Building an emergency fund essential, experts say

These days, with so much uncertainty swirling around the economy, inflation, and trade, experts suggest that socking away money in an emergency fund may be a wise move.

Save with SPP took a look at what the experts are saying about emergency funds.

The Winnipeg Free Press calls emergency funds “an absolutely crucial part of any financial plan, regardless of the life stage or situation.”

“For people who already have high-interest-rate debt, having an emergency fund can help guard against resorting to additional high-cost financing in a pinch. It also helps you defray unexpected expenses without needing to raid your retirement accounts,” the newspaper reports.

“Finally, the big reason to have an emergency fund is to cover your basic costs in case of job loss,” the Free Press adds.

The paper suggests that your minimum target savings amount for an emergency fund should be three times your basic living expenses – that’s “housing costs, utilities, food expenses, servicing debt, insurance and taxes.”

You can subtract any savings you already have from that minimum target and then begin adding savings to make up the gap, the Free Press notes.

The folks at MoneySense set out some of the advantages of having an emergency fund.

A fund, the publication reports, can be put into use when you face:

• “Urgent major repairs (not renovations) to your home or car.”
• “Unexpected medical expenses not covered by universal health care or insurance.”
• “Lack of income due to job loss.”

“Just like the name implies, an emergency fund is meant for emergencies. Unexpected events happen in life: the car breaks down, the fridge stops working or you get laid off during a recession. Without an emergency fund to help cover your expenses, you could end up paying bills with a credit card, relying on payday loans or heavily using your secured or unsecured line of credit,” reports MoneySense.

Having to go that route means your emergency is costing you an additional 19.99 per cent (if paid via credit card) or an eye-popping 442 per cent if paid via payday loan, the publication warns.

Forbes magazine notes that your savings target will be larger if there are more people in your household than just you. Base your monthly expense number not only on your expenses, but all the expenses you cover for everyone under your roof, the magazine suggests.

Finding money to divert to your emergency fund may be as simple as trimming the “non-essentials” you spend money on, such as “clothing, entertainment, and dining out.”

“Go through the list of things you normally spend money on that aren’t actual needs and consider what you can reduce or eliminate,” the magazine suggests. If that doesn’t work, you may need to aim for a higher income.

“Consider ways you can make more money each month. This may include taking on extra hours at work, getting a part-time job or starting a side hustle. Even selling things around the house you no longer need can help. The more money you can bring in, the more you can add to your emergency savings,” Forbes advises.

Forbes concludes by suggesting four steps to help build your emergency savings:

• Make savings automatic – make an automatic deposit to your savings account every pay day.
• Save “windfalls,” like tax returns, rebates and “other unexpected financial windfalls.”
• Use “cash back” apps or cards and direct the money to savings.
• If you are getting tax refunds every year, considering reducing the tax withheld from your pay and adding the difference to your emergency fund.

Writing for GoBankingRates, Caitlyn Moorhead suggests a few more saving ideas for boosting the balance in your emergency fund.

Find a chequing account that also pays interest, and move the interest received to your emergency fund, she writes. Cut back on your cable package and bank the savings, she continues. Be a stickler about sticking to your grocery list, she advises, and develop a meal plan that is based on weekly grocery sales. Bank the extra money.

In fact, you consider your emergency fund to be a bill, she writes. Huh?

“When it comes to financial planning, it’s a lot easier to part with the money you put in savings when you take on the mindset that it’s just another bill. Instead of looking at saving as an optional move, think of it as a mandatory expense like paying rent or your phone bill. That way when unexpected expenses arise, you already have it covered,” she concludes.

We’ll add a few we used when building up our savings. Lottery ticket winnings can be banked. When you roll up your change, you can deposit it in your account. And when you get a payout from your dental or vision insurance, you can pop that into savings.

The same tactics listed in these articles can be used – perhaps once you have built up that emergency fund – to save for retirement. And a great vehicle to speed along that savings journey is the Saskatchewan Pension Plan. You provide the savings, SPP provides the investment expertise, and will grow your hard-earned loonies in their low-cost, professionally managed pooled fund. When it’s time to retire your choices include a lifetime monthly annuity payment or the more flexible Variable Benefit.

Check out SPP today!

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New RetireMint platform helps with both money and non-money sides of retirement

Writing for MoneySense, Jonathan Chevreau explores a new Canadian retirement platform that covers both the financial and non-financial aspects of retirement.

