Forbes

May 16: Is the “new normal” retiring with debt?

May 16, 2024

There was a time when taking debt into retirement was considered an absolute no-no. But in these days of higher living costs, less helpful interest rates, and the many temptations of debt, is owing money when you retire now the norm?

Save with SPP took a look at this topic, which is one that we are well acquainted with on a personal basis!

Well-known personal finance writer Rob Carrick recently covered this topic in The Globe and Mail. He cites figures from insolvency expert Scott Terrio that show that, according to the most recent data, “42 per cent of senior households had debt…. compared to 27 per cent in 1999. Vehicle debt held by seniors nearly tripled between 2005 and 2019, while mortgage debt quadrupled.”

(Save with SPP talked with Scott Terrio a little while ago on the topic of retiring with debt. Here’s a link to that article: Debt can squeeze the spending power of seniors: Scott Terrio | Save with SPP)

Carrick suggests that younger people have a conversation with their parents about debt.

“Parents helping their adult children financially is the new normal in family life. It’s less common for those kids to help their parents, but high debt levels among seniors suggest this could change. Boomers and Gen Xers, do you know how well set up your parents are in their retirement or pre-retirement years,” he asks.

An article in Forbes agrees that “retiring with debt is often considered a cardinal financial sin: Every dollar you owe reduces your income in retirement, after all.”

However, the article warns, trying to get out of debt before you retire might also cost you. Huh? “Blindly prioritizing debt reduction before retirement savings, particularly for low-interest debt, could shortchange your nest egg,” the writers at Forbes warn.

On the other hand, not prioritizing debt has consequences as well, the article continues.

Currently, the article notes, credit card interest rates are well over 20 per cent. “Paying interest rates this high would hamstring your finances at any stage of life, let alone when you’re living on a fixed income in retirement. That means you need to prioritize paying down as much high-interest debt as possible before you stop working—and then keep from accruing any new credit card debt.”

The folks over at GoBankingRates say debt is manageable for retirees, but it’s no picnic.

“Yes, you can retire with debt, but it may impact the quality of your retirement. Having debt, especially high-interest debt, can strain your retirement savings and limit your financial freedom. It’s important to assess the type and amount of debt you have and create a plan to manage it effectively,” their article notes.

The article recommends trying to “minimize or clear your debts before retiring.” You might need to think harder about when you want to retire, boost your savings, or even downsize as strategies to cope with debt, the article continues.

“Focusing on high-interest debts, like credit card balances, should be a priority. Developing a comprehensive plan on how to get out of debt before retirement can significantly ease your financial burden during your later years,” the article notes.

MoneySense provides some good news on this topic, noting that some of your debt will eventually get paid off – and that when that happens, your retirement spending power gets a boost.

“If you only have a small mortgage and a few years of payments remaining, your income requirements may be on the verge of a big decrease. I’ve seen a lot of retirees with generous DB pensions work hard to pay off debt, retire, and suddenly find they’re flush with cash flow because their $500, $1,000, or $2,000 monthly mortgage payment disappears,” MoneySense reports.

There are several themes here to think about – retirement with debt is not seen as ideal. But neither is not saving for retirement in order to pay off debt. If you do bring debt with you on the retirement voyage, each time you pay something off you’ll have better cash flow.

All the articles suggested consulting a financial professional to help map your personal route – that’s always good advice.

If you don’t have a workplace pension plan, or want to augment your savings, have a look at the Saskatchewan Pension Plan. With SPP, you can consolidate little bits of savings in various RRSPs into one place, and also make regular contributions. SPP will grow your investments in a low-cost, professionally managed, pooled fund, and when it’s time to collect, your options include monthly annuity payments for life or the flexible Variable Benefit option.

Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Apr 8: How do rich folks invest their money?

April 8, 2024

Any of us who play golf watch with awe as better golfers blast their drive 100 yards past ours, and putt for birdies instead of bogeys. What, we wonder, are they doing differently to be having such success?

Save with SPP had those same sorts of thoughts about investing recently. After taking a boat tour of the river/canal network of Fort Lauderdale, Florida, we wondered what did folks do with their investments that brought them here – massive, waterfront houses with multi-storey crewed yachts?

Let’s see what the Interweb tells us.

An article from The Globe and Mail suggests that “the wealthy have a greater exposure to real estate and alternate investments in their portfolios – as much as a third.”

