SPP: a provincial plan that supplements CPP, rather than replacing it

Writing in the Edmonton Journal, Matthew Black notes that Alberta – interested in setting up its own provincial pension plan – can learn from plans other provinces have set up, or proposed.

The article looks at how Quebec, Ontario and Saskatchewan handled the idea.

In Quebec, the article notes, a decision was taken in 1965 not to join the then-new Canada Pension Plan (CPP), “instead establishing its own Quebec Pension Plan.”

Pension scholar Patrik Marier tells the Journal that Quebec’s decision to set up its own, new parallel plan on day one “is significantly easier than disentangling hundreds of billions of in assets from an existing plan, as Alberta would have to do.”

While Quebec argued in 1965, as Alberta argues today, that it has a younger population, things can change, Marier points out in the article.

“After the baby boom, there was a baby bust,” he tells the Journal. He notes that “Quebec’s fertility rate fell by half by the start of the 1970s following the Quiet Revolution,” and that contributions made by members of the Quebec plan are now higher than those made by members of the Canadian plan.

When Ontario unveiled plans, almost a decade ago, to roll out its own plan, the idea was for the Ontario Retirement Pension Plan to have “complemented, not replaced” the CPP, the article notes.

The plan was criticized by the then-Opposition provincial Progressive Conservatives as being a “job-killing payroll tax.” The federal government of the day also refused to cooperate with Ontario on the plan, the article notes.

“Ottawa’s refusal saddled Ontario with extra costs and administrative headaches, including collection of contributions, tax issues and integration with existing retirement savings programs,” the article explains.

The plan fizzled out, the article notes, after the Liberals won the federal election in 2015 and promised to expand the CPP.

In Saskatchewan, the article notes, the idea of creating the Saskatchewan Pension Plan (www.saskpension.com) was to “provide a voluntary provincial pension to supplement the CPP.”

“In the 1980s, Saskatchewan wanted to see homemakers, and others who lacked access to private plans, included in the CPP as part of a series of reforms led by the Mulroney Progressive Conservative government,” the article explains.

“The idea wasn’t popular among other provinces, but nonetheless became one of the founding principles of the Saskatchewan Pension Plan when it was created in 1986 without the complex negotiations involved with leaving the CPP,” the article reports.

“You could put in contributions which would actually provide some sort of a pension,” Marier tells the Journal, adding that “it would lessen the penalty of raising children at the time if you were leaving the labour market.”

“Over its lifetime, SPP claims to have an average return of 8.1 per cent to members, of which there are currently around 33,000,” the article concludes.

Why would supplementing the CPP – as SPP does, and as ORPP was intended to do – make sense? According to the federal government’s own figures, the average CPP payment for “new beneficiaries” at age 65 is $772.71. The maximum is $1306.57. Those figures are gross amounts (no tax factored in), so you can see that it is a modest benefit.

And while many Canadians also will get Old Age Security (OAS), the maximum amount, again according to the feds is “up to $707.68,” for those under age 75, with the possibility of a clawback of some or all of that for higher-income earners.

So, with a maximum benefit of $2,000 and change from both CPP and OAS, the need to supplement government benefits with other income – perhaps from a workplace pension or private savings – becomes clear. And that’s where the SPP comes in.

Any Canadian with registered retirement savings plan (RRSP) room can join SPP. The money you contribute is invested in a low-cost, professionally managed pooled fund. When it’s time to retire, you can collect some or all of your SPP retirement savings as a lifetime monthly annuity payment.

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!

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Handy tool takes some of the guesswork out of retirement planning

There are some tricky obstacles facing us when it’s time to figure out how to live on our retirement savings.

The Daily Hive recently reported on a new calculator put in place by the federal government to help Canadians better understand the multiple streams of money that may make up their future retirement income.

“The Retirement Hub provides a clearer picture of your options and how to plan for them,” the publication reports.

“The hub features a retirement income calculator, which includes the Old Age Security (OAS) pension and Canada Pension Plan (CPP) benefits. The calculator takes you through several steps to determine everything” The Daily Hive tells us.

