Registered Retirement Savings Plans

JUL 11: BEST FROM THE BLOGOSPHERE

July 11, 2022

Even if you have zero saved for retirement, these steps will get you started

One of the findings of a recent survey from the Healthcare of Ontario Pension Plan (HOOPP) was that “32 per cent of working Canadians said they have yet to save anything for retirement.”

South of the border, reports GoBankingRates via Yahoo! Finance, the situation is similar, with 23 per cent of Americans having saved nothing for retirement, and “25 per cent of Americans between 45 and 55 years old” not having even started saving.

Like dieting and going to the gym more often, saving for retirement is something we know is good for us but is easy to avoid doing. GoBankingRates offers a few ways to fire up your own personal retirement savings program.

The first step is to start budgeting, the article notes. “When payday comes around, it’s tempting to pay for immediate expenses, such as rent and groceries, and use the rest of that money for spending and splurging. Instead, you should consider budgeting,” the article urges. “By setting aside a little money every month towards retirement, you will be able to enjoy that money in the future,” states Jay Zigmont of Live, Learn Plan in the article.

Next, the article continues, is addressing your debt load.

“Debt is a frustrating thing to have, but the sooner you are able to eliminate it, the more money you will have for saving for retirement, investing and spending,” the article tells us. This is a very valid point. Next time you get your credit card bill, see how much interest you were charged on the balance over the last month. That amount could go to savings if you were able to pay off the card.

To target your debt, the article advises you to first be sure to make at least the minimum payment on all debts. They then advise that you put any extra money you can on the debt with the highest interest rate. Once that one’s gone, add what you were paying on high-interest debt 1 to high-interest debt 2, and repeat until you are debtless.

A third idea in the article is goal-setting for savings.

“Make sure you know why you are saving,” Zigmont states in the article. “What do you want your retirement to look like? What are you willing to give up to get there? What is the dollar number you need to hit to retire? When do you want to do it by?”

If you want, for example, to have $20,000 in savings for 20 years of retirement, a target might be $400,000. For simplicity, we are not talking about interest rates and investment returns in this example, but both can help you get there.

Other ideas from GoBankingRate include investing your savings, rather than putting it all in a savings account. “Follow the general rule of only investing in things you understand,” Zigmont states in the article. “Take the time to learn what your options are and be sure to understand both what you are investing in.” In Canada, your choices include workplace pension plans, the Saskatchewan Pension Plan, registered retirement savings plans (RRSPs), Tax Free Savings Accounts (TFSAs) and plain old cash trading accounts. Be sure you know the limits and rules for each type of investment vehicle.

The final advice in the article is to “take ownership” of retirement. “The key to retirement is making it your own,” the article concludes. Do you want to fully retire, or move to part-time work? Having an idea of what your own retirement will be like will help guide your savings plan, the article concludes.

Over many years of reviewing books for Save with SPP, there was one piece of advice that really stood out, and actually worked for us when money was tight. That idea was to put aside five per cent off your pay for savings right off the top, and then live on the rest.

A barrier to savings is the feeling that you won’t have anything left over after bills and groceries. But if you take five per cent off the top, and put it somewhere where you can’t get at it to spend, you’ll be amazed how quickly the savings start to add up, and how little you miss the five per cent (eventually).

A safe and secure cookie jar for your newfound savings is available through SPP.

With SPP, you can stash away up to $7,000 per year in a locked-in, voluntary defined contribution plan. “Locked-in” means you can’t raid your savings for non-retirement expenses; you can only access the money once you reach retirement age. And during that run up, your money will be invested professionally and at a low cost. SPP is a sensible savings option available to any Canadian with RRSP room; check them out today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Looking for tricky ways to boost your retirement savings

June 30, 2022

We’re living through some very weird times. First we get a pandemic that keeps many of us from working for an extended period of time, and the rest of us with nothing to spend our money on. Now we’re facing crazy inflation that is making even routine purchases very expensive.

Are there any tricky ways to put away a few bucks for retirement out there? Save with SPP decided to seek out a few new tricks – ideally ones we haven’t covered off before.

A GoBankingRates article posted on Yahoo! offers up 42 savings tricks.