The article quotes Nancy Grouni of Objective Financial Partners Inc., in Markham, Ontario, as saying “a typical portfolio breakdown would be 25 per cent real estate – excluding their personal residences – plus 10 per cent alternative investments such as hedge funds, derivatives, foreign currency and private equity. Then a third of the portfolio consists of cash and fixed-income vehicles, and the balance is in equities.”

“I find that people with a higher net worth tend to be more comfortable with those non-traditional, alternative ways of investing,” Grouni tells the Globe. “They have invested in private equity through personally held corporations; that’s how they earned a living.”

Writing for Business Insider, Peter Syme tries to find out the investing preferences of what he calls “ultra high net worth individuals,” or UHNWIs.

His research breaks it down as follows – 26 per cent is invested in equities, 34 per cent is in commercial property (21 per cent of the total commercial investment is direct, meaning owning the property, while the rest comes through real estate investment trusts or REITs), 17 per cent goes into bonds, private equity (again this means direct ownership of something, such as a business) gets nine per cent, “investments of passion” get five per cent and gold, three per cent. Seven per cent is invested in “other” investments, and the final two per cent is invested in cryptocurrency, the article concludes.

What’s an investment of passion? “Art, cars and wine – which may be bought for enjoyment or simply as an investment,” the article notes.

The Medium blog looked at folks in the U.S. who were millionaires, but perhaps not yet UHNWIs, and got a different asset mix.

“On average, the portfolios of the wealthy are heavily weighted toward equities, which make up 53 per cent of assets. The remainder is largely divided amongst bonds (15 per cent), cash (11 per cent) and CDs/money market funds (nine per cent). Real estate, excluding the primary residence, comprises just six per cent of their net worth,” the article notes, citing research from the National Bureau of Economic Research in the U.S.

There’s much more emphasis on owning stocks in this group, the article notes.

“Take it from the best: Warren Buffett’s will dictates that 90 percent of his wealth be invested in stock market index funds when he dies, with the remainder in government bonds,” concludes.

An article from Forbes offers a look at the investment habits of the wealthy, noting that they tend not to “sit” on their money, but keep it mostly invested.

As well, their focus is on “a year-over-year increase in net worth,” so “they don’t waste a considerable amount of time on the details.” They “live below their means,” avoid debt and paying interest, and are very aware of their income and expenses.

We once read a quote from Mark Cuban, well-known U.S. entrepreneur, who said that once you begin investing, try not to dip into that money – let it grow. It is certainly interesting to take a short look at how the richer half invests!

Members of the Saskatchewan Pension Plan don’t have to sweat out an investment strategy for their savings. SPP’s asset mix is currently 10 per cent Canadian equities, 16 per cent U.S. equities, 15 per cent non-North American equities, 11 per cent real estate, 18 per cent infrastructure, 13 per cent bonds, six per cent mortgages, and 10 per cent private debt, with the balance (small) in short-term investments. SPP isn’t sitting on its cash – it’s carefully growing its members’ contributions to help fund their future retirements!

Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Mar 7: What’s the difference between active and passive management?

March 7, 2024

We read all the time about “active” and “passive” management of investments. While it sounds like one type is for those that jog and work out, and the other is for people comfy on their couches, the actual meaning is a little different. Save with SPP had a look around to find a good explainer or two.

Writing for Bankrate via AOL, Dr. James Royal writes that “active investing is what you often see in films and TV shows. It involves an analyst or trader identifying an undervalued stock, purchasing it and riding it to wealth.”

“It’s true – there’s a lot of glamour in finding the undervalued needles in a haystack of stocks. But it involves analysis and insight, knowledge of the market and a lot of work, especially if you’re a short-term trader,” he continues.

On the other hand, he notes, “passive investing is all about taking a long-term buy-and-hold approach, typically by buying an index fund. Passive investing using an index fund avoids the analysis of individual stocks and trading in and out of the market. The goal of these passive investors is to get the index’s return, rather than trying to outpace the index.”

So the Coles Notes on this are as follows – an active management approach involves you (or an advisor) actually picking investments that you think will beat the market’s returns. Passive means you aim to duplicate the market’s returns, usually by buying index funds that consist (unsurprisingly) of all the funds on the various index.

So, is one approach better than the other?

A recent New York Times article suggests that over time, the passive approach tends to work out the best.

“Over the last 20 years, stock pickers have had a dismal record. Most haven’t come close to beating the overall stock market,” writes Jeff Sommer.