The Canadian platform, he writes, “isn’t just another retirement app that tells you how much money you need to be able to retire in comfort. It spends as much or more time on the softer aspects of retirement in Canada: what you’re going to do with all that leisure time—travelling, part-time work, keeping your social networks intact and so on.”

In fact, adds the well-known financial writer, the advice in the app reminds him of previous books he has authored and co-authored, including Victory Lap Retirement and Findependence Day.

Chevreau notes that the platform’s “mission statement is: `Helping Canadians retire better, faster and more prepared.’ It also bills itself as `Your guide to the modern retirement.’”

RetireMint’s CEO Ryan Donavan tells MoneySense that “retirement has become so synonymous with financial planning, and so associated with ‘old age,’ that they’re practically inseparable. Yet, in reality, retirement is a stage of life, not a date on the calendar, an amount in your bank account, and is certainly not a death sentence.”

As well, he continues, while financial planning for retirement is key, since “you won’t even be able to flirt with the idea of retirement without it,” life after work is much broader than just money.

Okay – so what can the app do to help with the “non-money” side of retirement?

There are 14 topics on the platform “ranging from the obvious ones, like estate planning and insurance, to less apparent matters, like hobbies and the psychological shift into retired life,” MoneySense reports. Donovan tells MoneySense that an eye-popping 8,000 Canadians per week will reach retirement age over the next 15 years, but “more than 60 per cent do not know their retirement date one year in advance, and more than a third will delay their retirement because they don’t yet have a plan in place.”

The idea of having something to do with one’s time post-work is very key, the article notes.

There’s a very high suicide rate amongst those of us age 50-64, 65-84, and 85 plus, the article warns. Those of us over 65 have “a divorce rate three times the national average,” and with 25 per cent of our seniors in social isolation, there’s a 50 per cent increase in the chance of them developing dementia, the article continues. Seventy-seven per cent of seniors, the article concludes, “live with at least two chronic illnesses or conditions.”

Having a plan for your time, and not just your money, can make a positive difference, the article contends.

The average retirement, Donovan tells MoneySense, lasts for 22 years. “In each of those years, you will have more than 2,000 hours of new-found free time that would have been spent working throughout the majority of your life.” 

We agree with these thoughts. You need to be sure to have something to do, and people to do it with. And retirement can be the best time of life.

Many Canadians don’t have a retirement program through the workplace. If you’re in that group, there’s a retirement savings ally you need to be aware of. The Saskatchewan Pension Plan has the investment expertise and experience that you lack. They’ll take your hard-saved retirement dollars and will invest them in a low-cost, professionally managed pooled fund. At retirement, you’ll be able to choose from options like a lifetime monthly annuity payment, or the more flexible Variable Benefit. Check out SPP today!

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Retirement still feasible for 40-year-olds with no pension – but it takes work and commitment

So, you’ve hit the big 4-0 and are beginning to realize that life after work is no longer as far away as it once was.

If you’re 40 and aren’t a member of a pension plan, can you still fund – on your own – a decent retirement income for yourself?

According to a recent article in MoneySense, the answer is yes – but it will take a little work on your part.

“The key is to try to mimic the pay-yourself-first approach by setting up an automatic contribution to your registered retirement savings plan (RRSP) to coincide with your payday. A good rule of thumb to strive for is 10 per cent of your gross income. Remember, in most cases the employees blessed with a defined-benefit pension are contributing around the same 10 per cent rate (sometimes more) to their pension plan. You need to match those pensioners stride-for-stride,” MoneySense suggests.

OK, this makes sense – preauthorized contributions on payday mean you won’t have time to spend the money on something else, and after a while, you won’t miss it.

The article takes the example of “Johnny,” who makes $90,000 per year gross and contributes 10 per cent — $9,000 – annually to his RRSP. If he gets an average return of six per cent each year for 25 years, he’ll have $493,780.61 in his RRSP by age 65.

This example does not factor in any growth in Johnny’s wages. If his salary goes up each year and he continues to contribute 10 per cent to his nest egg, he’ll be contributing more than $9,000 per year, the article notes.

If Johnny got a three per cent raise annually for 25 years, MoneySense adds, then his RRSP will be more like $700,000 by age 65.

