Registered Retirement Income Fund

Should we still be savers after we retire?

March 11, 2021

The mental image most of us have of the retirement process is quite clear – you save while you work, and then you live on the savings while retired.

But is this a correct view of things? Should people be adding to their savings once they’ve stepped away from a long life of endless meetings, emails, Zoom or conference calls, and annoying performance reviews? Or not?

Save with SPP decided to scout this out on the good old Interweb.

What we notice is that when you query about “saving after retirement,” you’ll find lots of advice about how to save by spending less. For example, U.S. News & World Report suggests things like asking for senior discounts, shopping “for cheap staples online,” downsizing your home or hobbies, etc.

You’ll also find general advice on saving that can apply to folks of any age – Yahoo! Finance points out that you need to “spend less than you earn,” and “grow and invest your money.”

The type of advice we’re looking for is more along the “pay yourself first” rule that our late Uncle Joe lived by until almost age 90; and Yahoo! Finance does have a bit of that.

“When people say `pay yourself first,’ they mean you should take your savings out of your paycheque as soon as it hits your chequing account to make sure you save something before you spend it all on bills and other expenses. The key to saving successfully is to save first, save a lot — 10 per cent to 20 per cent is often recommended — and save often,” the article states. Uncle Joe would endorse this thinking.

But it’s not clear this article is aimed at retirees – so is putting money systematically away when retired even a thing?

Maybe, but perhaps not quite in the way Uncle Joe might have envisioned.

MoneySense notes that Tax Free Savings Accounts (TFSAs) are a great savings tool for older, retired Canadians.

The article suggests that if you are retired, and don’t need to spend all the income from your Registered Retirement Income Fund (RRIF) or other sources, like a pension, a great home for those dollars is the TFSA.

“Unlike Registered Retirement Savings Plans (RRSPs) and RRIFs you can keep contributing new money into TFSAs after age 71. Even if you live to celebrate your 101st birthday – as my friend Meta recently did – you can continue to pump (the TFSA annual maximum) to your TFSA, as Meta has been doing,” the article explains.

“In contrast, you can no longer contribute to RRSPs after the year you turn 71 (or after the year the youngest spouse turns 71), and even then this depends on either carrying forward RRSP room or earning new income,” MoneySense tells us. So the TFSA is a logical savings account, and is still open to older folks.

Our late father-in-law gleefully directed money from his RRIF (after paying taxes) to his TFSA, so that he could continue to invest and save.

The TFSA has many other benefits, including the fact in can be transferred tax-free to a surviving spouse. An article in the Globe and Mail points out a few other interesting TFSA facts – investments must be Canadian, you can re-contribute any amounts you cash out, and your contribution room carries forward, the article notes.

It would appear then, that “saving” after retirement means two things – it means budgeting and bargain hunting to make your income last longer, and it means using savings vehicles like TFSAs to manage taxation. That’s probably the answer – when you’re working, taxes are simple to manage. You get a T4, your employer is usually deducting the correct amount of taxes, so filing income tax is simple. It’s more complicated for retirees with multiple income streams and chunks of withdrawn RRIF money.

You will have a greater opportunity to save when you are retired if you put away some cash now, before they give you the gold watch. The less retirement income you have, the tighter your future budget will be. If you haven’t got too far yet on the retirement savings trail, why not have a look at the Saskatchewan Pension Plan? You can set up a “pay yourself first” plan with SPP, which allows contributions via direct deposit. Money can be popped into your retirement nest egg before you have a chance to spend it – always a good thing. Be sure to check out SPP, celebrating 35 years of delivering retirement security in 2021!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Pape’s book provides solid groundwork for a well-planned retirement

March 4, 2021

Gordon Pape has become a dean of financial writers in Canada, and his book Retirement’s Harsh New Realities provides us with a great overview of our favourite topic.

There’s even a shout-out to the Saskatchewan Pension Plan!

While this book was penned last decade, the themes it looks at still ring true. “Pensions. Retirement age. Health care. Elder care. Government support. Tax breaks. Estate planning,” Pape writes. “All these issues – and more – are about to take centre stage in the public forums.”