“First, you must enter your gender, birthday, and annual income from all sources before tax. Then you’ll be asked to set an annual retirement goal income (before tax) in today’s dollars,” the publication advises.

The folks at The Daily Hive tried plugging in numbers for someone who is age 31, and making $60,000.

That person would receive a future retirement income of $27,000 to $46,000 by age 70, the article notes.

The calculated amount factors in things like your personal savings, any workplace pension plan you may belong to, money in a registered retirement savings plan, and so on.

It also blends in your future CPP and OAS benefits (and, if application Quebec Pension Plan benefits) into the overall retirement income picture, the publication adds.

“If you’re not sure if you’re ready for retirement or want extra assistance with planning, there’s also a quiz you can take, which provides a checklist of tips to help you with your plan,” the Daily Hive concludes.

The Saskatchewan Pension Plan also has some built in tools to help you with retirement planning.

The Wealth Calculator provides a nice, fast estimate of where your SPP will be when you are ready to collect. Have a look at your latest balance, via your statement or through MySPP, then estimate how much you plan to add to the plan until you retire. You can estimate how much you think your savings will grow, and then voila — there’s a rough estimate of what you’ll have when it’s time to collect.

MySPP is also a great resource. You can sign up by clicking here. Once you are in, you can easily see your contributions to date and any investment returns applied each month. You can print off your contribution receipts, and upon retirement, your income tax documents, as well as view your statements — and you can keep your contact information up to date.

These tools help you to demystify retirement — if you have a pretty good idea of what you will be receiving as income, that’s half the battle. The other half is figuring out what your future living costs will be.

Check out SPP today — if you don’t have a pension plan through work, or don’t want to invest on your own for retirement, SPP offers the expertise you need. We’ll grow your savings into future income via a low-cost, professionally managed pooled fund, and your income options will include the possibility of guaranteed monthly income through SPP’s line of annuities.

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While it’s never great to make a mistake, they have the interesting side effect of teaching you what not to do.

Save with SPP decided to hunt around for some tips on what not to do when it comes to saving for retirement.

According to the Espresso blog on MSN, there are a couple of retirement plans that can backfire on you.

Many who haven’t saved much for retirement plan to continue working past age 65. But, the article warns, your body may have other ideas. A StatsCan finding from 2002 was that 30 per cent of those who took early retirement did so “because of their health.”

If you are saving via an investment product that charges high fees, you may find those charges “can eat up huge amounts of your savings over time,” the article reports. Be careful and look for lower-fee options, the article advises.

A key tip is to get saving, even if you start late. “According to BNN Bloomberg, 32 per cent of Canadians approaching retirement don’t have any savings,” the article notes. “Anyone hoping to rely only on the Canada Pension Plan and Old Age Security will find it difficult to maintain a comfortable lifestyle in retirement, which is why middle-aged and older Canadians should start saving as early as possible,” the article concludes.

The Motley Fool blog offers up a few more ideas.

Be aware of your registered retirement savings plan (RRSP) limits, the blog warns — there can be penalties if you over-contribute.

If you are running your own money and wanting to think outside the box, don’t use your RRSP as the test bed, The Motley Fool warns. “You should test out your investment strategies in a non-registered account before investing in RRSPs. Apply your successful investment strategies in RRSPs because losses cannot be written off,” the blog suggests.

Other advice includes diversification — don’t go fixed-income only in an RRSP, because you’ll get more growth from equities, the blog advises.

Over on LinkedIn, Brent Misener, a certified financial planner, provides a few more ideas.

Don’t procrastinate on retirement saving, he notes. “The power of compounding is a significant advantage when it comes to saving and investing. Starting early allows your money to grow and work for you over an extended period. Take action now and harness the power of time to maximize your retirement nest egg,” he writes.

Have a handle on what your expenses will be after you retire, Misener writes. “Medical costs, housing, leisure activities, and unforeseen events can quickly deplete your savings if not accounted for,” he warns.

In a similar vein, he says you must not ignore the possible impacts of inflation. “Consider inflation as you plan for the future and ensure that your investments and savings can keep pace with rising prices. Consider how much everyday items like groceries and utilities have increased dramatically in the last two years,” he adds.