“But occasionally, there are exceptions. In some periods, stock pickers rule, and the start of this year was one of those times. In fact, it was the best January for actively managed stock mutual funds since Bank of America began compiling data in 1991. It wasn’t just that they turned in handsome returns for investors. The entire stock market did that. The S&P 500 and other stock indexes set records during the month,” he notes.

The article goes on to say that stock pickers seem to do best when markets are doing the worst – such as the 2008/9 credit crisis. Passive investing does well at most other times, he points out.

A Forbes article on the topic makes the point that active investing requires much more of an effort.

“You can do active investing yourself, or you can outsource it to professionals through actively managed mutual funds and exchanged traded funds (ETFs),” the article notes. However, the article notes, you need to be watching your holdings all the time.

“Without that constant attention, it’s easy for even the most meticulously designed actively managed portfolio to fall prey to volatile market fluctuations and rack up short-term losses that may impact long-term goals,” Forbes reports. “This is why active investing is not recommended to most investors, particularly when it comes to their long-term retirement savings.”

On the contrary, “because it’s a set-it-and-forget-it approach that only aims to match market performance, passive investing doesn’t require daily attention. Especially where funds are concerned, this leads to fewer transactions and drastically lower fees. That’s why it’s a favorite of financial advisors for retirement savings and other investment goals.”

No one likes to talk about investments unless they are winning. It’s like bingo – you hear when your friends win the big jackpot, but otherwise, you don’t. We have heard horror stories from friends who went for the home run with things like Bre-X, or Nortel, or cannabis stocks, and of late, bitcoin.

Whatever approach you personally choose for your own investments, we recommend that you seek the advice of a professional investor. The portfolio you construct on your own may be fine, but will almost always benefit from the oversight of a pro.

If you’re a member of the Saskatchewan Pension Plan, you are already benefitting from professional investment advice. The SPP balanced fund returned 7.73 per cent, on average, since its inception more than 35 years ago. While past returns are of course no guarantee of future rates of return – no one can predict the future – it’s nice knowing that SPP’s investing history has been so positive. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Jan 4 – The age old question – should we pay in cash or with credit?

January 4, 2024

For the first time in 70 years, there’s a new monarch on the back of our nickels, dimes, quarters, loonies and toonies.

And that change recalls an age-old question – is it better to use cash or credit, generally? Save with SPP took a look around for some answers.

According to figures from the Bank of Canada, this country has seen a gradual move away from cash spending. Cash accounted for 54 per cent of transactions as recently as 2009, the bank reports, but by 2013 that figure had dropped to 44 per cent. It slid to just 33 per cent in 2017.

Interestingly, the value of cash transactions also declined in the same period – in 2009, the bank notes, 23 per “of the total value of goods and services purchased” was in cash. By 2017, this number had fallen to 15 per cent. And we’ll recall cash use fell even more during the pandemic.

Is cash dead?

“So, does this mean that Canadians are giving up on cash? The short answer is no. Canadians still rate cash as easy to use, low in cost, secure and nearly universally accepted, and it’s the preferred payment option for small-value purchases like a cup of coffee or a muffin,” the bank notes.

“In fact, the lower the value, the more likely it is the buyer will choose cash,” the article adds.

An article in MoneySense from a while back highlights how using cash may make us more conscious of our spending than using credit or debit cards.

“Is it harder to part with cash than to slide your credit card through the machine? Would a $200 pair of shoes give you pause to think if you paid for them in cash more so than if charged your credit card? You betcha,” the article notes.

The article cites two U.S. studies on the topic. A Journal of Experimental Psychology article reports on a study, MoneySense notes, that concluded “shopping with cash discourages spending, while using credit or gift cards actually encourages it.” Why?

The authors of the study, reports MoneySense, found that “using a less transparent form of payment such as a credit card or a gift card lowers the vividness with which one feels that one is parting with real money, thereby encouraging spending.”

Interesting – spending with physical cash is seen as more “conscious” spending, then.

A Forbes article also weighs in on the topic.

The article makes the point that your own financial habits should dictate when you use cash, or not.

“If you are carrying a large credit balance or struggling to stay on top of payments, sticking to cash whenever possible may help you pay down debt,” the article notes.

“Many people use credit cards regularly and rarely carry a balance. If you stay on top of your payments and pay your card in full, a credit card is probably a great option for you,” Forbes reports.