One is to watch the fees in your retirement savings accounts, the article suggests. Here in Canada, this would be in registered retirement savings plans – RRSPs – or Tax-Free Savings Accounts, TFSAs. Do you have mutual funds that charge a high fee, say two per cent or even more? Maybe you can switch to a lower-fee exchange traded fund (ETF). Other ideas include renting out a spare room or an unused garage for extra savings cash, “shopping around” for the best possible insurance rate, and the idea of “putting every tax refund into savings.”

“It’s tempting to use the extra money from your tax refund on a new toy or vacation,” the article states. “But these spurts of cash provide the perfect opportunities to give your retirement savings a big boost.”

The My Money Coach blog has some great ideas, including freeing up money for savings by paying attention to your pre-retirement cash flow.

“A very important key to saving for retirement in Canada – that many have lost sight of – is to earn more than you spend,” the blog explains.

If you are following a budget and still have little room for savings, the blog continues, “the next thing to do is to up your income. You can ask for a raise at work, or you can apply for a job that offers a higher pay and better benefits. You can also pick up extra shifts or take on a second job during the weekends or evenings, if your schedule allows it.”

Other ideas to boost cash flow (and create more savings) are “a side business or freelancing,” the blog notes. “Capitalize on one of your passions and see where it takes you.”

From the Union Bank of Switzerland (UBS) site comes a little bit of savings psychology advice.  “Try this little trick to motivate yourself,” the site suggests. Simply change the name of your savings solution. Seeing “My world trip,” “Better living” or “Playa del Carmen 2030” every time you log into… e-banking or (a) mobile banking app will remind you of your big dream, and give your motivation a boost,” states Daniel Bregenzer of UBS.

Other tips from UBS include making it “harder” to access your savings account so the temptation to spend it is lessened, “like keeping a box of chocolates out of sight,” and making savings an automatic habit.

Save with SPP can add a couple more.  First, if you get a cash gift card – say it’s issued as a rebate on a purchase of tires, or contact lenses, or whatever – did you know that you can use that gift card to make contributions to your Saskatchewan Pension Plan account? SPP allows you to make credit card contributions, and we have used gift cards quite a few times over the years. Here’s the page where credit card contributions can be made.

And, if you have a cashback card, what better place for the cash than your retirement savings plan – just set up SPP as a bill payment on your bank website or app, and when the cash is deposited, contribute it.

Whatever way you can wring a few extra bucks out of your living costs will work, and your future self will greatly enjoy the work your current self has put in!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Quebec academic calls for changes to RRSP and RRIF age limits

April 14, 2022

A university professor from Sherbrooke, Quebec is calling for a couple of changes to Canada’s system of registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs), in light of the fact that people are living longer.

Professor Luc Godbout, Professor, School of Administration at the Université de Sherbrooke, is also Chair in Taxation and Public Finance. He kindly agreed to answer some questions Save with SPP had about his ideas, which were published by the C.D. Howe Institute as an open letter to federal Finance Minister Chrystia Freeland.

His open letter was originally published in French.

The professor’s open letter calls for “simple changes” to the existing rules.

“The first would be adjusting the threshold age at which registered capital accumulation plans – such as the RRSP – must be terminated. The rule now is age 71,” he notes in the letter.

Under the current rules, his letter explains, RRSP holders must “transfer their RRSP or defined-contribution pension plan balances into a RRIF or a life annuity” before the end of the year in which they reach age 71. If they don’t, he explains, “the entire value is added to their taxable income in that year.”

The age limit of 71 was established in 1957, his open letter notes.   “This means that since the creation of the RRSP in 1957, the age limit of 71 has never been raised,” the open letter explains. “Yet, since 1957, the life expectancy of seniors in Canada has improved significantly. 

“Life expectancy at age 65 was 14.5 years during the period 1955-1957. It improved to 20.9 years in 2018-2020. But the RRIF rules have not moved,” he writes.

He remarks that recent changes to Old Age Security (OAS) benefits for those aged 75 and older “provides an opportunity to harmonize other elements around our living 75-year-olds.”