If you are among the fortunate few who have a workplace pension plan, don’t stop saving outside that plan, Misener states. “Whether it’s a defined benefit or defined contribution, it’s important to remember that your pension may not cover all of your spending needs. Most retirees plan on spending more in retirement and often work pensions may only cover basic expenses,” he concludes.

These are all good tips to be aware of.

If you don’t have a workplace pension plan, or you want to supplement the savings you are getting from one, have a look at the Saskatchewan Pension Plan. SPP is an open, voluntary defined contribution plan that will invest your money at a very low fee. Your savings will grow within SPP’s pooled investment fund, and when it’s time to retire, you have the option of a lifetime monthly annuity payment, so that you will never run out of money. Check out SPP today!

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Nearly half of Canadians say they’re unprepared for retirement

New research from H&R Block Canada has found that “nearly half of Canadians are unprepared for retirement, lack enough savings, and are planning on working part-time in retirement years to make ends meet.”

The survey was carried out in February of this year, reports H&R Block via a media release, and the findings suggest that Canadians are beginning to realize that they won’t have the same kind of retirement their parents had.

“Not so long ago, the traditional vision of retirement was that at around 65 years old, Canadians ‘hung up their hats’ and celebrated the end of full-time employment. Enjoying the steady income of their company/government pension, they were ready to embrace new life ventures in pursuit of the things they never previously had time for,” states Peter Bruno, President of H&R Block Canada, in the release. “What we’re seeing now is that the vision for retirement has evolved dramatically – fuelled by shifts in tax-friendly savings plan options, evolving workforce realities, the gig economy, and the prevailing economic environment.”   

Some other key findings from the research, cited in the release:

• 50 per cent of Canadians say they plan to have a side gig when they retire
• 55 per cent say they need to better understand tax-friendly retirement savings options
• 52 per cent don’t feel they have enough money left at the end of the month to save for their retirement
• 19 per cent plan to rely on government-assisted retirement plans; 13% have not made retirement savings plans
• 32 per cent believe they put away enough money each month for a retirement fund
• 46 per cent feel good about their retirement strategy

While Statistics Canada says the average retirement age in 2022 was age 64 and six months, the release notes that 44 per cent of respondents “anticipate retiring before they hit the 64-year mark.”

At the other end of that spectrum, five per cent said they plan to retire “between 45-54 years old,” and 36 per cent don’t believe they ever will retire, the release notes.

The research found that Canadians seem to have a fairly good understanding of “tax-friendly” savings plans, such as registered retirement savings plans (RRSPs) and Tax Free Savings Accounts (TFSAs). (With an RRSP, your contributions are tax-deductible — savings grow tax free until you start taking money out in retirement, where taxes apply. With a TFSA, there’s no tax deduction for contributions, but no taxes are owed when you take money out.)

According to the release, the survey found that:

• 56 per cent of Canadians report having an RRSP; six per cent plan to set one up in the future
• 54 per cent have a TFSA; six per cent plan to establish one at some point
• 37 per cent have an employer-sponsored registered pension plan
• 19 per cent say they’ll rely on government-assisted retirement plans

Those planning to rely on government programs need to know that benefits from the Canada Pension Plan (CPP) and Old Age Security (OAS) are quite modest. According to Canada Life, the average CPP benefit as of October 2022 was just $717.15 per month. The maximum amount you could receive that month was $1306.57, the article adds. The OAS payment as of April 2023 was $691 monthly, according to the federal government’s website. If you don’t have a workplace pension program, and you haven’t yet started saving on your own, the Saskatchewan Pension Plan may offer just what you’re looking for. It’s open to any Canadian with RRSP room. You can contribute any amount up to the limit of your RRSP room, and can transfer in any amount from an existing RRSP. The possibilities are limitless! Check out SPP today!

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A recent poll by CIBC found that while most Canadians hope to retire by age 61, more than half (57 per cent) worry whether “they’ll actually be able to achieve that ambition.”

As well, a very high percentage — 66 per cent — of pre-retirees surveyed worry “about running out of money in retirement.”