He looks at the important question of how much we all need in retirement. Citing a Scotiabank survey, Pape notes that “56 per cent of respondents believed they would be able to get by with less than $1 million, and half of those put the figure at under $300,000” as a target for retirement savings. A further 28 per cent thought they would need “between $1 million and $2 million.” Regardless of what selection respondents made, getting that much in a savings pot is “daunting,” the survey’s authors note.

Government programs like the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) help, but the benefits they provide are relatively modest. “If we want more than a subsistence-level income, we have to provide it for ourselves,” Pape advises.

He notes that the pre-pandemic savings rate a decade ago was just 4.2 per cent, with household debt at 150 per cent when compared to income. Debt levels have gone up since then. “Credit continues to grow faster than income,” he quotes former Bank of Canada Governor Mark Carney as saying. “Without a significant change in behaviour, the proportion of households that would be susceptible to serious financial stress from an adverse shock will continue to grow.” Prescient words, those.

So high debt and low savings (they’ve gone up in the pandemic world) are one thing, but a lack of financial literacy is another. Citing the report of a 2011 Task Force on Financial Literacy, Pape notes that just 51 per cent of Canucks have a budget, 31 per cent “struggle to pay the bills,” those hoping to save up for a house had managed to put away just five per cent of the estimated down payment, and while 70 per cent were confident about retirement, just 40 per cent “had a good idea of how much money they would need in order to maintain their desired lifestyle.”

One chapter provides a helpful “Retirement Worry Index” to let you know where your level of concern about retirement should be. Those with good pensions at work, as well as savings, a home, and little debt, have the least to worry about. Those without a workplace pension, with debt and insufficient savings, need to worry the most.

If you fall anywhere other than “least worried” on Pape’s list, the solution is to be a committed saver, and to fund your own retirement, he advises. He recommends putting away “at least 10 per cent of your income… if you’re over 40, make it a minimum of 15 per cent.” Without your own savings, “retirement is going to be as bleak as many people fear it will be.”

Pape recommends – if you can — postponing CPP payments until age 70, so you will get “42 per cent more than if you’d started drawing it at 65.” RRSP conversions should take place as late as you can, he adds. This idea has become very popular in the roaring ‘20s.

Pape also says growth should still be a priority for your RRSP and RRIF. “Just because you’ve retired doesn’t mean your RRSP savings need to stagnate,” he writes. And if you find yourself in the fortunate position of “having more income than you really need” in your early retirement needs, consider investing any extra in a Tax Free Savings Account, Pape notes.

Trying to pay off debt before you retire was once the norm, but the idea seems to have fallen out of fashion, he writes. His other advice is that you should have a good idea of what you will get from all retirement income sources, including government benefits.

In a chapter looking at RRSPs, he mentions the Saskatchewan Pension Plan. The SPP, he writes, has a “well diversified” and professionally managed investment portfolio, charges a low fee of 100 basis points or less, and offers annuities as an option once you are ready to retire.

This is a great, well-written book that provides a very solid foundation for thinking about retirement.

If you find yourself on the “yikes” end of the Retirement Worry Index, and lack a workplace pension plan, the Saskatchewan Pension Plan may be the solution you’ve been looking for. If you don’t want to design your own savings and investment program, why not let SPP do it for you – they’ve been helping build retirement security for Canadians for more than 35 years.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Research suggests many should take CPP, QPP later – and use RRSPs to bridge the gap

February 25, 2021

Are Canadians doing things backwards when it comes to rolling out their retirement plans?

New research from Dr. Bonnie-Jeanne MacDonald of the National Institute on Ageing at Ryerson University suggests that in some cases, we are putting the cart before the horse when it comes to our Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) benefits.

Save with SPP spoke by telephone with Dr. MacDonald to find out more about her research.

In her paper, titled Get the Most from the Canada and Quebec Pension Plans by Delaying Benefits, Dr. MacDonald notes that “95 per cent of Canadians have consistently taken CPP at normal retirement age (65) or earlier,” and that a mere one per cent “choose to delay for as long as possible, to age 70.”

