Tag Archives: RBC

RBC Wealth Management survey sees rising living costs, unexpected expenses, as barriers to wealth for higher-income Canadians

A recent Royal Bank of Canada survey on wealth management, conducted by Ipsos, found there were a few new obstacles that were impeding even wealthy Canadians’ efforts to build wealth.

Save with SPP reached out to RBC Wealth Management to probe a bit more about these obstacles, and to ask if the study’s authors found any other surprises in their research. Their answers are here:

Q. Did the study and its authors find higher levels of debt to be a part of the “cost of living barrier” to building wealth, given the high record of household debt? Helping kids is also mentioned.

The study didn’t specifically ask respondents about levels of debt. After the rising cost of living, the next reasons that ranked highest on the survey were:

  • Unexpected expenses
  • Cost of raising children (survey did not specify what “helping kids” meant)
  • Home prices

Q. The survey says “traditional ways of building wealth” may not be doing the job like they used to. Is this referring to the volatile stock markets and the low-interest environment for fixed income? Are there any thoughts about new types of investment strategies/alternative categories that the study and its authors think could address this?

In the survey news release, Tony Maiorino, Head, RBC Wealth Management Services, says “regardless of income, many Canadians find themselves behind on their wealth goals as many of the traditional ways we build wealth have changed over the generations. With the added backdrop of market uncertainty, clients are voicing their concerns and looking for support using non-traditional methods of meeting their wealth goals.”

Howard Kabot, Vice-President, Financial Planning, RBC Wealth Management Services, elaborates, saying “things like tax strategies, insurance and retirement planning play a key role in building wealth today but I’m not surprised that so many respondents find them challenging. The financial landscape is always evolving and people have less time to research and learn about wealth management topics. Most clients need to explore a variety of tactics through a holistic lens to build and preserve wealth.”

The survey found that 81 per cent of Ontario respondents, 80 per cent of Albertans and 77 per cent of BC residents felt “building wealth now is more difficult than it was in previous generations.” Thirty-eight per cent of BC respondents (vs. 26 per cent for Ontarians and 20 per cent for Albertans) reported experiencing “poor investment performance.”

Q. Did the study indicate when respondents would use the services of a financial adviser like RBC? Did the study turn up any sense that people are having difficulty putting away as much as they would like for retirement, given the high cost of living, lower salaries, and maybe the lack of workplace pension plans?

The study found that three-quarters of higher-income Canadians were confident “they will reach their financial goals before retirement.” However, 41 per cent of the same group said they would “work with a financial expert to invest the money” if they experienced a windfall, such as an inheritance. Advisors might come in handy with things that “challenged” respondents, such as “staying on top of markets” (76 per cent) and “using… strategies to minimize taxes (71 per cent).”

The lack of a pension plan at work was cited by 20 per cent of those surveyed as one of the “unexpected expenses,” like the increased cost of living, raising children, lower salaries than expected and poor investment performance, that was a factor in respondents being less wealthy than they expected.

Q. Where there any other findings that surprised the authors?

The news release noted that it was surprising that respondents found it challenging to understand financial topics but still felt confident they would meet their financial goals.

The release noted that “of the 48 per cent of respondents who are not as wealthy as they thought they would be, almost three quarters (73 per cent) believe they will reach their financial goals before retirement.” This optimism seems to be at odds with their confidence when it comes to aspects of wealth management topics, with the majority agreeing the following topics are challenging:

  • Knowing which information to trust (78 per cent)
  • Staying on top of what’s happening in the financial markets (76 per cent)
  • Using tax strategies to minimize taxes (71 per cent)
  • Ensuring they don’t outlive their assets during retirement (70 per cent)
  • Understanding the use of insurance in a financial plan (66 per cent)

If you lack a workplace pension, and need a do-it-yourself solution for retirement savings, consider membership in the Saskatchewan Pension Plan. You can start small and gear up your contributions over time. At retirement, the SPP can convert those savings into a lifetime income stream – you won’t be able to outlive your savings. Check them out today.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Is low unemployment actually a sign that boomers aren’t retiring?

Politicians all over the continent like to point to our low levels of unemployment as a sign that our economy is booming and recovering.  And perhaps it is. A recent Bloomberg article notes that the Canadian labour market has seen “a decade-low unemployment rate” and “some of the fastest job gains on record.”

