June 14: BEST FROM THE BLOGOSPHEREJune 14, 2021
Boomers don’t think they’ll have enough – but aren’t aware of potential healthcare costs in retirement
It’s often said that if you don’t have a workplace pension plan, you will have to fall back on the “safety net” of the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). You’ll be able to augment those benefits with your own Registered Retirement Savings Plan (RRSP) nest egg, the party line suggests.
But new research from HomeEquity Bank and Ipsos, reported on by The Suburban, finds that 79 per cent of Canadians 55 and older “say they can’t bank on RRSPs, the CPP and OAS for a comfortable retirement.”
In short, they don’t think those sources will provide them with as much income as they want.
The survey goes on to note that “four in 10” of the same over-55 group think they may have to “access alternative lending options for their retirement planning toolboxes,” including accessing the equity in their homes via a reverse mortgage.
Traditionally, the article notes, older folks would “downsize” the family home, selling it and buying something smaller and/or cheaper. “That’s long been considered the right thing to do,” the article tells us.
However, states HomeEquity CEO Steven Ranson in the article, “downsizing isn’t as attractive as it used to be. Given the amount of risk associated with moving and finding another suitable home, more than a quarter of older homeowners are considering accessing the equity in their homes instead of selling to help fund their retirements.”
What could be behind this concern over retirement income?
One possibility is the possibility of expensive post-retirement healthcare costs, suggests an article in Canadian HR Reporter.
The magazine cites research from Edward Jones as saying that “66 per cent (of Canadians 55+) admit to having limited or no understanding of the health and long-term care options and costs they should be saving for to live well in retirement.” The article says that the cost of a private nursing home room – on average, in Canada – is a whopping $33,349 per year.
While not all of us wind up in long-term care, one might assume that you want to make sure you still have a little money set aside for that possibility – right?
The Edward Jones survey found that 23 per cent of those surveyed feel their retirement savings will last them only about 10 years, the article notes. Thirty-one per cent don’t know how long their savings will last, the article adds.
This is a lot to take in, but here’s what the survey results seem to tell us. Boomers worry they won’t have enough money in retirement – and many aren’t aware of the huge cost of long-term care late in life. Perhaps those who are aware of long-term care costs are realizing they might run short in their 80s or beyond?
So what to do about this? First, if you can join a pension plan at work, do. Often, your employer matches your contributions, and the income you’ll receive in retirement is worth a small sacrifice in the present.
No pension plan to join at work? No problem – the Saskatchewan Pension Plan has all the retirement tools you need. For 35 years they’ve delivered retirement security by professionally investing the contributions of members, and then providing retirement income – including the possibility of a lifetime annuity – when those members get the gold watch. 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, and playing guitar. Got a story idea? Let Martin know via LinkedIn.
Knowing where our money goes can help us saveNovember 14, 2019
We talk, often at great length, about ways to save money – to squirrel a little away each month for our life after work.
And while we all seem to wish we could save more, an answer to the question “why aren’t we saving” can be found by looking at where we are spending our cash. Where, Save with SPP wants to know, are our “non-savings” going?
According to Statistics Canada data from 2016, reported on in the Slice.ca blog, Canadians spent an average of $84,489 per household in that year. That’s what they spent, remember, not what they made – most of us spend more than we earn.
The blog reports that Canadians spent the most on shelter – 19 per cent of the total. “In 2016, according to StatsCan, the average Canadian household spent $16,293, or a little over 19 per cent of their total expenditure, on their principal accommodation,” the blog reports.
Next on the list is income tax, weighing in at 18.1 per cent. “They say that the only things that are certain in life are death and taxes. In Canada, $15,310 – or 18.1 per cent – of the average household’s total expenditure went to income tax in 2016,” the blog explains.
The third biggest category is called “private transportation,” our vehicles, which cost us $10,660 per year, Slice.ca notes. The category makes up 12.6 per cent of the total.