Why not, he asks, consider allowing Canadians to postpone their OAS payments to age 75, rather than the current age 70? And, he asks, why not move the limit for converting an RRSP to a RRIF to 75?

“This type of change would optimize the mechanics of pension plans, and also encourage Canadians to remain in the workforce, which improves health and also helps with Canada’s looming labour shortage,” his open letter concludes.

Save with SPP asked the professor a couple of questions about his open letter.

Q. You mention that moving the “end date” for RRSP contributions (and for DC plans) and RRIF conversion to 75 from the current 71 would encourage more people to stay in the workforce. Do you see the current age 71 rule as something that encourages the opposite – a deadline that encourages retirement?

A. It may not be an important factor, but it cannot play favorably in the heads of those who want to continue in the labour market, for example, a liberal profession.

Q. If your idea on changing the date is adopted, do you think government retirement benefits like the Canada Pension Plan/Quebec Pension Plan and Old Age Security should also be changed?

A. Yes, but it is not an obligation to retire later, only to offer a possibility to delay the time when the pension begins, currently CPP between 60 and 70 years and OAS between 65 and 70 years.

Q. You note that while the RRIF age of 71 has been lowered (to 69) in the past, it has never been raised. Why do you think 71 is still the age, especially considering how things have changed since the rules came in in 1957, and retirement was mandatory at 65!

A. Because the scheme does not provide for the adjustment of this threshold to take account of the increase in life expectancy.

We thank Prof. Godbout for taking the time to answer our questions.

One way that a pension plan can deal with longer life expectancies of its membership is by providing the option of an annuity. The Saskatchewan Pension Plan provides a number of different annuity options for its retiring members – but all of them provide a lifetime monthly pension. Check out SPP today.

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Mar 21: BEST FROM THE BLOGOSPHERE

March 21, 2022

How much is “enough” when setting an early retirement savings target?

Writing for the GoBankingRates blog, John Csiszar takes a crack at a challenging topic – how much is “enough” when setting your retirement savings goals, particularly if you want to retire early?

“While the fantasy of early retirement sounds great, the reality can be difficult to achieve. If you retire early, you’ll need much more than a standard retirement nest egg to fund the extra years that you will be retired and not working,” he writes.

Drum roll, here – Csiszar next tells us that since a “standard” retirement nest egg should contain one million eggs (all eggs are U.S. denominated in his article), then an early retirement nest egg should cost “$2 million or more, to fund a long, early retirement.”

He then does the math. For those wanting to retire at age 40, they need to first understand that their retirement (according to Internal Revenue Service stats for the U.S.) could last around 45.7 years.

In order to have a “modest” $40,000 income for life starting at 40, you would need to save $1.84 million once you hang up the name tag for the last time.

To get that $1.84 million, he adds, you would need to start saving $92,000 a year beginning at age 20. And even if you could manage that feat, Csiszar adds, you would need to have average investment returns of seven to 10 per cent annually.

Well, OK. What about early retirement at 50?

Csiszar does the math on that idea, with the same goal of having $40,000 in income annually. Americans aged 50 at retirement can expect 36.2 more years of life, so you’ll “only” need $1.448 million in savings. And you’ll need to save $88,266 annually from age 30 to 50 to get the job done.

These are scary numbers, but let’s not overlook the fact that most Canadians will get a Canada Pension Plan (CPP) benefit at retirement, and may also qualify for Old Age Security (OAS) and the Guaranteed Income Supplement (the latter is for lower-income retirees). These don’t start at age 40 or 50, of course, but you can get CPP at 60 and OAS at 65.

The average CPP payout in Canada, according to our friend Jim Yih at the Retire Happy blog, is $645 per month. That’s $7,740 per year. If you were to retire at age 65, and live for 20 years, the CPP (assuming you got the average rate cited here) would provide you $154,800, and that’s not including the inflation increases you would receive each year.

The Motley Fool blog tells us that the average OAS payment in Canada is $613.53, or $7,362.36 per year. If you were to start collecting OAS at 65, and received this average amount for 20 years, you would have received $147,247.20. Again, that figure doesn’t include inflation increases.