Assuming his mortgage is paid off, the article notes, Johnny will be able “to spend $40,000 per year (inflation-adjusted) until age 95.”

He will, the article adds, also get about $25,000 per year from the Canada Pension Plan and Old Age Security if he takes them at age 65.

That’s the second key point here – step one is to save 10 per cent of your gross earnings in an RRSP annually, and step two is to keep working until 65, and to collect government benefits at that age. “Working until 65 ensures he will get a robust retirement pension from the contributory CPP, plus he’s lived in Canada all his life and can expect to receive 100 per cent of his OAS benefits,” the article notes.

Retiring without a mortgage is another important aspect of this example.

“The ace up the sleeve for Johnny’s retirement is his mortgage-free home. It amounts to equity he could tap by downsizing, selling and renting, taking out a line of credit or using a reverse mortgage if he found himself needing cash flow or a lump sum of money in retirement,” the article explains.

This sounds great, but MoneySense notes that it can be greater. If Johnny were to also save three per cent of gross earnings in a Tax Free Savings Account, he will have an additional $355,000 in savings, bringing his total to over $1 million.

The TFSA would allow him more money to withdraw each year, boosting his income to $45,000, the article reports.

Another tactic Johnny could employ would be to delay his CPP and OAS until age 70, when he would get “42 per cent more CPP and 36 per cent more OAS,” the publication notes.

This article makes a lot of sense. Our late Uncle Joe was a strong believer in the “pay yourself first” concept of putting 10 per cent of your gross income into savings, and then living on the rest.

The Saskatchewan Pension Plan (www.saskpension.com) works well for “pay yourself first” savers. SPP allows you to set up pre-authorized contributions that can coincide with your pay dates. Or, you can set up SPP as a bill via online banking and pay yourself as well as the power, heat, and other bills. While Johnny will have to figure out what to invest in, SPP does that heavy lifting for you, in a professionally managed pooled fund. And when it’s time to withdraw money, SPP offers the chance of a lifetime monthly annuity payment or the more flexible Variable Benefit option.

Check out SPP today!

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Some tips and tricks to take some of the headaches out of moving

It’s said that the only certain things in life are death and taxes. But the likelihood that you, or your family members, will move from location A to location B should be a close third on that list.

Having just finished helping one family member move, Save with SPP decided to check around the Interweb for tips on how to make the process easier, and perhaps, cheaper.

The folks at Forbes start us off with a few good ideas. Rather than running out and spending big bucks on packing boxes and bubble wrap, “consider asking neighbors and friends who have recently moved or are about to move—to save their boxes and any extra moving supplies for you. You can also stop by select retail locations like grocery, furniture or appliance stores and ask if they have any boxes leftover from their recent deliveries.”

The next one – our relative did this one with quite a bit of success – is to host a yard or garage sale to get rid of any unwanted stuff you have, rather than packing it up and dealing with it again later.

“By taking the time to get rid of any clothes, furniture or other items that you don’t want prior to your move, you create an opportunity to decrease the number of necessary movers, as well as possibly decrease the size of the moving vehicle that will be needed for your job,” Forbes points out.

A final good bit of advice from Forbes is this – to “pack strategically.” Huh?

“By packing in a way that utilizes fewer boxes, you can save space, time and, most importantly, money. Be tactical with your packing by nesting some items inside of others, rather than just thoughtlessly tossing all of your things into boxes,” Forbes explains.

The Money Excel blog adds an important one – the need to “declutter your house before the move.”

“You need to make categories—to donate, to sell, and to throw away. The donation pile may consist of old winter clothes and boots that can be useful to people who do not have the money to buy them. The pile for selling includes old kitchen appliances that you cannot take with you. The trash pile is for documents you no longer need, such as old income tax returns from five or more years ago. This pile can also include broken, heavier items that no longer have a purpose, meaning you’ll be able to toss out old furniture and other items into your waste dumpster to lighten the load too.”

The From Frugal to Free blog suggests considering a “hybrid move,” rather than going all-in with professional movers or choosing the labour-intensive DIY route.

“A hybrid move combines the best of both professional and DIY moving. Hire professional movers for heavy and bulky items, like furniture and appliances, while handling smaller, more manageable items yourself. This method can significantly reduce costs compared to hiring movers for the entire job,” the blog notes.