Credit cards, the article notes, “provide a unique level of security against fraud and loss. In Canada, if your card is issued by a bank and unauthorized purchases are made on your card, the maximum amount you can be responsible for is $50 (unless you demonstrated gross negligence in safeguarding your card, its information and other info like your PIN or password).”

Similar protections apply to debt cards, the article reports.

Cards feature things like purchase protection and insurance, anti-fraud detection, a grace period and “rewards, cash back and bonuses” that you just don’t get with cash, the article adds.

“While creditors are hoping you will carry a balance, rewards points can be an excellent way to earn while you shop, especially if you don’t carry a balance. Some credit cards offer three to six per cent back on selected categories. Other cards may offer one per cent or more back on all purchases,” the article adds.

However, reports Forbes, cash has its advantages as well, particularly if you have balances on credit cards or lines of credit. “Debt is a major problem for Canadians. As of December 2022, the average debt in Canada was $21,183 (excluding mortgage debt), according to a report from Equifax,” the article notes.

“By paying for purchases with cash, you avoid interest charges on those new purchases,” as well as even higher interest on a higher balance, the magazine adds.

The Motley Fool lists off a few more advantages of cash. Cash is “universally accepted,” and by using cash you can avoid transaction fees common with credit and debit cards.

It is easier to budget using cash, the article continues. “Paying only in cash means that once the cash is gone, that’s it – you’re done spending,” The Motley Fool tells us. “This strict limitation can help you curb overspending, aligning your purchases more closely with your budget.”

A disadvantage of cash is that if it gets lost or stolen, you are out of luck – there is no theft protection or insurance built into it.

The Motley Fool article also makes the point that while you can earn cash back, rewards points and other perks with credit cards, it is easy to abuse them, and “spend more than you can reasonably afford.” And if you don’t pay the full credit card balance each month, you are looking at interest rates of 20 to 30 per cent, the article concludes.

Noted financier Mark Cuban once observed that when you pay with cash, you can often negotiate a better price. If something costs $200, and you say you only have $175 cash, maybe you will get a deal, he has said.

It sounds, from reading all this, like there is no single answer on which is best, cash or credit. The experts seem to be saying it depends on your personal relationship with money. If you pay all your bills on time, especially credit cards and lines of credit, then maybe credit use is OK for you. If not, cash is a way to keep your debt from getting even bigger.

We already know that the Saskatchewan Pension Plan is a great do-it-yourself retirement savings program for Canadians. Any Canuck with available registered retirement savings plan room can open an account, and can let SPP’s experts invest their savings in a professionally managed, low-cost fund. But what’s new is that now, any Canadian SPP member has the choice, at retirement, between a lifetime annuity or the flexible Variable Benefit option.

Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Nov 16: BEST FROM THE BLOGOSPHERE

November 16, 2023

A “Goldilocks” approach to retirement focuses on guaranteed sources of income

Writing in Forbes, Steve Vernon notes that annuities can be a way to find a “just right,” or Goldilocks solution to making sure you don’t run out of money in retirement.

Those living off lump-sum savings (the article is intended for a U.S. audience, so here it might mean money in a registered retirement income fund (RRIF) or similar capital accumulation vehicle) “to pay for their living expenses face a serious challenge,” he writes. “How do they carefully invest and draw down their retirement savings to spend on living expenses, with the goal that they don’t outlive their money and recognizing that they might live a long time?”

If you are gradually drawing down income from a lump sum account, he writes, there is “a dilemma: spend too much, and you might run out of money in your 80s or 90s. But if you’re overly cautious with your spending, then you might not spend as much as you could have,” and won’t know that until you “finish your retirement.”

It’s the fear of running out of money in retirement that makes some retirees really watch their spending. Those on the “spend too little list,” he writes, “want to prevent being broke in their later years. While that might be financially prudent, it’s unfortunate that they aren’t enjoying retirement as much as they could.”

And here’s where the “Goldilocks” strategy enters.

You need, he explains, to “build a portfolio of monthly retirement paycheques that are designed to last the rest of your life, no matter how long you live.” As long as you spend less than that amount, “you can feel confident that you won’t outlive your money.”

So what does this guaranteed income portfolio consist of? Here in Canada, it would include your Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, which are paid for life and are inflation-protected. Some of us also get the Guaranteed Income Supplement (GIS).

The article says other “guaranteed” sources of retirement income could be money from a workplace pension, “income annuities,” and also “payments from a reverse mortgage.”