Save with SPP reached out to CIBC to follow up on these results, and got some comments from Carissa Lucreziano, Vice-President, Financial and Investment Advice, CIBC.

Q. Quite an eye-opener to see that two-thirds of people worry they might run out of money in retirement. We wondered if you got any information on the causes of this worry – maybe more people are drawing down a lump sum of money in a registered retirement income fund (RRIF) versus receiving monthly workplace pension cheques? Or is it worry they’ll lose money in the markets? 

A. The rising cost of living is increasing faster than people expected which in turn is impacting many Canadians’ ability to save for retirement and other goals, which has them feeling less prepared for the future and worried about their retirement savings. A recent CIBC poll found that inflation is the top financial concern for 65 per cent of Canadians right now. While inflation is cyclical, many people are thinking, if inflation keeps going up at this rate, it’s going to affect my retirement plan. 

Another reason people may be worried is because they don’t know how much they will need in retirement. One third of Canadians simply hope they have enough to retire, 20 per cent have sat down to run the numbers on their own and only 14 per cent have enlisted the help of an advisor. It’s like going on a road trip without planning a route, of course you’ll be worried about getting lost. 

Given all the factors you need to consider in a retirement plan, it’s best to sit down with an experienced advisor who can map out a strategy that aligns with your goals, your current situation and how you expect your circumstances to change in the future. 

Q. We were interested in the quote in the release about the importance of having a financial plan. Wondered if you could expand (briefly) on what sorts of things should be in a plan – probably it is looking at what future retirement income will be versus expected expenses, and then including the great things listed in the release like travelling? 

A. A financial plan is your big picture, giving you a detailed look at your current financial situation to help you prioritize and manage your short- and long-term goals – like travel, renovations, and retirement. 

The key items that should be included in every financial plan are your income, expenses, net worth, investment strategy, retirement, and estate plan.  

Many advisors use a goal planning tool to build a personalized plan that addresses all your needs, while taking into consideration any “what if” scenarios to see how any major changes might affect your overall plan. What if you buy a cottage at age 55 or gift money to your children at age 75? It is important to understand the financial implications of any big moves before you make them.  

The most important thing to remember though, is that your plan should grow and change as you do. Ideally, you should be reviewing it every year or whenever there is a material change like employment, divorce, marriage or having a child. 
 

Q. It’s interesting that many people are saving for retirement more via Tax-Free Savings Accounts (TFSAs) than by traditional registered retirement savings plans (RRSPs). Wondered if you learned any of the reasons why they preferred the TFSA – tax free income when you withdraw the money? Accessible for emergency spending en route to retirement? Maybe it is not impactful on one’s Old Age Security (OAS) qualification? 

A. Right now, Canadians are prioritizing day-to-day needs over long-term planning. This means, for many, that they are saving more in their TFSA over their RRSP.   

Contributing to a TFSA is a terrific way to save for both short- and long-term goals. A TFSA gives you the flexibility to access money easily and any interest, dividends, and capital gains earned are tax-free. The funds you withdraw from your TFSA also do not count as income, so it will not affect the amount of OAS you qualify for when you are over the age of 65.  

You don’t have to choose between an RRSP or a TFSA.  However, one could give you more benefits than the other depending on your situation. An advisor can help you understand your options and how it fits into your plan.

Q. Finally, what was the one thing that surprised you the most about these results? 

What stood out to me is that most Canadians polled are relying on their best guess for how much they will need to fund their retirement. Only 14 per cent have met with an advisor to run the numbers.  

An advisor can help you get a better understanding of your big picture and put an actionable plan in place, setting you up for success! It may seem overwhelming, but you can get there with the right support. Plus, you will be able to enjoy your next chapter, knowing that you are in a good place financially. Financial wellbeing is so important. 

Our thanks to Carissa Lucreziano and CIBC for taking the time to respond to us!

The Saskatchewan Pension Plan has been helping Canadians save for retirement for more than 35 years. Now, saving for retirement is simpler than ever before. There’s no longer a dollar limit on how much you can contribute to SPP during the limit — you can contribute any amount up to the total of your available RRSP room. And if you are making a transfer into SPP from another RRSP, you can transfer any or all of it — no limit applies. It’s a limitless opportunity for retirement saving! Check out SPP today!