Next biggies are food, at seven per cent ($6,176) and “household operations,” which includes phones and Internet — $4,705, or 5.5 per cent, Slice.ca reports. Rounding out the top 10 (Slice.ca actually gives the top 20) are insurance and pension contributions ($5,067, or six per cent), clothing and accessories ($3,371, or four per cent), restaurant dining ($2,608, or three per cent), healthcare ($2,574 or three per cent) and utilities ($2,460 or 2.9 per cent). Savings didn’t make the top 20.
We can’t do much about most of these categories, but some are “non-essential” and could be targeted for spending cuts. If we were to save even 10 per cent of what we spend on vehicles, phones and Internet, clothing and restaurant dining, we’d have a whopping $2,134.40 to add to our retirement savings each year. Saving five per cent would provide a $1,067.20 boost to your savings.
Global News reports that we Canucks “splurge on guilty pleasures.” Citing research from Angus Reid and Capital One, the broadcaster reports that 72 per cent of us “dine out several times a month,” 71 per cent “regularly order takeout,” and half of us buy coffee daily.
MoneySense notes that a lack of personal savings has a variety of negative impacts for Canadians. Citing research from Abacus Data, the publication notes that only 34 per cent of us could “come up with $1,000 right away without borrowing or using credit.”
Debt seems to be missing from these spending stats.
According to the Financial Post via MSM Money the cost of paying our debts is cutting into our ability to pay other expenses.
“More than half of Canadians say they’re increasingly concerned about their ability to pay debts as disposable income shrank by a fifth since June,” the Post reports, citing data from insolvency practice MNP Ltd.
“Average monthly disposable income after paying bills and debt obligations fell $142 to $557,” the Post reports, adding that “nearly half — 48 per cent — of the 2,002 respondents to the early September poll by market research company Ipsos said they’re left with less than $200 at the end of the month.”
This is a lot of information, but a picture emerges. We’re not, as a rule, planning on saving anything each month. In fact, credit balances are getting so high that many of us can’t cover all our bills without dipping further into debt. We can understand how we might cut back on spending, but we also have to cut back on using credit, too.
We all have the power to cut back on spending and borrowing. That will not only reduce our costs, it will reduce our stress levels. Imagine a future where you have control of all your bills – it’s an achievable dream. And as you get to that desired level of financial freedom, you’ll have more and more money to put away for retirement.
If you’re looking for a place to grow those hard-earned savings, look no further than the Saskatchewan Pension Plan. Be sure 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 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|
Sep 23: Best from the blogosphereSeptember 23, 2019
A look at the best of the Internet, from an SPP point of view
Canadians “confused” about TFSA savings – poll
A new poll carried out for Royal Bank of Canada has found that Canadians “don’t know how to use a TFSA to generate wealth.”
The research, conducted for RBC by Ipsos, is reported on by the Baystreet blog.
It finds that “43 per cent of Canadians are misinformed about the funds, believing TFSAs are for savings and not for growing investments,” Baystreet reports, adding that a further 42 per cent of those surveyed use their TFSAs only for savings and cash. Just 28 per cent of those surveyed “hold mutual funds” in their TFSAs, along with 19 per cent for stocks, seven per cent for exchange-traded-funds, and six per cent for fixed income, the blog notes.
In plainer terms, people don’t realize that you can hold all the same types of investments – stocks, bonds, ETFs and mutual funds – in either a TFSA or an RRSP.
Yet, despite the fact that they tend to hold mostly cash in their TFSAs, the tax-free funds are more popular than RRSPs – 57 per cent of those surveyed said they had a TFSA, with only 52 per cent saying they have an RRSP, Baystreet notes.
The TFSA is a different savings vehicle from a registered savings vehicle, such as an RRSP. When you put money into a TFSA, there is no tax benefit for the deposit. However, the money in the TFSA grows tax-free, and there is no tax charged when you take money out.