Vernon says that if you add up all the “guaranteed money,” and get an income total, “then you’ll have a target for managing your living expenses.” The bigger the gap between your income and your expenses, the more prepared you will be for “the surprises that are inevitable over the course of a long retirement.”

If the math doesn’t work in your favour, and your guaranteed income is going to be less than your expenses, there are options out there for upping your income, Vernon adds:

  • Downsizing: As housing is typically the most expensive cost for retirees, downsizing is “win-win” in that you reduce your housing costs while “finding a home that might better suit your needs in retirement,” he writes.
  • Transportation: Vernon notes that it is cheaper to run one vehicle than two in retirement. Relying on public transportation and “not purchasing a new car until it’s absolutely necessary” can also dramatically cut your costs.
  • Shared expenses: “Look for ways to share significant expenses with close family and friends, such as carpooling, buying food in bulk to divvy up, and even (sharing) housing,” he writes.
  • Working part time: “Working part time in your 60s and 70s can really help pad your income, particularly if you have a small margin between your total retirement income and your living expenses,” he notes.

Vernon concludes by noting there is never a bad time to calculate (and adjust) your living expenses to align with your income, even if you are already retired.

Converting some or all of your registered retirement savings plan savings into a lifetime annuity has long been an option for Canadians, with the main alternative being to continue to invest your money within a RRIF. Similar options are available to Saskatchewan Pension Plan members.

Annuities sort of became less popular when interest rates were low, because the lower the interest rate, the higher the cost of the annuity. But in this higher interest rate environment, annuities are worth thinking about. A great SPP feature is that you can choose to convert some or all of your savings into an annuity within the plan – you don’t have to transfer money over to a third party to get the annuity.

Great news! SPP’s flexible Variable Benefit option is no longer limited to those members living within the borders of Saskatchewan. Now all retiring SPP members across the country can take advantage of this provision, which puts you in control of how much income you want to withdraw, and when you want to withdraw it. You can also transfer in additional savings from other unlocked registered sources. For full details see SaskPension.com.

Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


A one-sentence summary of what retirement is like

June 29, 2023

As our two Shelties (Duncan and Phoebe) pulled us around the neighbourhood the other day, we came upon a small group of younger folks — parents of school aged kids — enjoying a sunny late spring afternoon.

After some friendly chatting, talk turned to retirement. “You two are both retired now — what’s it like?”

After thinking a bit, our reply was this — “being retired is like every day is a Sunday.” It is not like every day is a vacation day — who could afford that — so it is more like the weekend, we explained. They liked that.

So Save with SPP decided to do a quick search for other peoples’ takes — ideally a short sentence — on what retirement is like.

We started by asking our new AI chat thingie what it thought retirement is like — in one sentence.

“Retirement is the time of life when one chooses to leave the workforce behind and live on savings, passive income, or benefits,” the AI doodad replied. OK, good, but we were thinking more of what it is like rather than what is literally is.

At the AAG website, a writer had a similar view to our own. When you are retired, the article notes, “now Fridays aren’t the best day of the week any more — they all are!”

A fairly recent article from Forbes didn’t boil it down to one sentence, but said these ten words are the ones most often used to describe retirement — “relax, happy, travel, retirement (of course), family, fun, success, freedom, money and fulfilled.”  This may not be an actual sentence but it captures a lot of what it’s like.

“Retirement is not the end of the road. It is the beginning of the open highway.” This two-sentence statement, original author unknown, was posted on the Southern Living website.

“We work all our lives so we can retire so we can do what we want with our time and the way we define or spend our time defines who we are and what we value,” states Bruce Linton. His quote is featured on the Goalcast website.

On the Goodreads website writer Charles Baxter describes retirement as being “gainfully unemployed; very proud of it too.” We like this one.

“Retirement is the best gift. No gold watch or plaque could ever top it,” state the folks at the Chapparal Winds Retirement Community website.

If there’s a common thread to all this, it’s that retirement means that your time is now yours, and it is up to you to decide what you’ll do with the time.

We saw that “money” was mentioned by Forbes magazine, and it’s true that money is part of it. The more you have when you retire, the more options you’ll have for your free time. So if you haven’t started saving for retirement — and maybe don’t have a pension or retirement savings plan through work — you ought to think about the Saskatchewan Pension Plan.