This, she writes in the paper, can be a costly decision. “An average Canadian receiving the median CPP income who chooses to take benefits at age 60 rather than at age 70 is forfeiting over $100,000 (in current dollars) of secure lifetime income.”

She tells Save with SPP that tapping into your (registered retirement savings plan) RRSP and other savings first, as a bridge to a higher CPP or QPP later, can make a lot of sense. “Rather than holding on to the RRSP, why not use the RRSPs sooner and CPP later,” she explains.

Even waiting one year – taking CPP or QPP at 61 instead of 60 – means you will get nearly 12 per cent more pension for life, she says. The longer they wait to start CPP, the more they get – about 8.2 per cent more for each year after age 65, Dr. MacDonald explains.

If you go the other route, and take your government pension at 60, “you don’t know what your savings will look like at 70,” she notes. As well, those savings may be harder to manage when you are older, especially if you are “drawing down” money from a registered retirement income fund (RRIF).

Many people, she notes, worry that taking government benefits at 70 is too late, and that they will potentially die before getting any benefits. Most people who are in good health will live long beyond age 70, she says; the data shows that only a small percentage of Canadians don’t make it past their 60s.

Dr. MacDonald notes as well that the retirement industry tends to help people save, but doesn’t help them on the tricky “decumulation,” or drawdown phase. It would be akin to having an adviser set you up with skis, boots, poles and bindings, and deliver you the top of the ski hill – where you would be on your own to figure out how to get to the bottom, she says.

While “Freedom 55” was a popular concept in decades past, the data shows that the retirement age is creeping back up to age 65 and beyond, she says.

“Finances… are part of the reason why people are retiring later,” she explains. Pension plans are less common these days, and not all of them still offer an early retirement window. Few offer incentives to late retirement, she adds.

Her paper concludes that Canadians – and the financial industry that advises many of them – need to rethink the conventional idea of taking CPP or QPP as soon as possible in retirement, and then hanging onto RRSPs until it is time to RRIF them up the road.

“Despite wanting and needing greater income security, Canadians are clearly choosing not to delay CPP/QPP benefits, thereby forfeiting the safest, most inexpensive approach to get more secure retirement income,” she writes. By showing, through the Lifetime Loss calculation, that Canadians can lose out on $100,000 of secure retirement income, the hope is that the industry and policymakers will begin to rethink how they present retirement strategies to Canadians, the paper concludes.

We thank Dr. Bonnie-Jeanne MacDonald for taking the time to speak with Save with SPP.

Celebrating its 35th year, the Saskatchewan Pension Plan (SPP) has a long tradition of building retirement security. SPP is flexible when it comes to paying out pensions – you can start as early as 55 or as late as 71. Check out SPP, it may be the retirement solution you are looking for.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Feb 1: BEST FROM THE BLOGOSPHERE

February 1, 2021

Canadians have socked away nearly $300 billion in Tax Free Savings Accounts

It’s often said that high levels of household debt, compounded by the financial strains of the pandemic, make it difficult for Canadians to save.

However, a report in Wealth Professional magazine suggests that Canadians – once again – are indeed a nation of savers. According to the article, which quotes noted financial commentator Jamie Golombek, as of the end of 2018, we Canucks had stashed more than $298 billion in our Tax Free Savings Accounts (TFSAs).

“[A]s of Dec. 31, 2018, there were 20,779,510 TFSAs in Canada, held by 14,691,280 unique TFSA holders with a total fair market value of $298 billion,” Golombek states in the article.

Again looking at 2018, the article says Canada Revenue Agency (CRA) data shows 8.5 million Canadians made TFSA contributions in ’18, with “1.4 million maxing out their contributions.” In fact, in 2018, the average contribution to a TFSA was about $7,811 – more than that year’s limit of $5,500 – because of the “room” provisions of a TFSA, the article explains.

The reason that people were contributing more than the maximum is because they were “making use of unused contribution room that was carried forward from previous years,” Wealth Professional tells us.

Another interesting stat that turns up in the article is the fact that TFSA owners tend to be younger. “Around one-third of TFSA holders were under the age of 40; two-fifths were between 40 and 65, and those over 65 made up about 25 per cent,” the article explains.