Another nice tip (one that we’ve used) is to “notify your utility companies well in advance of your move to avoid rush fees or penalties.” We used to keep the old utility bills (such as electrical or heating bills) from location A to show the utility folks at location B we were good bill payers, this often helped waive some hookup charges at the new location.

Finally, think of the tax breaks that may be out there for you, suggests MoneySense.

If you are moving to start a new job or for education, hang on to all your moving expense bills, because you may be able to claim them, the article notes.

“One of the key criteria for qualifying is that your move must take you at least 40 kilometres closer to a new work or post-secondary location (the shortest public route is considered). In addition, the move must be made to earn income at that new location from either employment, self-employment or to attend post-secondary school,” reports MoneySense.

These are all good tips. Our relative used both a garage sale and also social media to turn clutter – items that were still good, but not needed at the new location – into cash. A lawn mower, a BBQ, an outdoor hot tub, and appliances all generated more cash to help defray moving costs.

If you are moving to a new place for a new job, and are a member of the Saskatchewan Pension Plan, there’s at least one thing you won’t have to pack. SPP is a portable plan. Changing employers doesn’t affect your membership, and you can simply continue contributing when you land at your new job. It’s another way SPP helps you build a secure retirement.

Check out SPP today!

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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!

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Back in the day, when colour TV was a new thing and there was no Internet, a “charge card” was a way to pay for things instead of using cash or a cheque.

You didn’t get anything extra in those early days – just a bill in the mail.

But over the intervening decades, credit cards (as they have been rebranded) now offer a dizzying array of extras – points to help you pay for travel, coffee, and other perks, or cards that offer you cash back on purchases.

Save with SPP decided to take a harder look at cash back cards in particular.

They are very popular, reports The Motley Fool blog.

Over 56 per cent of Americans have cash back cards, the blog notes.

“Cash back cards offer a straightforward deal. Pay with your card and earn a percentage back on your purchase. It’s a valuable benefit, easy to understand, and consumers love it,” the blog reports.

Strategically speaking, The Motley Fool lays out two ways you can go with cash back cards.

“If you want to keep it simple, you could use one cash back card for all your regular spending. There’s nothing wrong with this method, but there’s also a way you could earn much more: carrying multiple cash back credit cards. Because when you don’t mind adding another card or two to the mix, you could potentially double your cash back,” the blog suggests.

Most cash back cards, the article continues, allow you to select two or three categories (say, gas, hotels, groceries) where you get extra cash back on top of the typical rate (between one and two per cent). So, The Motley Fool suggests getting a couple, so you can max out on more categories.

OK, either try to put everything on one cash back card, or have a couple and use them for the “bonus” categories.

It’s important to remember that like any credit card, the benefits of cash back only matter if you pay your card in full each month, reports The Points Guy blog.

“As long as you pay your bills on time and in full, you’ll likely avoid any sort of fee altogether and be able to focus on earning more cash back for the purchases that matter to you,” the blog advises.

The blog makes the point that getting cash back is easier to manage than having to figure out how and where to cash in points.

What cash back cards are available to us Canucks?

According to MoneySense all the major banks, Tangerine Bank, MBNA and American Express offer cash back cards.

The magazine reports that if you were to spend $2,200 a year on a cash back credit card in Canada, you would “earn” between $331 and $1,256 per year.

Those amounts are net of annual fees, which ranged from zero to $139 per year.

MoneySense urges Canadians to shop around before they decide which card to choose.

“Cash back credit cards are an extremely popular type of rewards card in Canada. Each cash back credit card has its own features and benefits, so you’ll want to compare the annual fee, earn rate and any additional benefits before you apply,” reports MoneySense.

The best cards, the article notes, have a two per cent earning rate on all categories, “so that you can get the most out of every dollar spent.” Some connect to other benefits offered by the credit card company, also a plus, MoneySense notes.

Some cards are not as widely accepted as others, the article notes, so that should factor into your research. Also, how the cash back is paid can vary from seeing a deposit in your chequing account each month, or to getting a monthly statement credit (not really cash back but credit back), or even only an annual credit.

Read the fine print before you sign up, advises MoneySense.

This type of credit card – in fact, any credit card – should get paid off in full every month, MoneySense notes.