Any Canadian with registered retirement savings plan room can join. You can contribute as much as you want to each year (up to your personal RRSP room limit), and if you want to consolidate savings from other RRSPs into SPP, you can transfer any amount in. It’s how SPP makes your savings options limitless. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Retirement investors need to think about balancing growth and income

February 16, 2023
Photo by Firmbee.com on Unsplash

Saving for retirement sounds like building wealth, but there’s a twist. After the saving is done, you’ll be wanting to convert that piggy bank into income for your golden years.

Do you bet it all on black, or is there a more sensible approach to investing for retirement? Save with SPP scouted the Interweb for some thoughts on the principles behind retirement investing.

Forbes magazine suggests retirement investors should take advantage of “tax advantaged accounts” available to them. In Canada, this would be things like a registered retirement savings plan (RRSP) or tax free savings account (TFSA).

The article suggests an “asset allocation” approach makes sense for retirement investing, with a portion of your investments targeting growth, through exposure to equities (stocks), and the rest to income, via fixed income investments, such as bonds.

You can either buy stocks and bonds directly, or via exchange-traded funds (ETFs) or mutual funds, the article adds.

Forbes believes that your age should help dictate the portion of your holdings that is in equities versus that in fixed income. In your 20s, the article notes, you should invest “90 to 100 per cent” in equities. By your 50s, you should be around 65 per cent equities and 35 per cent bonds, and once over 70, “30 to 50 per cent in stocks, 40 to 60 per cent bonds,” with the rest in cash.

At The Motley Fool Canada, dividend stocks are seen as one of the best investments in a retirement portfolio.

“You pay lower income taxes on dividend income from dividend stocks than your job’s income, interest income, and foreign income. Therefore, it is one of the best incomes to build up and grow as soon as you can. This low-taxed income will benefit you through retirement,” writes The Motley Fool’s Kay Ng.

She also notes that even if you have paid off your mortgage when you retire, you are still going to need income “to pay for home insurance, property taxes, and potentially utilities, condo, or home repair fees during retirement.”

Her article suggests real estate income trusts (REITs) are an investment well suited for your retirement portfolio. Owning REITs, she explains, is like owning shares in a property that is being rented out — you’ll get regular monthly income (like rent) and the value of the properties held by the REIT tend to go up over the long term.

The folks at MoneySense note the RRSP, now more than six decades old, is still a “go-to” for Canadian retirement investors.

The article begins by noting that the RRSP allows investments to grow on a “tax deferred basis,” meaning no taxes are owed until you take the money out in retirement. The Saskatchewan Pension Plan (SPP) operates very similarly, for tax purposes.

MoneySense agrees with the idea that Canadian dividend stocks make sense in your retirement investment portfolio, as they are taxed at a lower rate than foreign stocks in a non-registered account and aren’t taxed in a registered account.

Since the end game of retirement investing is converting savings to income, MoneySense notes the annuity — “which pays a fixed income for life” — is a good idea for some or all of your savings once you have retired.

So, let’s recap. You want to build your retirement portfolio with a mixture of dividend-producing stocks, and interest-producing (and lower risk) fixed-income investments. Real estate income is seen as beneficial both before and after retirement. When retirement begins, these sources will provide regular income, and if you want to guarantee the level of income, you can convert some or all of your holdings to an annuity.

If you’re hesitant about wading into this somewhat complex topic, another way to go is to join the SPP. SPP’s Balanced Fund is invested in Canadian, U.S. and international equities, but also bonds, mortgages, real estate, infrastructure and money market funds. The savings of SPP members are invested, at a very low cost, in a large pooled fund. And when it’s time to collect your SPP benefit, you can choose from a variety of annuity options for some or all of your account. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Taking a look at some of the financial potholes we’ll face on the retirement highway

January 19, 2023

You’re enjoying your retirement party, your last paycheque is about to be deposited, and soon you’ll be cracking into your retirement savings.

All smooth sailing? Well, it can be if retirees are aware — in advance — of some of the bumps in the road ahead. Save with SPP took a look at the most common risks faced by those of us who are retired.

If your retirement savings are invested and you plan to live off the proceeds, investment risk and inflation should be near the top of your list, reports the Financial Post.

“Turbulent markets, soaring inflation and a higher cost of living are all impacting older workers that are transitioning to full or part-time retirement,” Mercer Canada’s F. Hubert Tremblay tells the Post.

The Kiplinger website adds a few more. Will you outlive your savings, the article asks? That’s known as “portfolio failure risk,” and can happen even if you have a set withdrawal rate, such as taking out no more than four per cent of your savings each year.