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Canada, unlike France and the U.S., is not dealing with a pension crisis: Keller

In an opinion column for The Globe and Mail, Tony Keller explains why Canada isn’t having a crisis with its pension system like France and the United States are.

In France, he writes, there are protests in the streets and strikes over plans to raise the national retirement age to 64 from 62. In the U.S., he writes, there’s a “quiet… slow motion” crisis as Democrats and Republicans fail to agree on steps to stabilize the U.S. Social Security system.

“The Congressional Budget Office says that unless premiums are raised, the deficit is increased or taxpayers kick in cash, pension benefits will have to shrink 23 per cent by 2033,” Keller writes, noting that the Social Security system “continues to wend its gentle way toward the iceberg.”

There’s no crisis here, he says.

“Canada is not having a pension crisis. You may not have noticed. ‘`Absence of Crisis Expected to Continue Indefinitely, Experts Say’ is not a headline we tend to put on the front page,” he writes.

That’s because actions taken decades ago stabilized our system, Keller explains.

“Back in the 1990s, Canada was headed for a crisis. The Canada Pension Plan (CPP) (and the parallel Quebec Pension Plan (QPP)) had been created three decades earlier, and like most public pensions they were built on a pay-as-you-go model. CPP premiums deducted from workers’ paycheques paid retirees’ pensions, and once you retired, the next generation of workers would pay your pension. The CPP was a chain of intergenerational IOUs,” he writes.

The French and American systems also operate under the “pay-as-you-go” model. But such systems run into problems when there are fewer workers than retirees. Here in Canada, 19 per cent of us were seniors as of 2021; in France it is 21 per cent, Keller explains.

You have to change things up when demographics change, Keller contends.

“In the 1990s, then-Finance Minister Paul Martin and his provincial counterparts chose to face the arithmetic. They gradually doubled CPP premiums, to ensure that promised pensions would be paid, today and tomorrow. To make that possible, a large chunk of premiums now go into a savings account. The Canada Pension Plan Investment Board (CPPIB) manages the growing pile, which at the start of this year stood at $536-billion. Your premiums today partly fund your retirement tomorrow.”

This is a somewhat complex concept, but what it means is that we are still operating a “pay-as-you-go” system, but when we get to the point when there are not enough workers to pay for the pensions of retirees, money in the CPPIB cookie jar will be tapped into until the ratio returns to a sustainable level.

Keller’s article goes on to note that the Old Age Security (OAS) system, which is paid entirely out of tax dollars rather than employer and member contributions, has the potential for problems in the future; its costs keep rising as the senior population grows. One way to save money on OAS would be to increase the so-called “clawback” so only those seniors needing OAS the most would get it.

CPP was intended to supplement the workplace pensions Canadians were supposed to have; increasingly, workplace pensions are becoming less common. And OAS was designed for those who did not work (and contribute to CPP) during their careers. For a lot of people, CPP, OAS and even the Guaranteed Income Supplement are all they have to live on in retirement, and it’s a pretty modest living.

If you don’t have a workplace pension, there’s a great made-in-Saskatchewan solution out there for you — the Saskatchewan Pension Plan. SPP is a voluntary defined contribution pension plan that any Canadian with registered retirement savings plan (RRSP) room can join. Employers can also offer it as a workplace benefit. Contributions made to SPP are professionally invested in a pooled fund at a low fee. SPP grows the savings until retirement time, when options for turning savings into income include a stable of annuities. Check out SPP today!

And there’s more good news! Now, you can contribute any amount to SPP each year up to your RRSP limit. And if you are transferring money into SPP from your RRSP, there’s no longer an annual limit! Saving with SPP for retirement is now limitless!

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The Association for Canadian Pension Management (ACPM) has rolled out a new online course on retirement that will help you up your game when it comes to mastering the topics of retirement saving, and turning those savings into income.

The course consists of six sections, with questions at the end to test your new knowledge. The first section, The Importance of Saving, talks about the importance of making savings part of your financial plan. “Many imagine retirement savings can wait for later,” the course explains, adding that it is far harder to play catch up than to start saving, even a little bit, while you are younger.

