Rob Carrick

Sep 18: BEST FROM THE BLOGOSPHERE

September 18, 2023

We’re living longer, but not healthier — and may face costly care in our latter years

Writing in The Globe and Mail, columnist Rob Carrick reveals that our future cost of care — once we’re all elderly — could average about $3,500 per month.

Retirement savers, he writes, already have to consider “high interest rates and inflation” when predicting future costs. “Now comes one more complication: we’re living longer, but not healthier,” he writes.

So long-term care costs may be something many of us will be dealing with in the latter phases of life, and Carrick says it can be a pretty considerable expense.

“Health issues can be managed so that you have a good quality of life, but the expense is potentially massive. Reckoning with this cost is best done in the retirement planning stage as opposed to your 80s or 90s, when your options are more limited. You need to answer this question before you retire: If I need extensive care in retirement, how will I afford it,” he writes.

The two options, which the article notes are covered off in a new report from the Bank of Nova Scotia, are basically “aging in place,” at home with help, or moving to a long-term care facility if and when the need arises.

Carrick notes that while he now sees “happy 100th birthday cards” in card shops, and that financial planners tell him they are seeing more and more clients in the 90-100 year age range, those extra years of life are not always healthy ones.

“What’s less understood about longer lifespans is that some of our latter years could well be spent in poor health. Life expectancy for the average 65-year-old today is 21 years, with full health for just 15 of them,” he writes.

Three quarters of us aged 65 or older “have at least one major chronic disease, while one-third have multiple conditions,” the article continues. “More than 80 per cent of seniors at age 85 suffer from hypertension, over half from osteoarthritis, and one-quarter from dementia,” he continues.

These conditions can mean you’ll need help “to perform six aspects of daily living — bathing, dressing, eating, toileting, continence and being able to walk or transfer yourself from a bed to a wheelchair,” the article adds. That’s where the costs begin to rise.

“Light home care of five hours per week might be covered by provincial governments, whereas 22 hours per week might cost $3,500 a month. According to the Canadian Medical Association, 22 hours of home care per week is consistent with keeping people at home rather than a long-term care home. For continuous home care, the price could be close to $30,000 per month,” he writes.

We can add from personal experience that long-term care costs were around $5,000 per month when our late mom needed it.

How to fund that sort of cost, which might be needed for five or six years?

“If you don’t have the savings to cover care costs, your options include downsizing your home to pry loose some equity, or borrowing against your home value using a home equity line of credit or a reverse mortgage. Long-term care insurance bought before retirement is another possibility, but this type of coverage has not caught on,” the article notes.

In any case, future long-term care costs should be part and parcel of your overall retirement savings plan, the article concludes.

This is an eye-opening and alarming article. The implication is that maybe your retirement costs will actually increase, and that will happen at post-85, when you have very few options to deal with it. A takeaway from this piece, for us at least, is to never stop saving for the future.

If you don’t have a workplace pension arrangement, and are saving on your own for retirement, you may be interested to learn about the Saskatchewan Pension Plan. SPP has been helping Canadians save for retirement for over 35 years. SPP offers a voluntary defined contribution plan that any Canuck with registered retirement savings plan room can join. You decide what to contribute, and SPP invests it for you in a pooled fund with a great track record and low-cost professional management. 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.


Sep 4: BEST FROM THE BLOGOSPHERE

September 4, 2023

Annuities, buoyed by higher interest rates, regain their lustre

Thanks to today’s higher interest rates, an old staple of the retirement industry — the annuity — is making a big comeback.

Writing in The Globe and Mail, noted financial columnist Rob Carrick says annuities can be added to the “list of safe investments that have been revitalized by high interest rates.”

His article quotes insurance adviser Rino Racanelli as saying annuity sales “are 50 per cent higher than they were 18 months ago,” before the climb in rates. And, the Globe story continues, “financial planner Rona Birenbaum says she’s placing more money in annuities now than in the past, and she’s recommending annuities more often.”

Today’s higher interest rates have been good news for such savings tools as “savings accounts, guaranteed investment certificates, treasury bills, as well as annuities,” but the latter category has “a few other things going for them as well,” he writes.

“If you’re part of the wave of retiring baby boomers, they offer maintenance-free income that won’t demand your attention as you age. Annuities also offer refuge from the never-ending drama of stocks, bonds and everything else financial. Another benefit is the recent upgrade in the protection offered in case an insurance company selling annuities fails,” he writes.

For those who aren’t familiar with an annuity, Carrick offers up this explanation.