That high level of employment, the article adds, boosted “the average weekly earnings for Canadian workers… 3.4 per cent in May from a year earlier, to $1,031.” There were a whopping 32,600 jobs added that month, Bloomberg reports, citing Statistic Canada figures.

Reading these positive numbers, one might include that things look great for our younger workers – low unemployment and a high level of job creation.

Not so fast, reports Livio Di Matteo of the Fraser Institute, writing in the National Post. Sure, the story notes, we can expect that “in coming years employment and the labour force in Canada will continue growing,” but it will be “at a diminished rate, with employment growing slightly faster than the labour force.”

And the reason why, Di Matteo explains, is that low unemployment rates are “due largely to our aging population and the expected decline in labour force participation rates. Overall labour force participation in Canada has declined over the past decade in Canada, but interestingly has grown among people aged 55 and older.” In plainer terms, there are more older people in the workforce than before, meaning those at or nearing retirement age are continuing to work.

Di Matteo suggests that there will be more opportunities for younger workers when boomers begin to fully retire. In 2016, “people aged 55 and over accounted for 36 per cent of Canada’s working age population,” Di Matteo notes, adding that this figure should rise to 40 per cent by 2026. When the boomer cohort finally begins to retire, Di Matteo predicts higher demand for younger workers in “healthcare, computer system design… support services for mining, oil and gas extraction, social assistance, legal, accounting… and entertainment,” among others.

It’s a similar story south of the border, reports Market Watch. There, unemployment is “at a half-century low,” but a reason why is that there aren’t as many new entrants in the job market, the report notes.

“The U.S. doesn’t need to create as many new jobs to absorb a slower growing population of working-age Americans. Economists figure the U.S. needs to add less than 80,000 new jobs a month to hold the unemployment rate near its remarkably low rate,” the article states.

Experts are split on whether boomers are working late into life because they want to or because they have to. Sure, many love the social contacts and engagement of working – or want to travel more now that they are semi-retired. But those still saving for retirement may not be hitting their savings targets.

A report from RBC, covered in Yahoo! Finance Canada, says those boomers with “investable assets” of $100,000 or more planned on saving $949,000 for retirement, and “are falling $275,000 short.” Those with less than $100,000 saved have lesser goals, but are much farther away from them, the report states.

It will be interesting to see how the trend towards boomers hanging on to their jobs plays out, as it ultimately must.

For those of us who are still slogging away in the workforce, all these stats underline the importance of directing some of your income towards long-term savings for retirement. An excellent tool for this purpose is the Saskatchewan Pension Plan, which offers a flexible way for your savings to be invested, grown, and ultimately paid out to you as a lifetime pension in the future. It may be better to pay into your own retirement now, rather than having to work later in life to fund it.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Feb 11: Best from the blogosphere

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

When it comes to retirement saving, how much is “enough?”

There’s no question about it – saving for retirement is a moving target. We are frequently told to save more for retirement, but it’s not often anyone lets us in on the secret of how much “enough” is, retirement-wise.

A new poll by Ipsos, conducted for RBC and reported on in the Montreal Gazette, gives us some specific answers to this age-old question.

On average for Canada, the article says, the savings target is $787,000. The article says Ontarians feel they need $872,000. In BC, respondents think retirement savings should top $1.05 million, the highest total in the country. In Quebec, which has the lowest average, the target is $427,000 to “have a comfortable financial future,” the article reports.

Save with SPP reminds those reading these daunting numbers that all working Canadians will get Canada Pension Plan or Quebec Pension Plan benefits, plus other government benefits like Old Age Security and, if applicable, the Guaranteed Income Supplement. So those will account for a significant chunk of that total savings amount, even though you don’t get these benefits as a lump sum, but as a lifetime payment.

However, those without a pension plan at work will have to do some saving to get to these average totals. The survey asked people how confident they were about reaching the finish line on savings. On average, just 16 per cent said they were confident. An alarming 32 per cent of Ontarians (least confident) and 39 per cent of Quebecers said they “will never build up enough of a nest egg,” the article says. The article says the lack of a financial plan may be part of the problem here.

“The survey… found 53 per cent of respondents from Quebec had no financial plan. Only Atlantic Canada had a higher rate of respondents with no plan, at 54 per cent. Of the 47 per cent of respondents who have a financial plan, 34 per cent said that plan is in their head,” the article notes.

“Across the country, 54 per cent of respondents said they have a financial plan,” the Gazette reports.

If there’s a takeaway here, it is that if you can – despite the rising cost of household debt and other life costs that get in the way – you need to plan to put a little away for retirement. If you start small you can increase your commitment later when the bills calm down.