“This is not overly surprising since the TFSA, while often used for retirement savings, is truly an all-purpose investment account that can be used for anything,” Golombek states in the article.

However, there is a reason older Canadians should start thinking about TFSAs, writes Jonathan Chevreau in MoneySense.

“Unlike your Registered Retirement Savings Plan (RRSP), which must start winding down the end of the year you turn 71, you can keep contributing to your TFSA for as long as you live,” he writes – even if you live past 100.

He also notes that a TFSA is a logical place to put any money you withdraw from a Registered Retirement Income Fund (RRIF) that you don’t need to spend right away.

While tax and withdrawal rules for RRIFs must be followed, “there’s no rule that once having withdrawn the money and paid tax on it, you are obliged to spend it. If you can get by on pensions and other income sources, you are free to take the after-tax RRIF income and add it to your TFSA, ideally to the full extent of the annual $6,000 contribution limit,” Chevreau writes.

This is a strategy that our late father-in-law used – he took money out of his RRIF, paid taxes on it, and put what was left into his TFSA, where he could invest it and collect dividends and interest free of taxes. He always looked very pleased when he said the words “tax-free income.”

2021 marks the 35th year of operations for the Saskatchewan Pension Plan. The SPP is your one-stop shop for retirement security. Through SPP, you can set up a personal defined contribution pension plan, where the money you contribute is professionally invested, at a low fee, until the day you’re ready retire. At that point, SPP provides you with the option of a lifetime pension. Be sure to check out the SPP today.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Oct 19: BEST FROM THE BLOGOSPHERE

October 19, 2020

Watch out for these 20 mistakes retirement savers are making

The journey between the here and now of work, and the imaginary future wonderworld of retirement, is a peculiar one. We all imagine the destination differently and no one’s super clear on the route!

The folks over at MSN have a great little post about 20 pitfalls we need to avoid on the retirement journey.

The first, and probably most obvious pitfall, is “not having enough savings.” The blog post notes that “32 per cent of Canadians approaching retirement don’t have any savings,” citing BNN Bloomberg research. “Middle-aged and older Canadians should start saving as early as possible,” the post warns.

If you’re already a saver, are you aware of the fees you are paying on your investments? “High fees can eat up huge amounts of your savings over time if you’re not careful,” the post states.

Many of us who lack savings say hey, no problem, I’ll just keep working, even past age 65. The post points out that (according to Statistics Canada), “30 per cent of individuals who took an early retirement in 2002 did so because of their health.” In other words, working later may not be the option you think it is.

Are you assuming the kids won’t need any help once you hit your gold watch era? Beware, the blog says, noting that RBC research has found “almost half of parents with children aged 30-35 are still financially subsidizing their kids in some way.”

Another issue for Canucks is taking their federal government benefits too early. You don’t have to take CPP and OAS until age 70, the blog says – and you get substantially more income per month if you wait.

Some savers don’t invest, the blog says. “While it may seem risky to rely on the stock market, the real risk is that inflation will eat up your savings over time, while investments tend to increase in value over long periods of time,” the MSN bloggers tell us.

Raiding the RRSP cookie jar before you retire is also a no-no, the blog reports – the tax hit is heavy and you lose the room forever. Conversely, there are also penalties for RRIF owners if they fail to take enough money out, the blog says.

Other tips – expect healthcare costs of $5,391 per person in retirement each year, avoid retiring with a mortgage (we know about this one), be aware of the equity risks of a reverse mortgage, and don’t count on your house to fully fund your retirement.

The takeaway from all of this sounds very straightforward, but of course requires a lot of self-discipline to achieve – you need to save as much as you can while eliminating debt, all prior to retirement. And you have to maximize your income from all sources. That’s how our parents and grandparents did it – once there was no mortgage or debt they put down the shovel and enjoyed the rest of their time.