“Annuities are insurance contracts where the buyer exchanges a lump sum of money – as little as $25,000 or $50,000 – for a preset, guaranteed, lifelong stream of monthly income. According to Mr. Racanelli, a 65-year-old woman who bought a $100,000 non-registered annuity could receive as much as $6,386 per year, up 5.9 per cent from $6,032 12 months ago,” he writes.

Payouts today are about 20 per cent higher than they were only a few years ago, back in 2019, Carrick continues.

In the article, Naunidh Singh Hunjan of Hunjan Financial Group states that “this is really a special time when it comes to annuity rates,” and that he is seeing the best payouts from annuities that he has seen in years.

The article concludes by recommending that those converting savings into retirement income consider annuities for only some of their savings.

“Annuities should be considered only for a portion of your retirement savings,” writes Carrick. He notes that “Mr. Racanelli said his 65-year-old clients are typically putting 25 to 30 per cent of their savings in annuities, with older clients going as high as 50 per cent. Investments that are complementary to annuities include dividend growth stocks, which offset inflation with rising cash payouts to shareholders.”

Members of the Saskatchewan Pension Plan have the option of converting some or all of their savings into annuity income at retirement.

SPP’s Pension Guide explains the three annuity options in detail.

All three forms of annuity pay you income every month for as long as you live. With the life only option, payments stop upon your death, and there is nothing paid to your beneficiaries. With the refund life option, you get less monthly income, but a calculated death benefit is guaranteed to be paid to your beneficiaries. With the joint and last survivor annuity, your monthly annuity payments carry on (you can choose for your survivor to get 60, 80 or 100 per cent of what you were getting) for their lifetime.

Be sure to 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.


Aug 7: BEST FROM THE BLOGOSPHERE

August 7, 2023

In an about-face, kids now support parents who didn’t save for retirement

So much for stories about boomerang kids who won’t leave home — it now seems that kids are supporting parents who didn’t save enough for retirement!

Writing in The Globe and Mail, columnist Rob Carrick notes that “the overwhelming reason why adult kids are financially supporting their parents is insufficient retirement savings.”

In a poll conducted via the Carrick on Money newsletter, 52 per cent of those aged 18 and up who provide support for their parents cite a lack of retirement savings as the reason they have to help mom and dad. Ten per cent of those surveyed said their parents had outlived their retirement savings — and therefore needed help from their kids, the newspaper reports.

“A suggestion for anyone in their thirties and older: Have a conversation with your parents about their retirement savings. Ask if they have any. If so, how much and what kind. Though it’s not much talked about, adult kids are clearly playing a backstopping role in this country’s retirement system. Be prepared,” writes Carrick.

Some of the other reasons cited in Carrick’s column as to why adult kids are supporting their parents include illness or disability (nine per cent), debt loads experienced by the parents (4.8 per cent) and divorce (4.3 per cent). The article says other reasons include “cultural expectations, job loss and death of a spouse.”

Interestingly, the survey results indicated that “even people who owned homes and who have pensions require help,” the article reports. Seven in 10 of survey respondents said their parents “currently or previously owned a home,” and one in three said their parents “have a company pension.” But they still needed help, the article explains.

“Take note if you think your house is your retirement plan, or that having a pension means retirement security. Pension payments can be small if you work for an employer for a short period of time. As for houses, they are a financial responsibility as well as an asset. Coping with big repair and maintenance bills can be a handful when you’re retired,” Carrick warns.

Other findings from the survey include the fact that 38.5 per cent of those surveyed help their parents “through periodic cash infusions,” and 29 per cent “make regular cash payments to parents,” the article reports.

Eleven per cent report that mom and dad have had to move in with them, the article adds.

While a large percentage of respondents were helping parents who were in their 90s and above, age 60 seems to be when parents start needing help, Carrick concludes. That help, he notes, can be small — less than $1,000 a year — or large, and over $100,000 annually.

Saving for retirement is a great way to avoid being a burden to your kids. If you haven’t started yet, check out the Saskatchewan Pension Plan. Any Canadian with registered retirement savings plan room can join, and once you are a member, you can contribute any amount up to your RRSP contribution limit, or transfer in any amount from other RRSPs.

And if you are worried about running out of money in retirement, SPP offers retiring members the option of a lifetime annuity, which means you’ll get a cash deposit on the first of the month for the rest of your life.

Check out SPP today!