A little effort today will pay off handsomely in the future, when your savings will turn into retirement income, and you’ll theoretically have paid off debts, raised your kids, and downsized so that you can enjoy your extra time. Don’t be intimidated by the multi-hundred-thousand dollar-targets – a little bit here and there will get the job done. And if you’re looking for an excellent home for your hard-earned savings dollars, look no further than the Saskatchewan Pension Plan.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Oct 15: Best from the blogosphere

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

Boomer pension crisis is “here, and it’s real,” says survey
Saving for retirement is a lot like eating your beets. You know they are good for you, all the literature talks up their benefits, and many say you’ll be sorry later in life if you don’t eat them now. But they are not everyone’s cup of tea, and many of us choose to ignore and avoid them.

Unfortunately, retirement is a bigger problem than not eating a beet.

A recent Canadian Payroll Association survey found that 69 per cent of working people surveyed in British Columbia save less than 10 per cent of their earnings, “well below recommended savings levels.” The CPA survey is covered by this ABC Channel 7 news article.

The article goes on to say that 40 per cent of Canadians surveyed are “overwhelmed by debt,” an increase from 35 per cent last year. Debt, the article says, is clearly a factor restricting the average person’s ability to save for retirement.

Research from Royal Bank of Canada that found that 60 per cent of Canadians were concerned “about outliving their savings,” and only 45 per cent of them are confident they’ll have the same standard of living when they retire. This research was covered in an article in Benefits Canada.

So, eat your beets – contribute to a Saskatchewan Pension Plan account and if you are already doing that, consider increasing your contributions each year. You’ll be glad you did down the line.

Many savers using the wrong long-term approach
Let’s face it – whether it’s hanging a new door on the shed, patching a hole in the drywall or growing our own vegetables, many of us prefer to do things ourselves rather than depending on others.

However, when it comes to retirement savings, there are “DIY” mistakes that people tend to make, warns The Motley Fool.

First, the article notes, people tend to avoid riskier investments, like stocks. But over the long term, bonds and fixed income assets “are unlikely to provide a sizeable nest egg in older age,” the article says. The stock market is a good long-term investment, the article notes.

You need bigger long-term returns to outpace inflation, The Motley Fool advises.

Finally, it is important to avoid “short-term” investment thinking; retirement investing is for the long term, the article concludes.

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

 

How much should you contribute to your child’s education?

According to a May 2017 Globe and Mail Report average university/college tuition in Saskatchewan is over $7,000/year but you need to also factor in living expenses, books etc. And if your child is just starting kindergarten, it is not easy to predict how costs will escalate over the next decade or more.

Many parents wisely take advantage of the tax breaks and grants available by saving in Registered Educational Savings Plans. But they also expect their kids to contribute to the cost of their post-secondary education by applying for scholarships, working part-time and taking out student loans.

Therefore it is interesting to note the results of a recent poll conducted on behalf of RBC® that found students who receive less than one-quarter of their funding from parents feel more confident in their financial decision-making and are more likely to make and stick to a budget compared to their peers who receive more family financial support .

Students whose parents contribute less than 25% Students whose parents contribute 25% or more
I feel confident in my financial decision making 50% 41%
I make a budget and stick to it 42% 33%

 

Expectations after school
Students receiving more financial support not only have more expectations of parental assistance during school but are twice as likely to expect some help from their parents post-graduation (21% compared to 11%).

“While contributing financially to your child’s education is a wonderful gift, being clear on expectations from both parties is really important. Make sure you discuss the ‘terms’ including when financial support will end,” says Laura Plant, RBC Director, Student Banking

Tips for Parents

  1. Have “the talk”: Start talking about budgeting and money management with your child early on. The earlier you get the conversation started, the more prepared everyone will feel when it comes time to start paying for tuition and other expenses. The transition to post-secondary education is significant – reducing money stresses is one way of easing the change.
  2. Start saving early: If you plan on contributing to your child’s education, save early and save often. One way of getting started is by opening up a Registered Education Savings Plan.
  3. Set the expectations: If you plan on contributing to your children’s post-secondary education, set the expectations on what you will contribute and what you expect them to contribute. Getting everyone on the same page is an important first step.