If you have a workplace pension, congratulations – you are in the minority, and you should do what you can to stay in that job to receive that future pension. If you don’t have a pension at work, the onus for retirement savings is on you. If you’re not sure about investments and fees, you could turn to the Saskatchewan Pension Plan for help. They have been growing peoples’ savings since the mid-1980s, all for a very low investment fee, and they can turn those savings into lifetime income when work ends and the joy of retirement begins.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Dreams can be realized if you put the work in, book suggests

August 6, 2020

A glance at the title on the Indigo website – How to Retire Debt-Free & Wealthy – made this writer decide to add Christine Ibbotson’s book to our retirement library. What else, after all, could anyone want from their retirement?  What’s great about this book is that it illustrates the path you need to take to get there, and uses dozens of different anecdotal/testimonial trails to illustrate the key points.

Ibbotson starts by noting that “very few clients (she is a licensed financial and investment advisor, estate planner and tax specialist) entering retirement will want to compromise their current lifestyles, but will find it difficult to live on less income, especially if they still have a mortgage or outstanding debt.”

That’s seminal retirement advice, and the book builds on it.

A key part of the book is her five-step methodology to establishing what she calls “your core plan.”  Step one is debt elimination, she writes. No easy way out – the best step is to target one of your debts with extra payments, pay it off, and then go after the others. “Once all the debt is paid, you can use these new-found funds to start a savings program towards investing,” she says.

The second idea is one we’ve not seen before, specifically the idea that your “mortgage amortization should match the years left to your retirement.”

“If you are now 45, the amortization on your mortgage should be 20 years,” she explains. Why this idea is so smart is that it basically guarantees you will retire without a mortgage, which is usually the largest debt we Canadians carry. Carrying a mortgage when you have less money (because you are retired) is not always a lot of fun.

Other ideas in the five-step plan are to set up a daily cash journal and track all expenses (so you know where every nickel of your money is going), determining your total debt-servicing ratio, and to “explore ways to increase your wealth” once debt is out of the picture.

In one of the many examples in the book, 50-somethings “Tracie and Kyle” are able to get out of a debt quagmire by tracking and then dramatically slashing their discretionary spending, enabling them to live on one salary. Then, both added side gigs, their debts were addressed and eliminated, and their turnaround resulted in an education plan for the kids and retirement savings for themselves.

The experience turned great spenders “into great savers,” the book declares.

For those who can’t imagine becoming savers, the book has a chapter just for you on “Ways to Save Every Day.” Do your own house cleaning and cut your own lawn. Do small repairs yourself. Cut back on phone and cable. Bundle services where you can. Buy second hand. Drive your car longer.  Cut back on expensive memberships. Buy generic brands. Buy in bulk, and shop when there are sales. There are many more tips like these in this well-thought-out volume.

There’s even advice on the tricky problem of making your money last in retirement. Ibbotson suggests when you are retired, there will be a “honeymoon phase” for the first five years of retirement, followed by the middle age of retirement (years six to 20) and the “long-term” phase, 20 years and beyond.

Use your unregistered savings for the first phase as much as you can. Start tapping into RRSPs, pensions, and government benefits in phase two. By phase three you will need income from your RRIFs and fixed-income investments, which you will have been “laddering” in phases one and two.

This great little book is well worth adding to your collection.  If, like the book suggests, you are banking on retiring more than 20 years from now, it’s probably well past time to start putting away money for retirement. The Saskatchewan Pension Plan offers you a choice of a Balanced Fund or Diversified Income Fund for your contributions. Be sure to check out SPP today!

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


Apr 20: Best from the blogosphere

April 20, 2020

Stay the course on your retirement savings plans, experts say

If you’re a retirement saver, these past few months of pandemic-related market turmoil have no doubt raised your blood pressure and caused concern.

Experts tell us to take a deep breath, and to remember this crisis will eventually end, and things will move back to normal, reports The Record.

“While many Canadians may be panicking as they watch their retirement funds drop by tens or hundreds of thousands of dollars, financial experts say it’s important to stay the course regardless of how close to retirement they are — and even if they’ve already finished working,” The Record reports.

“I would certainly encourage all of us to take a big collective deep breath,” states Karin Mizgala, co-founder and CEO of Money Coaches Canada, in the article.

If you aren’t planning to access the savings for retirement income any time soon, you should “stay the course” on your retirement plan, Mizgala tells The Record.

And even if you are withdrawing funds from your retirement savings, it’s important to put the market downturn in perspective, financial author Kelly Keehn says in the article.