Small savings, we learn, can add up due to the “compounding effect” of time — even $50 a month in retirement savings can grow to more than $16,000 in 20 years.

The second section, Individual Registered Savings Plans, looks at registered retirement savings plans (RRSPs), Tax-Free Savings Accounts (TFSAs), the Home Buyers Program and Lifelong Learning Program (these allow you to “borrow” from an RRSP to pay for buying a home or furthering your education) and the new Tax-Free First Home Savings Account.

Ideas expounded on here include how much you should be expecting to live on when you retire — a rule of thumb given here is 70 per cent of your gross, pre-retirement employment income. The course notes that money from an RRSP should be considered to be “deferred income,” since you are able to put it away and grow it tax-free until the time you take it out as future income, when it is taxed.

The Government Retirement Income section walks you through the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement. The important points raise about CPP is that the benefit it provides it quite modest, with the average monthly after-tax payment ranging in the $700 range. And while OAS is a universal benefit, it can be subject to a partial or even full “clawback” if you earn more than a certain level of overall retirement income.

The Workplace Retirement Savings section walks you through the difference between defined benefit, target, and capital accumulation plans. Defined benefit plans provide you a lifetime benefit based on a formula that takes into account your earnings and years of membership in the plan; benefits are guaranteed. Target is similar, but lacks the guarantee. With a capital accumulation plan, what’s “defined” is usually how much money you and your employer contribute — your income will be based on how well those savings are invested. Examples of capital accumulation plans are defined contribution plans, group RRSPs, and of course the Saskatchewan Pension Plan.

The final sections talk about the critical “transition to retirement” stage, where you really need to know exactly what your retirement income will be and what expenses you will need to cover, as well as “decumulation,” which involves turning the money you have saved in a capital accumulation plan into income, either by withdrawing money periodically or converting some or all of it to an annuity, which provides a guaranteed monthly payout.

Estate planning — a complex topic that we all need to know more about — is also covered off.

ACPM has done a great job here. The ACPM Strategic Initiatives Committee (SIC), of which SPP’s Executive Director Shannan Corey is a proud member, led this project, and a broader financial literacy framework for plan sponsors is in the works. The group feel a national effort towards broader financial literacy is an important project, she notes.

Shannan says that response to the program has been good so far since the course was rolled out late last year, with close to 200 people graduating from the program.

Asked if the course might make its way into school curriculum one day, Shannan says “yes, we have talked about that and a contact of mine who teaches financial literacy for high school seniors is using the course as part of this curriculum.” It would be great, she adds, to see usership of the course expand.

“We feel it is a really great tool, but that it will take time for it to gain credibility and exposure. The financial literacy framework is going to be pretty amazing and should help get broader national exposure too — that one may have broader uptake as it is designed for plan sponsors rather than individuals,” she adds.

ACPM describes itself as “the leading advocacy organization for a balanced, effective and sustainable retirement income system in Canada,” and ACPM member organizations “manage retirement plans for millions of plan members. “

The group believes that “part of having a better retirement system is to provide education to those preparing for and contemplating retirement.”

According to ACPM, the motto for retirement savings is “the sooner the better.”

They state that their online retirement savings course is designed to be of value to all ages. “If you are in your twenties or thirties and just starting your career path, this course is for you.  If you’ve reached the point where you are building your household savings but not yet focused on retirement savings, this course is still for you. And if you’re nearing retirement but haven’t already learned how to manage and accumulate retirement savings, there are still many important lessons to be gleaned here,” states ACPM.

Finally, ACPM notes that many Canadians are not well prepared for the inevitable retirement from work that lies ahead of them.

“Nearly one in five retirees has less than $25,000 in savings and investments while more than half of Canadians do not have a financial plan for their retirement,” the group states. “It is our hope that this course will help you gain an understanding of pensions and retirement savings as you plan for your retirement.”

