According to a recent TD survey, more than two-thirds of Canadians between the ages of 35 and 54 say they’re not saving enough for retirement, and one in four say not being ready for retirement is keeping them up at night. As a result, the majority of Gen-X Canadians (60%) who aren’t saving enough do not expect to be able to retire on time and half as many (29%) expect to still be working in some capacity during retirement.
The top barrier preventing Gen-Xers from retiring on time is everyday financial demands like living expenses, mortgage or rent, and childcare costs (61%), followed by existing debt (42%) and major unexpected life events such as divorce or death of a spouse (19%). Given these challenges, it’s not surprising that more than half (54%) of Gen-X Canadians surveyed say they need help meeting their financial goals, with a majority feeling guilty about not saving enough for retirement and wishing they had started earlier.
If you have fallen behind in saving for retirement, here are some ways you can get on track to achieving your savings goals and become retirement-ready.
Track your spending More than three in five (61%) Gen-Xers attribute everyday financial demands as the reason they don’t expect to retire on time. Keeping a record of your spending is a simple way to see where your money goes each month and look for ways to cut back on expenses to free up funds and help boost your savings.
Once you’ve identified some monthly savings, consider arranging for those funds to be transferred automatically into Saskatchewan Pension Plan, a Retirement Savings Plan (RSP) or Tax-Free Savings Account (TFSA). As you identify even more savings over time, you can increase the amount transferred automatically each month. Remember to also factor in any additional money you receive throughout the year such as annual raises or bonuses.
Tackle your debt while also saving Four in ten (42%) Gen-Xers attribute existing debt as a top reason that prevents them from retiring on time. While everyone’s financial picture is different, there are a few key steps you can take immediately to help pay down debt while building up savings:
As you start tracking your spending and becoming more in control of your finances, take a look at where your money is going and determine where you can free up cash flow to go towards paying down debt.
Seek out groups and communities – either online or in your neighbourhood – where you can sell stuff you no longer use or need, and use those funds to pay down your debt. One person’s junk is another person’s treasure.
Look for tips and tools online, like this Debt Repayment Calculator, to help you become organized by determining how much you owe and prioritizing what to tackle first. You can stay on top of your debt more easily when you have a repayment plan.
According to the survey, of Gen-Xers who are already saving for the future, the majority (64%) rely on RSPs to help fund their retirement. If you have RSP savings room, this video will show you how easy it is to join the Saskatchewan Pension Plan. SPP is an easy, flexible, cost-effective way that any Canadian over age 18 can save $2,500/year. You can also transfer an additional $10,000 a year into your SPP account from another RSP.
Hi. Today I’m interviewing Catherine Allen, co-author of The Retirement Boom for Save with SPP.com. She is Chairman and CEO of the Santa Fe Group, a financial services and technology executive, corporate board director, and expert in cyber security and risk management. Catherine lives in Santa Fe, New Mexico.
Q. Catherine, The Retirement Boom is a book by baby boomers for baby boomers about the transition into a new phase of life. Why did you and your co-authors decide to write the book?
A. Well, all of us are boomers ourselves at various ages within the category. We all have experienced or continue to experience reinvention. We all have a desire to stay involved and to be relevant. In fact, we do retreats and many of our attendees age 55-60 told us, “I really don’t want to retire. I’m not ready to retire. I want to do much more.” That’s what led us to do the research and the book.
Q. Who should read your book and what can they expect to learn from it?
A. First are the boomers, especially those 55 plus, who are concerned about and have a fear that they’ll never be able to retire or that they will run out of money before they pass away. For them it’s both financial and lifestyle planning. Twenty-seven percent of Gen Xers are also very concerned that they too many not be able to retire. Lastly there are many 70 year olds that have retired and told us, “I’m bored. I want to do something different. I want to reinvent myself. I may have 30 more years to live.” By reading the book, financial advisors and corporate HR people can also learn a great deal about the needs of their clients and workforce.
Q. How do you think retirement today for baby boomers is different than it was for their parents 30 or 40 years ago?
A.I see differences in four areas: financial, health, emotional, and government policies.
Thirty or forty years ago many more people had pensions which today are pretty much gone. Most people thought they might live to 70 or maybe 72 or 75. Today because of health care and being fit it’s very likely the boomers will live until 100. That means there are expenditures like travel or entertainment or other things that they want to do that they need to allow for.
Also, when people retired 30 or 40 years ago they did the 3 G’s as I call them. Gardening, grandchildren, and golf. Today people want to stay active, they want to get involved, they want to give back, they want to be a part of the ongoing environment.
Finally, government policies are not keeping up. Government policies have to positively support the aging population instead of being against things like social security or medicare or pensions or even not understanding the impact of aging. Those are all big differences I see from just 30 or 40 years ago.
Q. People spend their whole life with an identity that’s tied to their work. How can they overcome the fear associated with this loss of this identity to better embrace and enjoy their retirement?
A. That’s my favorite subject and it’s about reinvention. You don’t have to keep that same identity. This is a time when you can follow your passions as a way to reinvent your identity. We encourage people to keep their bio and resume and certifications up to speed because you never know when you might want to go back into the work force, especially if it’s a field that you love.