“It’s not like you have to cash it all out the year that you retire, and I think people forget that,” she tells The Record.

If your funds are in a Registered Retirement Income Fund (RRIF), the federal government is planning to put new rules in place reducing the amount you have to take out. (Full details on this rule change are covered in this article in Advisor’s Edge).

As well, the article says, you can choose to defer your withdrawals until later in the year, when markets are expected to start rebounding.

Noting that markets lost 35 per cent of their value in 2008/9, and then fully recovered and increased in value, Keehn makes an important conclusion.

“The takeaway is: If this was causing you sleepless nights, maybe in the future you need to adjust your risk tolerance and your risk exposure. But it doesn’t mean acting on it now. That’s for darn sure… This is not the time to make those changes,” she tells The Record.

If you are a member of the Saskatchewan Pension Plan, there’s a feature of the plan you should consider if, as Kelly Keehn says, the markets are causing you to worry and lose sleep. With SPP, one of your options at retirement is to receive some or all of your savings in the form of a life annuity. With an annuity, you get the exact same amount each month, regardless of whether markets are up or down. And you’ll get that amount for life – and can provide for your survivors too, if you choose to. It’s an option that offers peace of mind, so check it out on their website today.

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

Save for retirement, sure – but think of your loved ones also

March 19, 2020

We spend most of our annual allocation of pixels talking about saving for retirement. But there’s an equally important consideration for all of us to think about – what happens to our retirement savings when we die?

Naming a beneficiary is a very important thing, but it is also an incredibly complex topic.

Writing in the Globe and Mail, Rob Carrick says that TFSAs, RRSPs and RRIFs all have a place for you to designate a beneficiary “buried in the boilerplate of the application form.” Don’t “blow it” by rushing past beneficiary designation without “considering the implications,” he writes.

Carrick notes that single people can name anyone as their RRSP beneficiary. If they don’t name a beneficiary, any leftover balance in the RRSP will go to the individual’s estate. Where there is a spouse, Carrick writes, a spouse who is the beneficiary can receive the RRSP balance in a tax-deferred way, it can be “rolled over” to the spouse’s registered retirement vehicle, and taxes are deferred “until the surviving spouse removes money from the plan,” the article notes.

Similar rules are in place for RRIFs.

Jim Yih, blogger for Retire Happy also stresses the importance of a beneficiary choice.

“The designation of the beneficiary in your RRSPs and RRIFs is one of the most important factors in how much taxes you are going to have to pay at the time of death,” he writes. “Yet, it is astonishing how many people make this decision without regard to the overall estate plan or simply forget to designate a beneficiary.”

The Boomer & Echo blog also underlines the importance of this choice.

“Naming a beneficiary is a very important part of tax and estate planning.  The RRSP (or RRIF) will not form part of the estate assets, which may require probate.  The assets will transfer directly to the beneficiary, which may result in significant savings,” the blog notes.

The Saskatchewan Pension Plan, a specified pension plan, has similar rules.

In the SPP Member Guide we learn that “if you name your spouse as beneficiary of your SPP account… death benefits (can) be transferred, directly, to his or her SPP account, RRSP, RRIF or guaranteed life annuity contract.”

As well, a variety of annuities are available through SPP which allow you to provide for your surviving spouse or other beneficiary. The Retirement Guide explains that you can choose a “life only” annuity, where only you receive monthly payments, a “refund life annuity” that provides a lump sum benefit for your beneficiary, and a “joint and last survivor” annuity that provides “your surviving spouse or common law partner… a monthly payment for the rest of his or her life.”

Let’s end with an important warning, here. The rules for beneficiary designation vary from province to province, and for the type of savings vehicle you have. It’s important to understand the consequences of making, or not making, a beneficiary choice. Be sure to talk to your retirement savings provider about this, be it a workplace pension, an RRSP, or the SPP. You might want to get some professional advice before making your choice.

Survivor benefits can be a huge help to the folks we leave behind when we pass away, so be sure to make an informed choice.

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

Book makes “fin lit” understandable, easy to digest, and inspires action

August 29, 2019

A fear one has when picking up a financial self-help book is that the advice it contains will be so confusing and complex that you’ll feel less financially literate than before.