These are estimates based on average payouts; what you will actually get depends on your own earnings and employment history. But the point is, these two federal programs can provide a significant chunk of your nest egg – you are not completely on your own in your savings program.

We can save on our own in registered retirement savings plans (RRSPs), and another The Motley Fool blog post shows that the average RRSP balance in the country is $101,555.

Saving a million bucks sounds impossible, but maybe, it’s not as big a mountain as it appears.

Those with company pensions as well as RRSPs, tax free savings accounts, and other savings, can get closer to the target. The value of your home can be a savings factor if you decide to sell and downsize for your golden years.

If you do have a company pension plan, be sure to contribute to the max.

With a committed approach to saving, and assuming you can get decent investment returns with low fees, we can all get a little closer to that “standard” savings level. For those without a company pension plan, consider the Saskatchewan Pension Plan, which currently allows you to save $7,000 annually toward retirement (you can also transfer in up to $10,000 a year from other RRSPs). The SPP has a stellar investing track record – the average rate of return has been eight per cent since the plan’s inception in 1986. And while past rates of return don’t guarantee future rates, the SPP has been helping people build their retirement security for 36 years. Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Mar 7: BEST FROM THE BLOGOSPHERE

March 7, 2022

Is inflation causing Canadians to fear they aren’t saving enough for retirement?

Writing for the Canadian Press, via Canoe, Christopher Reynolds notes that inflation is causing the price of almost everything to go up – including retirement.

Citing recent research from the Bank of Montreal, Reynolds notes that “Canadians are losing confidence they’ll have enough cash to retire as planned,” with fewer than half believing they can hit their savings target.

That’s because inflation is boosting the value of that theoretical retirement piggy bank, he writes. “The average sum (Canadians) anticipate needing has increased 12 per cent since 2020 to $1.6 million,” he writes.

Last year, he continues, 54 per cent of those surveyed felt they would reach their savings targets; the most recent research shows that number has dropped to 44 per cent.

“Inflation,” states Robert Armstrong of BMO Global Asset Management in the article, “is starting to impact their views on how much they need to save for retirement.”

The price of housing, the article continues, is “another source of angst,” with the average home price in Canada rising to a record $748,450 in January. That’s a year over year jump of 21 per cent, the article notes.

Those who don’t own their own homes not only face higher rents, but don’t have the “automatic nest egg” associated with being able to sell one’s principal residence without paying capital gains taxes, the article notes.

Another problem retirement savers face is the shortage of good workplace pension plans, Reynolds writes. Only about 25 per cent of Canadians are covered by defined benefit pension plans, which provide a guaranteed monthly lifetime income. Just seven per cent enjoy being members of defined contribution plans (like the Saskatchewan Pension Plan), where future payouts depend on how much is saved and invested.

Those numbers, the article continues, are “still far below those of the ‘70s, ‘80s and early ‘90s when the rates were consistently above 40 per cent.” That information, Reynold adds, comes from Statistics Canada.

Jules Boudreau of Mackenzie Investments tells the Canadian Press that these factors – inflation, high housing prices, and a general decline in workplace pension plan coverage – put a lot of pressure on younger retirement savers.

“The personal retirement portfolio of a young worker is much more critical, because their retirement hinges entirely on it — and that can create more anxiety, more uncertainty,” Boudreau states in the article. As well, the article concludes, many younger people are not focusing on long-term retirement savings, such as registered retirement savings plans (RRSPs), but on “short term” things like getting a home, furnishing it, and starting a family.

While the average RRSP balance in Canada as of 2020 was $101,155 – a figure that is growing – the Motley Fool blog says that seemingly high amount will only generate about $3,500 of income per year. And it’s far short of the $1.6 million target mentioned by Reynolds in his article.

If you are part of the majority of working Canadians who lack a pension or retirement program at work, the Saskatchewan Pension Plan may be just what you’ve been looking for. The SPP is a do-it-yourself, end-to-end defined contribution pension plan. You can contribute up to $7,000 every year, and SPP will invest your contributions in a low-cost, professionally managed pooled fund. When it’s time to unshackle yourself from the rat race, SPP has a number of options for turning those savings into income. Make SPP part of your personal retirement program today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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 21: BEST FROM THE BLOGOSPHERE

February 21, 2022

Retirement savings is just a key first step in the process: IG Wealth

No one applauds retirement savings of any sort more than Save with SPP, but new research from IG Wealth suggests most of us don’t think about the many other steps in the retirement process.