“The payoff with a cash back credit card is the cash—a reward that is easily cancelled out by the penalties and interest accrued if you carry a balance. Like all rewards credit cards, cash back cards tend to carry annual interest rates at the higher end, usually around 19.99 per cent. At this rate, unpaid debt will rapidly accumulate interest charges that eat up any gains you’ve made. As long as you pay off your balance in full every month, you’ll avoid this pitfall, but if you find you regularly carry a balance, you might consider a low interest credit card instead,” the publication adds.

This is very sensible and important advice. If you aren’t planning to pay off your credit card balance each month, you are going to be paying more in interest than you are going to receive in “free” cash back. If you are disciplined, and pay off your entire credit card statement each month, then the cash back approach may actually work for you.

We used our cash back money to make Saskatchewan Pension Plan contributions! SPP members can fund their accounts in multiple ways – you can set SPP up as a bill and “pay” yourself online, or you can have amounts withdrawn automatically from your chequing account. You can even make a contribution with a credit card – so cash back on retirement savings is a possibility.

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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!

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You’ll hear about it on the golf course, at the Legion, on the dance floor at line dancing, or over coffee – seniors like talking about their investments, and worry about how they are doing.

Save with SPP decided to look into what sorts of things seniors should be thinking about when it comes to investing.

Over at the Retire Happy blog, Grant Hicks notes that older seniors, say 75 plus, want their investments to be “safe, short term, and no risk.” He says folks tend to get more cautious as they get older, even when we are talking from age 65 to age 75.

He cites the example of “Mr. and Mrs. Jones” of Qualicum, B.C. (real names are not used) who were debt-free, mortgage-free, and had about $200,000 to invest.

“They were looking for tax efficient income. They were not looking to keep it short term in case of something happened to one of them because the other person would still require the income,” he writes.

“Here’s what they decided on. First, we put aside 20 per cent short term for emergencies. This was invested into a cashable term deposit at the highest interest we could find. Then we built an income portfolio that consisted of bonds and guaranteed investment certificates (GICs) (20 per cent) preferred shares (20 per cent), common dividend paying shares (20 per cent) and income trusts and income securities (20 per cent). The portfolio focus was to pay out approximately four to five per cent monthly on a tax efficient basis, meaning the income was not all interest, but dividends, business income and capital gains.”

In an article in MoneySense magazine, investment counsellor and author Patrick McKeough “pounds the table for a conservative portfolio of quality dividend-paying stocks spread among the five major economic sectors.” Those sectors, the article advises, include manufacturing and industry, resources, finance, utilities and consumer.

In the article, McKeough discusses “pre-retirement financial stress syndrome,” which occurs when older investors begin to realize they may not have saved enough to fund “the stream of income they had been counting on.” He warns older investors of the urge they may have to make “one last desperate `Hail Mary’ gamble” on a breakout stock to try and play catch up. Instead, they should do the opposite, and look for safer investments, the article notes.

An older, but still wise article in Canadian Living also says older investors should focus on bonds (chiefly government bonds, with a smattering of corporate bonds that pay higher interest), GICs and dividend stocks, but adds the idea of annuities.

“Insurance companies offer annuities, which are investments that, in retirement, pay set monthly payments for life. It’s a great option for people who are worried about their cash flow, but it can be an expensive one. Fees are typically higher than what you’d pay on a mutual fund, and your money won’t get as great of a return as it would if you invested in the market yourself. But your cash is protected and you do get a regular cheque in retirement, which, to many people, is worth the extra costs,” the article notes.

At the time this article was written, interest rates were at record lows – today, higher rates mean the cost of an annuity has gone down – you get more income than you would have got with lower rates.

The Canadian Living article takes a different look at riskier common stocks.

“While you’re supposed to become a more conservative investor in retirement, you should also own some plain old stocks. Your portfolio still has to grow or you could run out of cash as you get older. That’s not to say you should invest in risky start-ups, but some solid brand-name growth stocks should help increase your savings,” the article notes.

There used to be an industry “rule of thumb” we heard around the pension plan office, specifically, that your present age should be the percentage of your holdings that are in fixed income. So if you were, say, 64, then 64 per cent should be in fixed income, with the rest in equities and other investments. This rule sort of got set aside during the decades-long low interest period, but may live on in some people’s financial plans.