Many Canadians don’t have any sort of retirement program at the workplace. If you’re in this group, the responsibility for saving for your future retirement is squarely on your shoulders. Fortunately, the Saskatchewan Pension Plan offers a program for any Canadian with unused RRSP room. SPP, which operates on a not-for-profit basis, will invest your savings in a pooled retirement fund managed at a very low group rate. When it’s time to retire, your income options include choosing one of SPP’s lifetime annuity options, which will ensure you never run out of money. Check out SPP today!

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Aim for two-thirds of your retirement income to be guaranteed

There’s a new rule of thumb for retirement planners, reports Nicole Spector, writing for Yahoo! Finance.

While you would need a lot of hands to cover off all the various retirement rules of thumb out there, this one is refreshingly simple. It’s called the “two-thirds retirement plan.”

“With the two-thirds retirement plan, guaranteed retirement income (i.e., Social Security, pensions and annuities) is used to pay for two-thirds of living expenses during retirement. The additional third of living expenses is funded via non-fixed income (e.g., investments and retirement savings),” she writes.

Let’s Canadianize this. With this plan, your guaranteed income, such as money from the Canada Pension Plan (CPP), Old Age Security (OAS) or other government benefits — along with workplace pension income and any annuities you buy — is used to pay two-thirds of your retirement living expenses. The rest comes from other retirement savings, such as money from a registered retirement income fund (RRIF), your Tax Free Savings Account (TFSA) or non-registered investments and savings.

The article encourages readers to “do the math” to see how this idea would work for them.

“Add up the total amount of guaranteed income you expect to receive in a month,” suggests financial coach Michael Ryan in the article. “Next, estimate your monthly living expenses, including everything from housing to food… (and) leisure activities. Multiply your total monthly expenses by two-thirds.”

This sort of estimate, the article explains, is relatively easy to do if you are already retired, but harder to estimate if your golden handshake is years or decades away.

“I tell every person I work with to pretend that tomorrow is their retirement day,” Robert Massa of Qualified Plan Advisors tells Yahoo! Finance.

“If they want to live just like they are living now, they need to pay themselves at least 80 per cent of their regular paycheque in order to maintain their standard of living,” he states.

“From there, they have a basis to work with and then they can start to ask themselves what else they want from retirement and add those costs in. Then you can project forward using inflation and come up with a monthly and annual income goal and work from there,” he adds.

If, after doing the math, you don’t think government benefits will cover off two-thirds of your retirement living expenses, you need to consider finding other sources of guaranteed retirement income, the article adds. This can be done, the article notes, through converting some of your retirement savings to a lifetime annuity when you retire.

The article concludes by recommending that everyone have a good financial plan in the present — this will make us more aware of how and where our income is being spent and what we will need in the future, when we retire. And while two-thirds is a target, the closer you can get to a plan where guaranteed income covers off all of your expenses, the better, the article concludes.

An additional benefit of guaranteed fixed income — you can never run out of it, as it is paid to you for as long as you live.

Having fixed retirement income is an option for any member of the Saskatchewan Pension Plan. When it comes time to convert your savings into income, SPP’s stable of annuities is among your options. You can convert some or all of your savings to an annuity, which will land in your bank account on the first of every month for the rest of your life. Check out SPP today!

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South of the border, near-retirees fear changes to government benefits

Our friends south of the border — those of them who are nearing retirement — are worried that their government-backed Social Security system might not be there for them when they need it.

That was one of the findings of the Allspring Global Investments Annual Retirement Survey; a media release from Allspring walks us through the survey results.

The survey found that retirees with guaranteed sources of income — such as their Social Security, a pension plan, bank account or annuity — have a “more positive outlook on retirement” than those with savings vehicles without guarantees, such as investment accounts, tax-free savings accounts (IRAs) or capital accumulation-style retirement savings accounts. Those who have not yet retired, the media release notes, worry about the solvency of the Social Security system.

Another finding that may resonate with Canadians as well was the idea that American retirees are concerned about “drawing down retirement (funds) tax-efficiently.” More than half of those surveyed hired an advisor to help with tricky taxation related to receiving Social Security and Medicare, and 71 per cent say they want to learn more about taxation.

One of the most eye-opening findings was that “you either reach your savings target, or you don’t.”

