Tag Archives: Market Watch

Why some people don’t retire

 

We were chatting about retirement with a salesman at the local car dealership when he rolled out a bombshell – in his early 70s, he had no plans for retirement. He loved what he does and wants to keep on doing it for as long as he can. Maybe in his mid- to late 80s he might get a cottage, he says.

That made Save with SPP wonder if others aren’t retiring – and why.

The Wise Bread blog says there are five types of people who don’t retire – the “broke non-retiree, the workaholic, the successful investor, the life re-inventor and the mega-successful lifers.”

The article notes that “a startling 47 per cent” of Americans “now plan to retire “at a later age than they expected when they were 40.” The reason why – 24 per cent of Americans 50 and older have saved less than $10,000 for retirement.

For workaholics, the article notes, “it can be devastating to face retirement,” with many fighting it “tooth and nail.” Successful investors, the article notes, may have bought real estate, gold, or stocks early and now have enough money that they don’t need to work. Life re-inventors retire from one job and take on a new, totally different one, and the “mega-successful” tend to be CEOs, actors, star athletes, folks who have sufficient wealth to not worry about a formal retirement.

The New York Times reports that there are 1.5 million Americans over the age of 75 who are still working. Judge Jack Weinstein, age 96, still gets up for work every day at 5:30 a.m., the newspaper reports. “I’ve never thought of retiring,” he tells the newspaper. “If you are doing interesting work, you want to continue.” The paper says that those who are employed in jobs “in which skill and brainpower matter more than brawn and endurance” often keep going past usual retirement age, as do the self-employed and industry stars, like Warren Buffett.

An article in Market Watch picks up on another point – there are many people who don’t like the sound of retirement. “The idea of a retirement where a person has little responsibility, and, worst of all, interacts with very few people, just isn’t appealing to the current crop of pre-retirees,” the article notes.

A more Canuck-friendly view comes from Canadian Living, which lists the main reasons for not retiring as “you need the money, you like working, you hate retirement,” and significantly, “you’ll collect bigger benefits” and “you’ll lose your RRSP later.”

“If you collect your CPP at age 70,” the article points out, “you’ll get 42 per cent more than if you retired at 65.” Similarly, if you collect CPP at 60, you get 36 per cent less than if you collected at 65, the article states.

On the RRSP front, since you must convert your RRSP to a RRIF (or buy an annuity) by age 71, delaying retirement means you will have more money in retirement, the magazine notes.

These are all good points. Save with SPP notes that there are many folks who simply live in the now and won’t think about retirement until they must. The idea that we can all keep working forever is a nice one but tends to be an exception, rather than a rule.

We may not want to retire, but the vast majority of us probably will. Even if you’re in the group that has saved very little up until age 50, there is still time to augment your life after work with some retirement savings. The Saskatchewan Pension Plan is quite unique in that it is open to all Canadians and provides an end-to-end retirement vehicle – your savings are invested and turned into a lifetime pension at retirement time. It’s a wise choice, even for those who don’t want to retire.

 

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

Dec 17: Best from the blogosphere – Canadians need to save 11 times their salary by retirement

A look at the best of the Internet, from an SPP point of view

Canadians need to save 11 times their salary by retirement

There are many “rules of thumb” in the world of money. One used to be that your rent should equal one quarter of your monthly take home pay. Another used to be that your house should be worth twice your annual salary.

According to research by Fidelity in the US, reported by Market Watch, people should have saved a year’s salary for retirement by age 30.

By age 40, Canadians should have saved three times their salary for retirement. And by “average retirement age,” usually early 60s, Canucks need to have saved 11 times their salary, the article says.

The article tempers the alarm it raises with these high figures by pointing out that they are just guidelines. “Everyone faces different circumstances, and therefore need varying amounts of money by the time they retire,” the article reports. “Some people may choose to rent or pay off a mortgage, while others may not have any housing obligations except for taxes and utilities. Some retirees may want to take more vacations, or have more medical bills to pay, or have intentions with their money, such as an inheritance for their children and grandchildren.”

And don’t forget that the contributions you make towards CPP and a portion of your income tax are retirement savings payments, since you will get a CPP pension one day and likely Old Age Security as well.

That said, Statistics Canada, via the CBC, reports that the average Canadian saves only four per cent of his or her income, and that there was a whopping $683.6 billion in unused RRSP room as of the end of 2011. The article notes that someone saving $2,000 a year from age 25 on would have $301,478 by age 65. That might not be 11 times his or her salary, but it is a pretty good number.

Retirement savings, like losing weight or getting out of debt, is overwhelming when you first set out to do it. But if you start small, and chip away over the years at your target, you will be surprised to see how far you’ve come when the time comes to log out of work for the last time.

If you’re not fortunate enough to have a pension plan at work – and if you do, and have extra contribution room each year – the Saskatchewan Pension Plan is a great way to build your retirement savings. You can start small, or can contribute up to $6,200 per year. You can transfer savings in from other retirement savings vehicles. The money is invested professionally at a very low fee, and when you retire, you’ll have many options for turning savings into a lifetime income stream. Check it out today.

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