the most popular articles.
Q. What have some of the spin-offs from blogging been for you?
A. I think its interacting with awesome people online that is the most rewarding. I’ve met a lot of cool people across Canada and even around the world.
I’ve connected with great Media personalities like Rob Carrick, Gail Vaz-Oxlade, Bruce Sellery, etc. I’ve met awesome bloggers like Frugal Trader, Preet Banerjee, Blunt Bean Counter, the Canadian Couch Potato, Boomer and Echo, Tom Drake and so many others.
I also love interacting with readers who write in and tell us how the site has helped them.
Q. I recently read that Scotiabank found that 31% of Canadians planned to contribute to their RRSP for 2013, down from 39% last year. And BMO said 43% of those surveyed planned to contribute, down from 50% in 2013. Why do you think these numbers are dropping?
A. We live in a world that’s all about spending. Every major holiday has turned into an excuse to have a big giant sale. Saving money is simple but not easy. Spending is easier. Spending is more fun. There are more opportunities to spend than to save. That’s led to too much debt and I think for all of us, this can led to lower savings.
Q. What role do you think participation in the Saskatchewan Pension Plan can play in Canadians’ retirement saving plans?
A. What I like about SPP is that they have tried to make savings simple, easy and affordable. I think a lot of people need that. SPP has simplified investment options, the fees are lower, the returns are decent and the process is streamlined and easy. You can even contribute using your credit card!
I think the easier we make it for Canadians to save, they more likely they will do so. More choice sometimes paralyzes people from making decisions. So I think simpler options are necessary and SPP has done that and it’s available to all Canadians.
Q. How can people calculate how much they will need to retire and the amount of money they need to produce that income stream?
A. The average Canadian will need $2.654 million dollars by the time they retire . . . .
That’s a fictitious number of course, but we are all seeking a number. There are millions of calculators out there to help people find it.
However, for most people, the calculation is less important than their savings rate. The formula is so simple. This is not rocket science. Save 10% of your income for as long as you possibly can. Start as early as you can. The more you save the more you will have in retirement.
Q. What do you think the biggest hurdle is for Canadians who want to get their financial affairs in order and save for retirement?
A. For most people, the hurdle is themselves. You need motivation, action and discipline. Eighty percent of what you need to become financially successful and retire happy you already know:
Put together a game plan
Spend less than you earn
Pay off debts
Pay yourself first
Know your spending
Q. If you had one piece of advice to help Canadians get over this hurdle, what would it be?
A. Do something but not too much. Make small changes one step at a time. Find some like-minded people to support your goal. Try to make it fun. If you are competitive try to compete with someone to meet or exceed your savings goals.
Thanks Jim. It was a pleasure to talk to you today.
I really enjoyed our discussion, Sheryl.
This is an edited transcript of the podcast you can listen to by clicking on the graphic under the picture above. If you don’t already follow RetireHappy, you can find it here and subscribe to receive blog posts by email as soon as they’re available.