With RRSPs (and registered pension plans) the contributions you make are tax-deductible, and the money grows tax-free while it is in the RRSP. However, taxes do apply when you take money out of the plan to use it as income.
While TFSAs are relatively new, some financial experts have suggested they might be well-suited for use as a retirement savings vehicle, reports Benefits Canada.
“While RRSPs have the advantage of deferring tax payments into the future, which TFSAs don’t do, the deferral may not be as important to low-income seniors, especially those who want to avoid clawbacks or maintain their eligibility for government benefits, like the GIS, after they retire,” explains the article.
A lower-income earner “might find it more advantageous to maximize their TFSA contributions, which is currently $6,000 annually and indexed to inflation going forward. Unlike funds withdrawn from RRSPs, funds withdrawn from TFSAs — including the investment growth component — aren’t taxable, and contribution room after withdrawals can be restored,” Benefits Canada reports. The article also talks about employers offering group TFSAs as well as group RRSPs.
Those taking money out of a RRIF might want to put the proceeds – minus the taxes they must pay – into a TFSA, where it be re-invested tax-free and where income from it is not taxable.
A key takeaway for all this is that you need to think about putting money away for retirement while you are working. The concept of paying yourself first is a good one, and one you will understand much better when you’re no longer showing up at the office and are depending on workplace pensions, government retirement programs, and personal savings for your income. No amount is too little. If you are just setting out on your savings journey, an excellent starting point is the Saskatchewan Pension Plan. Be sure 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|
Feb 11: Best from the blogosphereFebruary 11, 2019
A look at the best of the Internet, from an SPP point of view
When it comes to retirement saving, how much is “enough?”
There’s no question about it – saving for retirement is a moving target. We are frequently told to save more for retirement, but it’s not often anyone lets us in on the secret of how much “enough” is, retirement-wise.
A new poll by Ipsos, conducted for RBC and reported on in the Montreal Gazette, gives us some specific answers to this age-old question.
On average for Canada, the article says, the savings target is $787,000. The article says Ontarians feel they need $872,000. In BC, respondents think retirement savings should top $1.05 million, the highest total in the country. In Quebec, which has the lowest average, the target is $427,000 to “have a comfortable financial future,” the article reports.
Save with SPP reminds those reading these daunting numbers that all working Canadians will get Canada Pension Plan or Quebec Pension Plan benefits, plus other government benefits like Old Age Security and, if applicable, the Guaranteed Income Supplement. So those will account for a significant chunk of that total savings amount, even though you don’t get these benefits as a lump sum, but as a lifetime payment.
However, those without a pension plan at work will have to do some saving to get to these average totals. The survey asked people how confident they were about reaching the finish line on savings. On average, just 16 per cent said they were confident. An alarming 32 per cent of Ontarians (least confident) and 39 per cent of Quebecers said they “will never build up enough of a nest egg,” the article says. The article says the lack of a financial plan may be part of the problem here.
“The survey… found 53 per cent of respondents from Quebec had no financial plan. Only Atlantic Canada had a higher rate of respondents with no plan, at 54 per cent. Of the 47 per cent of respondents who have a financial plan, 34 per cent said that plan is in their head,” the article notes.
“Across the country, 54 per cent of respondents said they have a financial plan,” the Gazette reports.
If there’s a takeaway here, it is that if you can – despite the rising cost of household debt and other life costs that get in the way – you need to plan to put a little away for retirement. If you start small you can increase your commitment later when the bills calm down.
A little effort today will pay off handsomely in the future, when your savings will turn into retirement income, and you’ll theoretically have paid off debts, raised your kids, and downsized so that you can enjoy your extra time. Don’t be intimidated by the multi-hundred-thousand dollar-targets – a little bit here and there will get the job done. And if you’re looking for an excellent home for your hard-earned savings dollars, look no further than the Saskatchewan Pension Plan.
|Written by Martin Biefer
|Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22|