We encourage everybody to have a business card that has their website or their email and telephone number on it so that they feel like they have an identity and that’s who they are. Then lastly, we talk about people having a portfolio career and that means perhaps a third of what they’re doing is earning income by consulting or writing books and so forth. A third of their time is giving back through non-profits. A third of their time is just having fun enjoying and learning about life.
Q. Many people do continue working beyond the normal retirement date. Do you think that most people that are doing this are doing it for love or for money?
A. Well, that’s … It’s hard to tell. I would say 50/50. First of all, they are continuing to work as a form of insurance to keep funding their lifestyle and their retirement because many people believe they will live to 100. Secondly, many people want to remain again, relevant. They want to make a difference, they’re engaged.
The boomers — many of whom are part of the 60s generation — feel like now they finally have time to give back. It might be teaching, it might be mentoring, it might be being active in non-profits either by giving or volunteering or being on boards. Recent research published in the Journal of Epidemiology and Community Health say that the longer people work beyond 65 the less likely they’re to die at that age compared to others who do not work.
And what’s interesting is the numbers go up. At age 72 you’re 56% less likely to die than a 72 year old who is not working. I think that kind of research is going to encourage people to work longer after the age of 65.
Q. What do you mean by retirement robbers and how can retirees avoid them?
A. First of all, the biggest retirement robber might be yourself. They are people that keep you from doing what you want to do. You may have set up goals for retirement so you have time to follow your passions. Now guilt keeps you from enjoying what you said you wanted to do in retirement.
Also there are relatives. You’re retired, so guess what? You’re the one that can do the errands, you might be the caretaker or the “go to” person. We encourage people to try to think of retirement just like thinking about a career. What it is that you want to do, and how do you want to allocate your time? Try to stick to your plan so you are not sabotaging yourself.
Q: You and your co-authors interviewed over 300 people as part of your research for this book. Can you share 1 or 2 of your favorite anecdotes with us?
Well, I’ll start with my dad. He was a small town community banker. He always said he wanted to die with his boots on. That was his way of saying he wanted to be working when he passed away and he did. He was always a role model for me.
We’ve also heard from several women who were stay-at- home wives raising their kids who have gone back to work. Now their husbands have retired and they say things like, “I married you for life but not for lunch.” In other words, just because you’re retired doesn’t mean that it’s up to me to fill all of your time.
Another example is I was on a corporate board with a gentleman who was 92 years old and probably the smartest one of all of us. He wouldn’t say anything until he was ready to say the exactly right thing. There are lots of examples of people well into their 70s, 80s, and even 90s who are still actively involved and engaged in the world.
Q. What are some of the ways retirees can simplify their lives so that they can pursue their passions?
A. Well, start with your own home. Downsize or clean up. There’s a relationship between having less clutter in your mind and less clutter in your home. Try yoga or meditation or journalling. One of my favorites is detaching from technology for a while, whether it’s for a weekend or for a day or even for an entire vacation.
Lastly is relationships. I think as you get older you really want to think about who are the people that are most important to you and surround yourself with those you trust. Plan most of your time to be around these people. I call it sorting friends just like you sort your closet.
The Retirement Boom: An All Inclusive Guide to Money, Life, and Health in Your Next Chapter can be purchased in paperback or for Kindle on Amazon.com.
*This is an edited transcript of a podcast interview recorded in May 2016.
This is the last Best from the Blogosphere for 2015 and I’m taking a break, so the next one will be published on January 25, 2016. We wish all savewithspp.com readers a healthy, prosperous New Year.
As we look back on 2015 and ahead to 2016, there is much to think about. We have a new Federal government, the loonie is at an all-time low and Canadians have extended extraordinary hospitality to Syrians and other refugees from war-torn lands.
Here are some interesting stories we are following:
In TFSA vs. RRSP: How are Canadians saving? I interviewed Krystal Yee (Gen X), Tom Drake (Gen Y) and Bonnie Flatt (Boomer) to find out how Canadians are taking advantage of the tax-sheltered savings vehicles available to them.
In What Sean Cooper Really Achieved By Paying Off His Mortgage In 3 Years Robb Engen from Boomer and Echo tells us that Sean Cooper didn’t just pay off his $255,000 mortgage in three years; he taught us all a lesson in personal branding. Mr. Cooper, a pension analyst by day, mild-mannered blogger by night, took an almost Machiavellian-like approach by achieving fame through mortgage freedom at age 30.
Jim Yee offers some Year End Finance Strategies that will take advantage of ongoing changes to our tax rules. For example, in 2016, the new Liberal government will be lowering the tax rate on the middle income bracket from 22% to 20.5% so those individuals making more than $45,283/year but less than $90,563/year, deferring income to next year might save some tax dollars.
On the Financial Independence Hub, Doug Dahmer writes about the timing of CPP benefits. He says the CPP benefit for a couple can be in excess of $700,000 over their lifetime and the study demonstrates that the difference between starting your benefit at the least beneficial date and starting at the best date can be more than $300,000.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.