“Another withdrawal method is guessing how long you’ll live and dividing your savings by 20 to 30 years—but what happens if you live 31 years,” the article asks.

They also cite “unexpected financial responsibility risk” as being a possible challenge — this would involve having to help out adult children or ageing parents — or both.

The Wealth of Geeks blog offers up a few more risks, including a surprising one — frustration.

“Retirees are frustrated with their retirement,” the article notes. “On average, retirees rate their satisfaction in retirement as 7.0 out of 10 in 2022, compared to 7.4 in 2020. Similarly, retirees ranked their alignment of life in retirement with their prior expectations at an average of 6.4 in 2022, down from 6.8 in 2020,” the article continues.

A lot of the frustration is linked to inflation — the fact that everything costs more than it did even a year ago, the article continues. Having less to spend than expected while on a fixed income becomes a source of frustration, the article explains.

Forbes magazine sees three chief risks for retirees. The first two, inflation and investment risk, we’ve covered — but the third is possibly even more important — longevity risk.

“While there are a lot of benefits to living a long time, longevity increases financial risk. You need to pay the living expenses for all those extra years. Also, your annual expenses might increase, because people generally need more medical and long-term care as they age,” the Forbes article explains.

Save with SPP has been embedded in the camp of retirement for more than eight years now, and we can add another risk to the list — carrying debt into retirement.

According to the Canadian Press, via CP24, Canadians have $1.83 in debt for every dollar they earn.

While that’s bad, having debt when retired (and living on less income) is worse. Trying to reduce debt prior to retirement is, in many people’s opinion, almost as important as retirement savings.

It’s a daunting list of potential pitfalls. The best way to arm yourself against future risks is to have retirement savings and thus, future retirement income.

If you have a pension or retirement system through work, you are ahead of the curve. If you don’t, consider the Saskatchewan Pension Plan. SPP is a pension plan any Canadian with registered retirement savings plan (RRSP) room can join. SPP will take your contributions, as well as transfers from other RRSPs, and will grow them efficiently in a pooled fund offering low investment costs. When it’s time to turn savings into retirement income, SPP has several options for you, including lifetime annuities which guarantee you’ll never run out of income. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Tough economy has adult kids moving back in with parents

December 1, 2022

If you take a look at the cost of real estate in most Canadian towns and cities – and then look as well at rental rates – it is not surprising that so-called “boomerang kids” are choosing or being forced to move back in with their parents.

Figures from 2016 – pre-pandemic – from Statistics Canada showed “34.7 per cent (of) young adults aged 20 to 34 were living with at least one parent,” states an article on the Chartered Professional Accountants of Canada website.

The article, written in 2019, quotes Great West Life Realty Advisors’ Brigitte Lazarko as saying the high cost of housing is definitely a contributor factor in the boomerang equation.

“Everybody has that dream of owning a home, and they’re seeing [that] it’s going to take quite a bit more to get there than perhaps the previous generation,” she states in the article.

Since then, while housing prices have rolled back from their highs, interest rates have jumped to record high levels. That makes mortgages more expensive, and can increase rental rates as well, and no doubt the number of kids moving home has increased.

Interest rates, which recently were around 6.8 per cent, are having impacts on housing, confirms MoneyWise Canada via MSN.

“Higher mortgage rates have already affected house sales. With fewer buyers, homesellers have been forced to consider lower prices,” the article notes.

“But it’s not only buyers and sellers impacted. Renters are competing with those who can’t afford to buy, while investors are considering raising rent to keep up with increasing mortgage payments,” the article continues.

Those of us who remember paying under $200 a month for a one-bedroom apartment in the 1980s (when interest rates were also high) get sticker shock when they see what young people must pay now. The article notes that the average rent for one-bedroom apartments in Vancouver hit $2,590 recently, with Toronto ($2,474) and Burnaby ($2,292) close behind.

The pandemic has added some twists in the boomerang story, reports the BBC. “Though the ‘boomerang’ stage has been on the rise for at least the last decade, the pandemic has added a few new contributing factors: many who planned to go away for college could not – university campuses closed across the world – and others who might have otherwise moved for a job after college delayed leaving home because in-office work has not been available,” the broadcaster reports.

Other factors that hinder kids from leaving the nest include student debt, time needed to save a much larger down payment or just the need to “establish themselves in their career,” the BBC reports.

The Street reports that having to look after adult kids can impact retirement savings.