JUL 18: BEST FROM THE BLOGOSPHERE

July 18, 2022

Rising interest rates herald the return of annuities, guaranteed investment certificates (GICs)

The prolonged period of low interest rates we have been experiencing up until recently sort of took the bloom off the rose for interest-related investing, such as via GICs and their income-producing cousin, the annuity.

But, writes Rob Carrick in the Globe & Mail, the current rising interest-rate environment may give these old investment friends a new lease on life.

“Annuities are insurance contracts where you turn a lump sum of money over to an insurance company in exchange for a guaranteed stream of monthly income for as long as you live. In a world where a majority of workers do not have pensions, annuities address the fear of running out of money,” he writes.

Higher interest rates are great news for annuity buyers, because the higher rate means your annuity will provide a higher monthly payment.

“The improvements in monthly income from annuities over the past 12 months can be seen in the following examples of $100,000 annuities in a registered account, with payments guaranteed to last 10 years even if you die sooner (the money would go to your estate or beneficiaries),” the article notes. Data, the article tells us, was supplied by “ Rino Racanelli, an insurance adviser who specializes in annuities.”

Improvements for annuity income on $100,000 over just the pay year are quite impressive, the article notes. A 65-year-old woman would now get “$550.88 a month, up 15 per cent from $478.90 12 months ago,” Carrick writes. For men aged 65, it’s a jump to $589.75 a month, “up 15.6 per cent from $510.10 12 months ago.”

Carrick writes that some folks shy away from annuities because you have to give up a large lump sum to get the monthly payment. “Solution,” he writes, is to “use an annuity for just part of your retirement income.”

Racanelli tells the Globe that “interest in annuities has increased lately, but some people are waiting for higher rates to lock money in.”

The GIC was a “go-to” investment for boomer parents back in the 1970s and 1980s, when interest rates were in the teens.

“As of the end of June, GIC rates were as high as 4.15 per cent for a one-year term and five per cent for five years,” he writes.

With a GIC, your money is locked up for the term of the contract, typically, one, two, three, four or five years. You receive regular interest payments which compound, typically monthly, so your GIC can really only go up in value. Few people looked at the GIC when they only offered one or two per cent interest rates, but they are now becoming more popular, the article suggests.

Did you know that the Saskatchewan Pension Plan offers a variety of annuity options for retiring members? According to the Retirement Guide, you can choose either a life only annuity (pays you for life, no survivor or death benefits), a refund life annuity (life income for you, but there can be a payout to survivors if you die before receiving your total annuity purchase amount) and a joint and last survivor annuity – lifetime income for you, and lifetime survivor pension to your surviving spouse upon your death.

Annuities may make sense for some of your money at retirement – you’ll get a lifetime income stream and can choose options to look after your survivors. It’s just another way the SPP provides its members with retirement security.

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.


Is there a silver lining to be found if interest rates rise?

February 10, 2022

Many observers are worried about the return of higher interest rates. It will cost more, they warn, to renew a mortgage, or get a car loan. It may create a stock market downturn because the cost of borrowing (for corporations) will increase.

But is there any sort of silver lining to watch for in a higher-interest rate environment? Save with SPP took a quick look-see.

Noted Globe and Mail columnist Rob Carrick sees a couple of good things about higher rates.

First, he writes, “one thing higher rates can do is tamp down inflation, which lately hit a 30-year high at 4.8 per cent.” A higher rate, the article continues, may “encourage saving and discourage borrowing, and in turn spending,” all factors that slow the growth of inflation.  In fact, those of us with greyer hair remember a time when the federal government tried to wrestle inflation to the ground by limiting wage and price increases to six per cent in year one, and five per cent in year two! Those rates now look sky-high, but at the time, you could get a Canada Savings Bond that paid interest in the teens.

Carrick notes that higher interest rates may stop the runaway growth of housing prices, and feels might prompt more of us to pay off our record-high household debts. “Higher rates should be a prompt to reduce debt levels and thereby put households in stronger shape for financial challenges ahead,” he writes.

Finally, Carrick reports, higher interest rates will be a boost to savers. “Rates for savers have been suppressed by the Bank of Canada as part of its efforts to support the economy. When the central bank starts raising rates, savers will gradually receive a better return on their money,” he notes.

Over at Sapling, writer Victoria Duff makes a similar argument.  She notes that higher interest rates actually make things easier for large pension funds and insurance companies.  “Retirement funds, insurance companies and educational endowments benefit from higher interest rates, as does anyone who depends on bond investments for his income. These funds, as well as banks and other lending institutions, can meet their target investment returns through more conservative credit quality portfolios,” she explains.