“The survey found that a retirement savings plan can help keep workers on track, but it represents several assumptions,” Allspring’s media release states. “Retirement expenses vary widely, while many retirees participate in part-time work and others stop working earlier than expected. Many will adjust their spending—by force or by choice.”

In plainer terms, your retirement spending must align with your new (and usually lesser) retirement income. You can’t sustain a system where you spend more than you take in.

The Allspring research draws a rather surprising conclusion from this, noting that “each year of early retirement before 65 significantly increases the chance of running out of money in retirement,” but also that “even working 10 hours a week after 65 significantly decreases the risk of running out of money in retirement.”

Among the conclusions of the research was that “women, African Americans and Hispanics” are experiencing a wealth gap. “The financial services industry needs to do better in serving these groups,” the media release notes, adding that only 69 per cent of women (versus 87 per cent of men) are “confident their savings will last.” As well, the release states, African Americans generally were more impacted by the pandemic and now expect their retirement will be delayed by two years.

The article makes the point that those with guaranteed income have a more positive outlook. Here in Canada, the chief retirement benefits (Canada Pension Plan and Old Age Security) are lifetime benefits. But if the rest of your income is being drawn down from a registered retirement income fund (RRIF), or you are living off savings, the risk of running out of money is certainly possible.

A solution available to members of the Saskatchewan Pension Plan is the annuity. SPP offers several different types, but all of them will result in a monthly payment that you’ll receive on the first of every month for life. It’s an option worth considering for some or all of your SPP savings when you reach the “time to collect” stage. Check out SPP today!

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Do pension protests in France send a message about retirement saving?

As protesters fill the streets of Paris, demanding that a plan to start government pensions two years later be dropped, some observers are saying the situation underscores the need for us all to be more self-reliant with retirement saving.

A report by Global News states that “retirement as a concept is changing, with people in Canada and elsewhere having to rely on themselves more than they ever have.”

First, the article notes, the fact that France is moving the retirement age forward (two years later) is a bit of a red flag.

“A lot of times a country will move those ages forward because they feel they don’t have the resources to pay the pension obligations that they’ve set the system up for. And the idea that your country can’t afford to pay you is something that makes people very nervous and understandably so,” certified financial planner Millie Gormely tells Global News.

Even Canada’s “wonderful” government retirement system can see benefits changed, Gormely warns in the article.

“I think retirement as a general concept is changing a lot. The idea of leaving school when you’re 19 or 20 years old, you go work in a factory, you stay there for 30 years, they give you a gold watch and a pension, and then you sit on the front porch whittling for a few years until you die. That’s just not the norm,” Gormely states in the article.

Workplace pensions, according to Statistics Canada aren’t available to every worker. Stats Can notes that as of 2019, 4.3 million Canadians were covered by defined benefit plans (where the payout amount is pre-determined), 1.2 million were in defined contribution plans (where what you pay in is pre-determined), and 9.6 million belong to “other” arrangements. Since there are 39 million Canadians, these stats suggest that there are millions of us without any workplace pension arrangements.

Retiring and getting the Canada Pension Plan (CPP) and Old Age Security (OAS) is great, but those government benefits don’t pay a whole lot. As of 2021, reports The Motley Fool Canada the CPP pays a maximum of $1203.75 monthly — but the average payment is $635.26. The OAS as of that date was $635.26 per month.

“It’s not that much money. And if that’s the only money that you have, you’re going to have a hard time, so, if anything, that underscores how important it is for people to be preparing for their retirement outside of what they can expect from the government,” Gormely states in the article.

“Saving up your own money to take care of yourself in the future is going to be very important for those of us who don’t have company pensions. And for younger people, especially, the sooner you start, the better off you’ll be,” she concludes.

If you don’t have a workplace retirement savings program, and are saving on your own for retirement, the Saskatchewan Pension Plan is a resource you should be aware of. SPP lets you contribute up to $7,200 a year towards your retirement — and best of all, the funds you set aside are locked-in, meaning you can’t raid that piggy bank until it’s time to retire. Find out why thousands of Canadians have made SPP their go-to for retirement saving!

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