The research is covered in a recent article in Wealth Professional.

The article points out that two-thirds of Canadians over 18 have registered retirement savings plans (RRSPs), and “57 per cent plan to invest in theirs” before the 2022 deadline.

As well, the average amount in our RRSP kitties is around $13,000, the article reports. All good, right?

But, the article asks, have many of us thought about the other issues retirement presents?

“Investing for retirement is just one piece of the overall retirement readiness puzzle,” IG Wealth’s Damon Murchison tells Wealth Professional. “It’s important to be thinking about retirement planning in a more holistic manner, and as a key component of an overall financial plan.”

So what are we not sure about, retirement-wise?

First, the article reports, the survey found that only 21 per cent “understand taxation of retirement income.” Those of us who are no longer working for the old company know all about this – the easy days of having the payroll department deduct enough from your pay so that you always got a tax refund are over. It’s trickier to figure things out when you are getting income from multiple sources.

Next, we are informed, only around 21 per cent have thought about their insurance needs. Once the office is far off in your rearview mirror, you may not have any drug, dental or vision coverage. Have you factored in the cost of getting this on your own, or checked out to see what your province or territory may be able to help you with?

Only 19 per cent have thought about estate planning, only 18 per cent have thought about their budgets, the article notes.

Save with SPP has had several friends who passed away suddenly, and without making a will. Without getting into this complex topic, let’s just say a will helps ensure your stuff goes to who you want it to go to. Without one, the process is slower, costly and complex, and at best is a guess by someone else of what you ought to have wanted.

A budget is highly recommended. And it doesn’t have to be a mega-detailed spreadsheet. As a former colleague of ours once explained in a masterful one-page financial planning document, it’s just knowing how much of your money needs to go to expenses, and how much is left to spend or save. When you’re retired, your expenses will probably be less, but so will your income, so the clearer the idea you have about your total retirement income, the better off you will be.

If you’re a member of the Saskatchewan Pension Plan, one way to be certain about your SPP income is to consider transferring some or all of your savings into an SPP annuity.

An annuity delivers you the same monthly payment for the rest of your life. The Canada Pension Plan and Old Age Security also give you a predictable monthly income. That income certainty will make budgeting and tax planning a whole lot less painful.

Join the Wealthcare Revolution – follow SPP on Facebook!

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 14: BEST FROM THE BLOGOSPHERE

February 14, 2022

RRSPs on the rebound: RBC poll

After hitting “a historic low” in 2021, a new poll suggests that 53 per cent of Canadians are now “using registered retirement savings plans (RRSPs) to save for their future,” reports BNN Bloomberg.

That’s a seven per cent jump from last year, the broadcaster reports, citing findings from a recent Royal Bank of Canada poll.

Interestingly, the research found that savers – even younger ones aged 25 to 34 – are okay with the idea of paying fees with their investment portfolio “if it will give an opportunity to earn higher returns,” the report notes.

“When assessing value, investment performance after fees is what really matters,” Stuart Gray, director of the Financial Planning Centre of Expertise at RBC, states in the article.

“It’s encouraging to see that younger Canadians understand how crucial this is in achieving your retirement savings goals and building a strong financial future,” he states.

What’s prompting younger Canadians to save more for their faraway retirements?

“The poll found 85 per cent of younger investors are worried about balancing their current financial situation and saving for the future as basic living expenses continue to rise,” the article notes.

But, Gray states in the piece, “it’s a good sign many Canadians are placing the spotlight on their investments, as it will help them manage future uncertainty around inflation and the COVID-19 pandemic.”

If you are worried about when to jump into the world of investments, Apurva Parashar of Alitis Investment Counsel tells the Campbell River Mirror that the best time to get investing is now.

“A lot of people wait for the ‘perfect time’ to invest, or the ‘perfect investment’ that grows their portfolio to their long term goal in less than a year. But it’s better to treat investments as a slow and steady process,” she tells the Mirror.