That’s not the case with A Canadian’s Guide to Money-Smart Living, by Kelley Keehn. In fact, her book – a slender volume – is designed to break down big ideas into small, digestible ones. And once you’re done, you feel that maybe yes, you will go out and follow some of the things you’ve learned.

Keehn begins by saying her mission is “to make Canadians feel good about money.” She says her mom, who as a single parent was an excellent manager of money, would probably change her view that “money doesn’t grow on trees” to “money doesn’t grow in plastic.” Keehn says her mom saw credit cards as being for emergencies – and that they should be paid off in full, every month.

Yet, Keehn writes, even though someone making $51,000 a year will see, in his or her life, “over $2 million past through (their) hands,” why are so many Canadians “living from paycheque to paycheque… burdened with excessive debt… and not better off when it comes to retirement?”

Keehn’s advice is simple. We need to take control of our finances by spending less than we earn, and by paying ourselves first – saving before you spend. “Do not look upon savings as something left over after you’ve spent everything else. Save first, live and budget within the net amount.”

Your goal, she writes, should be “a comfortable life.”

“I’m not talking about applying some complex budget plan to your paycheque that requires you to watch every penny in order to squeeze out something at the end of the month to be put away and called `savings.’ I’m talking about setting aside something from every paycheque before you do your spending,” she writes. The goal should be 10 per cent of your gross earnings, she advises.

You and your partner also need to do a little goal-setting to get on the same page, she writes. Define your goals, establish a “needs and wants” list, check your progress, talk about next steps, make changes, and “take action and get help,” she recommends.

The book reviews major spending categories and offers specific tips to manage each. In the mortgage chapter, her advice is to “seriously consider your options to speed up the mortgage amortization,” so that your biggest expense is paid off as quickly as possible.

In the chapter on credit cards, she notes that most Canadians have a “household debt to disposable income” ratio of around 170 per cent. She cuts to the chase here, recommending people carry no more than three credit cards, and to avoid department store cards that carry higher interest and “are a temptation you should resist.”

Interestingly, she says debit cards can be expensive “unless you have a no-fee arrangement with your institution,” so consider carrying cash to avoid debit card fees.

With any type of consumer debt, remember that when interest rates go up on a loan or line of credit, so do your payments – and you still “have to pay back the entire principal.”

There’s a chapter on retirement savings that walks you through the rules of RRSPs and RRIFs. For RRIFs, she says when you withdraw money each year, it “doesn’t mean you have to spend it, all you have to do is report it as taxable income.” So that money could be reinvested in a TFSA or non-registered account, she says. She explains Old Age Security, noting that depending on your income in retirement, you may have to pay back some or all of the OAS payments you receive. (A good reason to bank it until tax time.)

This is a great book that makes you feel energetic about winning back control of your wallet. It’s a highly recommended addition to your retirement planning library. And a great destination for the money you save is a Saskatchewan Pension Plan account!

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

Even those with workplace retirement savings plan coverage still worry about retirement: Aon research

May 30, 2019

Recent research conducted for Aon has found that Canadian workers in capital accumulation plans (CAPs), such as defined contribution (DC ) pension plans or group RRSPs, while confident about these plans and their own finances, “find it hard to save for retirement and are worried about having enough money to retire.”

The global actuarial and HR firm’s report, Global DC and Financial Wellbeing Employee Survey, also found that “fewer than half” of those surveyed have a particular goal for retirement savings, and that “depending on other sources of income, many find their current plan contribution levels are inadequate to ensure their total income needs in retirement,” according to an Aon release.

Among the other findings of the report:

  • Of the 1,003 respondents, only 27 per cent saw their financial condition as poor
  • Almost half of those surveyed say outstanding debts are preventing them from saving for retirement
  • Two of five who are in employer-matching plans (where the employer matches the contributions made by the employee) are not taking full advantage of the match
  • Of those who expect to fully retire from work, two-thirds expect to do so by age 66; 30 per cent expect to keep working forever in some capacity.