Tips for Students

  1. Don’t leave free money on the table: No matter how you are funding your education, there are lots of resources out there to help you access free money, including scholarships. Resources such as ScholarshipsCanada.com and StudentAwards.com will help you on your journey to free money.
  2. Save, Save, Save: Develop a habit to save on a regular basis. No matter how small the amount, saving can help you achieve your short and long term financial goals – whether it’s paying for tuition, rent or saving up for a reading week vacation. Let your money work harder for you by setting up automatic transfers from your daily chequing account into a separate high-interest savings account or guaranteed investment certificate to be used towards your goals.
  3. Talk to an expert: Let’s face it, as a post-secondary student (or soon to be student), you have a lot on your plate. Speak with a financial advisor on how to start saving and what options make the most sense for you and your family. This will help set you up for success.

We contributed to our childrens’ university education using RESP savings and current earnings. While I didn’t keep track of how much we gave them or what percent of their educational expenses we covered, they were able to graduate from their first degrees debt free.

Both kids also have Masters degrees and took post-graduate professional college programs which they self-financed. My son had scholarship money and my daughter worked for a major public sector union that paid for her tuition as she successfully passed each course.

I am quite confident that the financial lessons they learned living on a student budget and helping to support themselves were just as important to their future success as the programs they formally studied at university.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Why you should closely monitor your bank account

I love online banking because I like to visit my money every day to make sure it’s still all there. So imagine my surprise when the RBC account I share with my mother and sister went within a couple of days from half a million dollars in arrears to a balance of +$500,000!

My sister discovered the deficit initially when in late May she tried to take out a small amount of cash for my mother and she was locked out of the account.

In fact, in mid-May at our request CIBC Investors Edge had processed a transfer of $512,000 from the RBC account to our CIBC investment account. This was the proceeds of sale from my mother’s condo. But then CIBC initiated a second transfer of the exact same amount on May 29th and since there was only a few thousand dollars in the RBC account to pay monthly bills, we were left with a huge negative balance.

When I contacted CIBC, our IE representative told us that as a result of “a bank error” thousands of May transfers into CIBC IE were duplicated and that the problem would be rectified within a day. Meanwhile, RBC said not to worry, because the second transfer out would be sent back and the negative balance in the account would be reversed as we do not have overdraft protection. However, just to make sure I was advised to notify any vendors with automatic withdrawals that their cheques may bounce temporarily.

That occurred within hours and our RBC account was unlocked. But the next day CIBC IE also “fixed” the problem by transferring $512,000 back into the RBC account, leaving us with a hefty, unwarranted surplus! Much as I was tempted to blow town and take an around-the-world cruise, I dutifully reported the new error to our CIBC IE representative. He said the second mistake would be quickly rectified.

Shortly after, I also got a call from the CIBC Director of Executive Client Relations apologizing for the inconvenience and assuring me the $512,000 erroneously deposited to our account would be out of the RBC account on Friday June 2nd. It took until June 6th for the extra $512,000 to disappear.

In spite of our conversation I still can’t figure out how similar mistakes possibly involving thousands of clients were never communicated to clients up front or investigated by the mainstream media. I was told CIBC had no idea there had been a computer glitch until their clients started reporting the mistakes.

This comedy of errors was reversed in a few days and the only residual effect that I am  left with is a great story. But it could have been much worse if I wasn’t able to track the errors online and quickly make the necessary calls to understand and correct the errors.   And it was also time-consuming and embarrassing to have to make multiple calls and stop payment on the monthly payment to my mother’s nursing home.

So the moral of the story is: Check your recorded bank account transactions frequently either in person or online. If something looks wrong it probably is. The sooner you intervene and get it fixed, the less chance there is that an error will go unnoticed, affecting both your cash flow and your credit rating.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

How we are spending our 2000 hours

By Sheryl Smolkin

Designed and crafted by Joel Troster 2016

A press release I read recently titled “What will you do with your 2,000 hours a year when you retire?” made me stop and think about how my husband and I have spent our time since I left my corporate job 11 years ago and he fully retired in mid-2015. 

An RBC survey of 1,500 working Canadians age 50 and older found almost three-quarters (73%) are unsure what they’ll do with that extra time. While the study found nearly two-thirds (64%) have done some planning for how they will finance retirement, less than half have planned for retirement lifestyle decisions, such as where they will live, where they will travel (44% each) and what activities they will do (46%). 

I was 54 when I retired from a benefits consulting firm with a reduced pension and post-retirement medical benefits. I never intended to stop working and had a job lined up as editor of an employee benefits magazine working from home. That eventually morphed into a freelance writing business. 