Asked by the Mirror for her thoughts on people “saving for retirement, a down payment on a house, or other financial goals,” Parahar was very clear.

“Start as early as you can. Don’t wait for the perfect time, and don’t overthink it,” she tells the Mirror. “Trust the process.”

Save with SPP remembers being a young reporter in Thunder Bay when a colleague talked up the value of RRSPs. We got the message – anything you put away today, in your 20s, will be worth much more 40 years from now. And, the colleague said at the time, you’ll get a tax refund. It was the thought of the refund that actually pushed us towards RRSP saving.

So, let’s sew these ideas together. More than half of us have RRSPs, and even the young are willing to pay fees if they get investment performance. At least one expert says now is the time to start investing.

Enter the Saskatchewan Pension Plan. While last year’s sparkling 11.53 per cent rate of return is no guarantee of future performance, the SPP has returned more than 8 per cent (on average) annually since its inception 36 years ago. And while there are indeed investment fees, they are low – usually less than one per cent. You can start small, and ramp up your contributions as you get older and earn more, and can leave the professional investing decisions to the experts at SPP. Slow and steady can create a fine nest egg for when you unshackle yourself from the bonds of commerce.

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


Rich Girl, Broke Girl shows the steps women need to take to gain control of their finances

December 30, 2021

Financial author Kelley Keehn thinks women need to be in charge – not unwilling passengers – when it comes to steering their financial ships of state.

Her well-written (and entertaining) book, Rich Girl, Broke Girl provides step-by-step directions to help women gain control over debt, day to day expenses, investing and of course, retirement savings.

As the book opens, Keehn notes that while most women are told they can “financially achieve anything, dream as big as any man, accomplish anything,” they often get blamed if they fail, and are told to leave finances to “someone else in (their life),” or to “marry rich.”

The stats, she writes, show that many women don’t like others being in charge of their money. A full two-thirds of women “whose partners are the primary breadwinners feel trapped,” Keehn writes. “Seven in ten women wish they had more power in their financial futures,” she continues. “Sixty-four per cent of women wish they had their own money set aside just in case.”

She then tells the story of “Mack,” a young woman who tried to strike out on her own, but lacked financial knowledge, didn’t know the cost of things, tried to live an impossibly unaffordable life, blew her credit on a single trip, then got behind and didn’t ask for help, ultimately forcing her to move back home.

An “anti-budget,” Keehn writes, is the solution here. Track every dollar, categorize spending, multiply expenses by 12 to create an annual budget, and then “trim the excess… (and) reallocate.” Fictional Mack could save $3,255 a year, writes Keehn, by saving just 50 per cent on her discretionary expenses.

The book looks at the ins and outs of credit, and then, cohabitation.

“Have the money talk with your partner early,” Keehn advises. If your partner is a saver, and you are a “live for today” spender, that collision of views could harm the relationship, she notes.

There’s a great, detailed overview of investing, which looks at cash, fixed income and equities, as well as other investment vehicles. Keehn recommends a diverse approach to investing. Don’t invest in just one stock, but a diversified portfolio, she explains. Understand the risks of equity investing, but don’t fear them and put all your money in fixed-income, Keehn adds.

She explains the difference between buying stocks and bonds yourself versus buying units in mutual funds – the latter can have high fees, she warns.

Keehn points out how even the modest inflation we’ve experienced in the past five years can “erode your wealth.”

In the section on tax shelters, Keehn says it is best to think of registered retirement savings plans (RRSPs) and Tax Free Savings Accounts (TFSAs) “as an empty garage. You have to put “cars” (investments) into them, and depending on the rules of the tax shelter, there are different perks and penalties.”

With both, you can invest in a “plethora” of different vehicles, from “guaranteed investment certificates (GICs) and savings accounts to stocks, bonds, exchange-traded funds (ETFs), mutual funds and more.” Only the tax treatment of the “cars” is different – you get a tax deduction for funds placed in an RRSP, and they grow tax free, but are taxed when you take money out. There’s no tax deduction for putting funds in a TFSA, but no taxes on growth, and no taxes due on any income taken out of the TFSA.