Save with SPP reached out to one of the authors of the research, Rosalind Gilbert, Associate Partner in Aon’s Vancouver office, to get a little more detail on what she made of the key findings of the research. 

Do you have a sense of what people think adequate contributions would be – maybe a higher percentage of their earnings?

“I don’t believe most respondents actually know what is ‘adequate’ for them from a savings rate perspective.  The responses are more reflective of their fears that that they don’t have enough saved to provide themselves a secure retirement.  Some may be relating this to the results of an online modeller of some kind, or feedback from financial advisors.

“I also think that many employees don’t have a clear picture of the annual income they will be receiving from Canada Pension Plan/Old Age Security to carve that out from the income they need to produce through workplace savings.  Some of this comes back to not having a retirement plan in terms of what age they might retire and, separately, what age they might start their CPP and OAS (since both of those drive the level of those benefits quite significantly).”

Is debt, for things like mortgages and credit cards, restricting savings, in that after paying off debt there is no money left for retirement savings?

“We were surprised to see the number of individuals who cited credit card debt as a barrier to saving for retirement. Some of this is the servicing (interest) cost, which is directly related to the amount of debt (and which will increase materially if interest rates do start to rise, which many are predicting).

“I think that the cost of living, primarily the cost of housing and daycare, is currently quite high for many individuals (particularly in certain areas like Vancouver), and that, combined with very high levels of student loans, means younger employees are just not able to put any additional money away for retirement.  There is also a growing generation of employees who are managing child care and parent care at the same time which is further impeding retirement savings.”

We keep hearing that workplace pensions are not common, but it appears from your research that participation rates are high (when a plan is available).

“This survey only included employees who were participating in their employers’ workplace retirement savings program.  So you are correct that industry stats show that overall coverage of Canadian employees by workplace savings programs is low, but our survey showed that where workplace savings programs are available, participation rates are high.”

What could be done to improve retirement savings outcomes – you mention many don’t take advantage of retirement programs and matching; any other areas for improvement?

“In Canada, DC pension plans and other CAPs are not as mature as they are in other countries such as the UK and US.  That said, we are now seeing the first generation of Canadians retiring with a full career of DC (rather than DB) retirement savings.  Appropriately, there has been a definite swing towards focusing on decumulation (outcomes) versus accumulation in such CAPs.

“From service providers like the insurance companies that do recordkeeping for workplace CAPs, this includes enhanced tools supporting financial literacy and retirement and financial planning.  Also, many firms who provide consulting services to employers for their workplace plans encourage those employers to focus on educating members and encouraging them to use the available tools and resources.

“However, if members are required to transfer funds out of group employer programs into individual savings and income vehicles (with associated higher fees and no risk pooling) when they leave employment, they will see material erosion of their retirement savings. Variable benefit income arrangements (LIF and RRIF type plans) within registered DC plans are able to be provided in most jurisdictions in Canada, but there are still many DC plans which still do not offer these.

“It is more difficult to provide variable benefits when the base plan is a group RRSP or RRSP/deferred profit sharing plan (DPSP) combination, but the insurance company recordkeepers all offer group programs which members can transition into after retirement to facilitate variable lifetime benefits.  The most recent Federal Budget was really encouraging with its announcement of legislation to support the availability of Advanced Life Deferred Annuities (ALDAs) and Variable Pay Life Annuities (VPLAs) from certain types of capital accumulation plans.

“There is still more work to be done to implement these and to ensure that they are more broadly available and affordable, but it is a definite step in the right direction.  A key benefit of the VPLAs is the pooling of mortality risk while maintaining low fees and professionally managed investment options within a group plan.  The cost to an individual of paying retail fees and managing investments and their own longevity risk can have a crippling impact on that member’s ultimate retirement income.”

We thank Rosalind Gilbert for taking the time to connect with us.

If you don’t have access to a workplace pension plan, or do but want to contribute more towards your retirement, the Saskatchewan Pension Plan may be of interest. It’s a voluntary pension plan. You decide how much to contribute (up to $6,200 per year), and your contributions are then invested for your retirement. When it’s time to turn savings into income, SPP offers a variety of annuity options that can turn your savings into a lifetime income stream.

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