“Parents in their 40s and 50s should be saving aggressively for retirement, and extended child support can do a lot of damage. Suppose an assortment of parenting costs come to $500 a month for five years, starting when the parents were 45. If that money was invested instead at an eight per cent annual return it would grow to $36,707 in five years,” the article notes. “Over the next 20 years that sum could grow to $171,000. How many 70-year-olds wouldn’t like to have that?,” the publication reports.

Forbes magazine offers five ideas on how to help boomerang kids become more financially self-sufficient, including a detailed cost analysis on what extra you’ll pay to help the kids with accommodation, their bills, etc., to helping them set up a budget, to considering charging them rent, to getting them saving for retirement while at home, and to making sure they get financial advice.

The overall message here is to work things out beforehand, so that your kids aren’t “guests,” but contributing family members with various chores and responsibilities. As well, an effort needs to be made to ensure that they benefit from living at home for less by paying off debt and saving for the future, including retirement.

For anyone without a retirement program at work, the Saskatchewan Pension Plan (SPP) is a great do-it-yourself option. You can contribute up to $7,000 a year towards SPP, plus you can consolidate savings stuck in various registered retirement savings plans by transferring up to $10,000 annually into SPP. Be sure to check out this made-in-Saskatchewan solution to Canadian retirement saving today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Bartering – an ancient money-saving idea expands through 21st century technology

November 24, 2022

Let’s face it. The cost of a lot of things, particularly groceries and gas, has gone way up of late, leaving us all with a little less in the wallet to buy other things. That’s prompted a number of us to take a look at an old idea – bartering. Save with SPP took a look around to see what people are saying about this ancient take on trading goods and services for other goods and services, without the need for money.

“Bartering is a simple and cheap exchange of goods and services between people,” reports the Moneyless blog. “Bartering is also recommended if you want to live without money or if you want to save money. Bartering is also a fantastic way to get new stuff and it can be a good alternative to the monetary economy,” the blog suggests.

The chief idea of bartering is trading, the blog explains. It’s like “can you fix my computer? Then I’ll fix your curtains,” the article adds. However, thanks to 21st Century technology, the process has moved online.

The blog notes that there are online bartering sites where people offer to exchange “games… audio equipment, TVs or furniture” for other goods or services they specifically need. Some of these sites work with a credit system, and others “one to one,” meaning you trade your chair for someone’s table.

Save with SPP looked for a few Canadian barter sites, and found Swapsity, Barter Pay and First Canadian Barter.

The Budget And Invest blog looks at some of the advantages of bartering.  Bartering, the article says, “generates more business” by bringing your items to “a larger pool” of barterers. It also “reduces the cost of doing business” by virtue of it being a moneyless system – unsold items that remain on a store’s shelf, for instance, equate to lost money, the blog suggests.

Bartering helps “conserve cash” since you are trading items and services for the same, and not paying for them, and is “easy” since it has grown from individual dealmaking to online networking.

Forbes cites the example of Melissa Barker, who has launched a bartering business called WE Barker that has “5,000 people involved in 44 industries across 25 cities.”

“At the crux of WE is the bartering system, both small trades like writing a review to big trades like developing a website in exchange for public speaking coaching,” Forbes reports.

Another practical example comes from the Blogging Away Debt blog, which provides the testimonial of a woman named Hope, who has bartered for things like “Tae Kwan Do lessons, homeschool co-op tuition, competitive gymnastics training, and so much more over the years.”  She recently bartered for two full weeks of boarding for her seven dogs in exchange for redoing the kennel’s website.

Save with SPP has one fond memory of bartering. Back in the 1980s, we were driving an ancient 1975 Impala around Wainwright, Alta. One day, the engine blew. The mechanic across the street from work said it would cost $2,000 for a new one. Told a friend, he said a national chain might have rebuilt engines for $1,000. Told another friend (happily) about this saving, and he said try a wrecker, could only be $250. Finally, told my friend Don, and he said he and his brother had a car like mine in the barn and could switch out the engines for a case of beer. Now that’s the value of bartering!

The money you save by bartering might allow you to put more dollars in your retirement piggy bank. If you are daunted by saving money in today’s challenging markets, take a look at the Saskatchewan Pension Plan. As a member of SPP, you get the experience of their expert money managers at a very low fee – less than one per cent. They’ll grow your money over your working career, and when it’s time to give back the security badge, SPP can help you turn those savings into a stream of retirement income. Check them out today!