She talks about the need to maximize your contribution to any company-sponsored retirement savings plan, because otherwise, “you are leaving money on the table.”

Keehn offers some thoughts on the idea of paying off mortgages quickly as a strategy – perhaps, she writes, it’s less of a good idea given the current low mortgage rates – if you have debts at a higher interest rate, perhaps they should be targeted first.

She’s a believer in getting financial advice when you run into problems.

“It’s natural to feel ashamed of our money mistakes. However, our problems compound when we can’t manage on our own and don’t seek help. Think of it this way: Would you formulate a health-improvement plan before going to your doctor to see what’s actually wrong with you? Probably not.”

This is a great, clear, easy-to-follow walk through about a topic that many people don’t like to deal with. If you’re living paycheque to paycheque, with no emergency savings, this book offers you a blueprint for getting out of trouble and building financial independence. It’s a great addition to your financial library.

Kelley Keehn spoke to Save with SPP last year and had great additional insights about the stress Canadians feel over money matters.

Did you know that in-year contributions you make to the Saskatchewan Pension Plan are tax-deductible? In 2022, you can contribute up to $7,000 per calendar year, subject to available RRSP room. As the book suggests, funds within a registered plan like SPP grow tax-free, and are taxed only when you convert your SPP savings to future retirement income. Check out SPP today.

Join the Wealthcare Revolution – follow SPP on Facebook!

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 12: BEST FROM THE BLOGOSPHERE

April 12, 2021

Canadian millennials now focused on long-term saving: report

It’s hard to find many silver linings to the dark, terrible cloud that is COVID-19, but a report from Global News suggests the crisis has caused millennials to think longer-term when it comes to savings.

Carissa Lucreziano of CIBC tells Global that Canadians aged 24-35 “are very committed to saving more and investing.” That’s great news for this younger segment of our society, she states, “as actions now can have long-term benefits.”

The report also cites data from Semrush, an online data analysis company, as showing 23.6 per cent of millennials regularly visit their online banking websites, as compared to 20.7 per cent of older Canadians aged 35 to 44.

Semrush’s Eugene Levin tells Global this suggests younger people “are more conscious moneywise… they are using this time (the pandemic) to plan out their finances to either mitigate their financial insecurity or improve their financial security.”

Other findings – more people are searching for information on Tax-Free Savings Accounts (TFSAs), and investment apps like Wealthsimple and Questrade, the article reports.

CIBC data noted in the Global report found that 38 per cent of millennials have decreased spending, 34 per cent plan to add to TFSAs or Registered Retirement Savings Plans (RRSPs), and to establish emergency savings accounts.

While there is also interest in topics like payday loans and installment loans, the article finds it generally positive that younger people are thinking about long-term savings.

For sure it is positive news. Data from Statistics Canada reminds us why long-term savings are so important.

The stats show that as of 2019, 70 per cent of Canadians are saving for retirement, either on their own or via a workplace savings program – that’s up from 66 per cent in 2014, Stats Canada reports.

“Interestingly, this may reflect the fact that over the past five years, Canadians have become increasingly aware of the need to save for retirement,” reports Stats Canada. “For example, almost half of Canadians (47 per cent) say they know how much they need to save to maintain their standard of living in retirement—an increase of 10 percentage points since 2014 (37 per cent).”

Those who don’t save for retirement on their own (or via a workplace plan) will have to rely on the relatively modest government benefits, such as the Canada Pension Plan, Quebec Pension Plan, and Old Age Security, the article notes. And surely, the terrifying pandemic era has more of us thinking about our finances, both current and future.

So that’s why it is nice to see the younger generation is focusing on these longer-term goals. The best things in life, as the song goes, are free, but many other things carry a cost. The retired you will certainly be thankful that the younger you chose to stash away some cash for the future.

If, as the article notes, you don’t have a workplace pension plan and are saving on your own for retirement, there’s a plan out there for you that could really be of help. For 35 years, the Saskatchewan Pension Plan has been delivering retirement security; the plan now manages $673 million in assets for its 33,000 members. Check them out today!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.


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!

Join the Wealthcare Revolution – follow SPP on Facebook!

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.