My husband had no pension other than government benefits when he retired from his position as a software engineer with a major telecommunications company at age 65. However, over the years he made maximum allowable contributions to individual and Group RRSPs. After a couple of months’ break he contacted his former employer about contract work, but no opportunities have materialized.

We moved to a new “infill” house in Toronto near the subway in 2001 and since then, the value of our two-story plus basement home has doubled in value. We’d love to renovate a large bungalow and stay in the area, but the prices of even much smaller homes have increased so much that we would end up with significantly less house for the same amount of money. 

Based on a previous mobility issue, I‘d like to be living on one floor sooner rather than later, but for now we are staying put. We go to the gym regularly and climbing stairs helps us stay fit. When we were both working we paid for regular housecleaning, snow removal and grass-cutting. We now employ outside help less frequently but we are prepared to ramp it up again if one or both of us has health problems. 

Vacations are a high priority for us and our favourite mode of travel is cruising. We want to see and do as much as we can as long as we are healthy and able to purchase comprehensive travel health insurance. At least once a year, we try to bring our daughter’s family living in Ottawa on holidays with us so we can spend more quality time with them. 

Paying for expensive travel is one explanation for why I continue taking on freelance writing jobs. But the other reason is that I thrive on deadlines and I really love to get paid for something I enjoy doing. My hobbies include reading, working out and singing in a community choir but interviewing and writing provides me with both structure and a creative outlet. I work about 30 hours a week so I have loads of flexibility to fit in personal appointments, travel and family time. 

In contrast, my husband has found a whole new creative outlet since he retired. He finished off a coffee table that he has been working on for years and there is a matching end table on the drawing board. He has also designed and a produced a series of beautiful cheese boards, bread boards and cutting boards (see above) that friends and family have received as welcome gifts. While in future he may consider selling a few of his pieces there is no pressure for him to do so. 

I can’t say we exactly planned in advance how we would fill up our days when we left the world of work, but once our finances were in order, we had the latitude to make it up as we went along. We know that retirement in our 50s and 60s (the go-go phase) is likely to be different than in our 70s and 80s (the slow-go phase) or even 90s (the no-go phase) but I think we’re on the right track. I’ll know when it is time to send out the last invoice and together we will decide when it is the right time to sell our house and downsize. 

Have you thought about how you will spend your time once you leave the office for the last time? Tell us how you are spending your 2,000 hours by sending an email to socialmedia@saskpension.com.  We’d love share your story.

Dec 21: Best from the blogosphere

By Sheryl Smolkin

Recently Rob Carrick at the Globe and Mail wrote Prepare for the worst and make 2016 the year of the emergency fund. According to Carrick, the emergency fund is how you survive a financial setback without raiding your retirement savings, adding to your line of credit debt or borrowing from relatives. “Think of an emergency fund as insurance against a short-term setback that affects your long-term financial goals,” Carrick says.

20 Reasons Why You Need am Emergency Fund by Trent Hamm on thesimpledollar.com lists all of the obvious reasons (job loss, illness, urgent medical expenses) why you may need to tap into an emergency fund plus a few you never thought of. Some more obscure examples are:

  • Your identity is stolen, locking you out of your credit cards and/or bank account for a while until the issue gets straightened out.
  • An unexpected professional change forces you to relocate quickly.
  • A relative or friend of yours passes away suddenly in another part of the country (or the world).
  • You discover your partner is cheating on you, and for your own safety and peace of mind you have to pack your bags quickly and go.

How much do you need to save in your emergency fund? Typically financial experts suggest three to six months of fixed (as opposed to completely discretionary expenses). Emergency fund calculators from RBC and moneyunder30.com can help you figure out how much you should set aside.

Jason Heath at MoneySense is not a big fan of emergency funds if that means a substantial amount of cash sitting in a bank account doing nothing. He says, “I’m all for having the potential to cover 6 months of expenses in the event of an emergency. But I’d rather someone be able to do so through a combination of modest savings and ideally, a low-interest rate debt facility like a secured line of credit.”

Gail Vax-Oxlade believes the TFSA is a perfect place to stash your emergency fund. She says, “The best thing about the TFSA is its flexibility. You can take money out of your TFSA at any time for any purpose, without losing the contribution room, which makes this account the number one choice for socking away an emergency fund. So even if you take money out in one year, you can put it back the next, without affecting that year’s contribution limit ($5,500 for 2016).”

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.