Did you know that members of the Saskatchewan Pension Plan have a couple of great retirement income options? They could choose to convert their SPP savings into a lifetime annuity – a monthly payment arriving on the first of every month for the rest of their lives. Or, they could choose SPP’s Variable Benefit, which allows you to decide how much money you want to withdraw when you retire – more if you need, less if you don’t – with the option to annuitize at some future date.

Check out SPP today!

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We run into lots of fellow seniors as we line dance our way around town, and we’re always running into discussions about whether — as retirees — we should ditch the family home and rent, or hang on.

Save with SPP decided to see what others have to say on this topic, which seems to become more and more important with each passing birthday.

The folks at MoneySense took a look at this topic a few years ago, and had some interesting thoughts.

“Those who criticize renting over home ownership often ignore some costs of owning a home. Beyond a mortgage payment and property tax, home insurance is higher when owning versus renting. Condo fees may also apply. There are maintenance costs, repairs and renovations. If mortgage rates rise to more normal levels, you can expect your mortgage payment to be higher in the future. Home ownership has costs as well as benefits,” the article tells us.

An article in The Globe and Mail looks at the issue a little differently.

Noting that two-thirds of Canadians own their own homes, the article asks if home ownership still makes financial sense for the older folks among us.

“With many older Canadians approaching retirement with little savings – and some even carrying significant debt – selling the family home and renting may mean the difference between just getting by and living a life free from financial worry,” the article suggests.

The article quotes Scott Plaskett of Ironshield Financial Planning as saying those of us with homes “can be equity-rich and cash-poor: you are worth $5 million on paper, but you can’t pay for dinner because you have no liquidity.”

Selling the house and then renting fixes the liquidity problem, the article contends.

There are pros and cons to renting, writes Jean-François Venne for Sun Life.

He quotes real estate broker Marie-Hélène Ouellette as saying “you first have to consider the pros and cons of being an owner versus a renter. The biggest difference between the options is in the level of responsibility and freedom.”

“You obviously have more freedom when renting since you can leave when your lease is up. And you have fewer responsibilities because the owner takes care of the maintenance. But renters can also have less control than owners over things like decorating, repairs and even pets. And if you’ve been a homeowner for a long time, losing control and choice isn’t always easy to handle,” she states in the article.

The article makes the point that while owning a home usually means its value increases over time, “values do sometimes drop. And as a retiree, you won’t have a lot of time to make up for a decline in value.”

As well, your money can be tied up for a while when you sell or purchase a property, the article adds.

In the article, financial planner Josée Jeffrey says that it can be an unpleasant surprise, for those who have paid off their mortgage, to have to pay rent again. And, she adds, while you no longer are paying property taxes, they may be built into your rent, which usually goes up every year.

There’s a lot to unpack here. Owning means a long commitment to paying a mortgage, as well as property taxes, maintenance, but also your heat, light, and water bill. If there’s a driveway or a lawn it’s on you to clear away the snow and weed-whack the lawn. “Maintenance” involves fixing things that break, like toilets or garage doors or ovens and fridges.

Renting liberates you from many of these responsibilities. But rent can go up — and go up quite a bit if, for instance, the place you’re renting changes ownership. Not all landlords are quick to fix things that break (some are, and bless them), and it’s true — if you are used to owning prior to renting, you’ll have an inescapable urge to bang a few nails into the wall and hang up some artwork, which is typically frowned upon.

So this is a decision you will have to think long and carefully about, concludes an article in Yahoo! Finance.

“Don’t discount emotional issues when making this important decision,” the article advises. “Do you love the idea of owning your own place and fixing it up the way you want? Or will it be a big relief after years of ownership not to worry about the lawn or a broken sump pump?”

The article concludes by stating “while your decision needs to be financially sound, make the decision that makes the most sense for you. Not being a homeowner can be freeing, scary or both. Your home, its location and amenities should fit the life you lead now.”

If you are renting or paying for a mortgage, be sure to still put something away for retirement. A little extra money when you’re older will help with things like future property tax or rental increases. A wonderful retirement savings program open to all Canadians with registered retirement savings plan room is the Saskatchewan Pension Plan. A not-for-profit, open, voluntary defined contribution plan, SPP has investment experts who will invest your retirement savings in a low-cost, pooled fund. When you’re over the walls and away from work, SPP can help you convert those savings into income — including the possibility of a lifetime monthly annuity payment. Check out SPP today!

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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!

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