Also important, she writes, is that countries with higher government-set interest rates “attract investment from other countries,” which can strengthen their currency. Similarly, governments that issue bonds to pay down debt will get a better return, which ought to help them retire debts more quickly, she notes.

Finally, higher interest rates are great for anyone shopping around for an annuity. According to the Get Smarter About Money blog, “if interest rates are high when you buy your annuity, your annuity payments will be higher than if interest rates were low. That’s because the financial institution predicts it can earn more (through higher rates) by investing your money.”  This is a complicated thought, but an important thing to know. If you are thinking of buying an annuity when you retire, your monthly income from it will be higher if interest rates are high at the time of purchase. Monthly income is lower if interests are low at the time of purchase.

Members of the Saskatchewan Pension Plan can, at retirement, choose to convert some or all of their savings into one of many annuity options. All of them are designed to provide you with monthly income for life, and there’s also an option that provides lifetime income for your spouse should you die before they do. Annuities are a great way to ensure you don’t run out of money before you run out of time to spend it! 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.


July 12: BEST FROM THE BLOGOSPHERE

July 12, 2021

Retirement saving concerns top health, employment and debt: HOOPP research

Writing in the Globe and Mail, Rob Carrick reports on new research that shows Canadians are more worried about retirement savings than they are about their physical and mental health, employment security, and debt burden.

Carrick cites research from the Healthcare of Ontario Pension Plan that found that, of 2,500 respondents, “48 per cent said they were very concerned about have enough money in retirement. Only the cost of day-to-day living ranked as a larger worry. Health and other financial/economic worries lagged well behind.”

The survey was carried out in April 2021, and clearly the pandemic has had an impact on people’s attitudes towards their finances, Carrick reports. “The poll results suggest 52 per cent of Canadians have been financially harmed by the pandemic, notably younger and lower-income people,” he writes.

Carrick notes that another recent survey by the Canadian Centre for Policy Alternatives that found that “Indigenous and racialized seniors… have average retirement income that is, respectively, 25 per cent and 32 per cent lower than seniors who are white.” But, he points out, the HOOPP research shows that even those with higher incomes are worried about retirement income – “42 per cent of those making more than $100,000 said they were very concerned about their retirement savings,” he writes.

Carrick sees a glimmer of good news mixed in with all the gloom, and that is, that the pandemic creates, for many of us, an opportunity to save.

“One more highlight for the well-off is the opportunity to save more money than ever as a result of economic lockdowns that curtailed travel, concerts and commuting to work for many. In the HOOPP survey, almost half of participants said they were able to save more money,” he notes.

He suggests that while those who have managed to stay employed throughout the crisis and have some unspent money should definitely sock some of it away in an emergency fund, retirement savings is a logical destination. “A lot should be put away for retirement using tax-free savings accounts and registered retirement savings plans,” writes Carrick.

The HOOPP survey found that Canadians generally are concerned about the national retirement savings rate. “Sixty-seven per cent of participants agreed with the statement that there is an emerging retirement crisis,” Carrick reports.

Those surveyed cite the rising cost of living, the “prices home buyers are paying,” and inflation as being inhibitors to retirement saving. Save with SPP will add another factor – high household levels of debt – to this category.

It’s easier to save for retirement if you belong to a pension program at work. The money comes off your pay before you have time to spend it. But if you don’t have a workplace plan, the Saskatchewan Pension Plan may be a solution. With SPP, you can set up automatic withdrawals that can coincide with your payday, allowing you to pay your future self first. The folks at SPP, who have been running retirement money for 35 years now, will diligently invest your savings and – when work is in the rear-view mirror – will help you turn savings into retirement income. 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.


Pandemic has dethroned cash as the monarch of personal finance

May 14, 2020

Your parents say it, the experts say it, people who are wealthy say it – if you’re buying something, pay with cash, not credit. And even debit cards can come with hidden fees, they say.

But this crazy pandemic situation has us all tap, tap, tapping away for groceries, for gas, for a box of beer, and any of the other services we can actually spend money on. Could this represent a sea change for the use of cash, or is it just a blip? Save with SPP had a look around the Interweb for a little fact-finding.

Proponents of cash include Gail Vaz Oxlade, author and TV presenter who has long advocated for using cash for expenses, rather than adding to your debt.

“I’m a huge fan of hers and have read every book and watched every episode of Til Debt Do Us Part, Money Moron and Princess… the premise of the system is to use cash only (no plastic), storing it in envelopes or jars, sticking to a budget, tracking your spending, and once the money is gone, there’s no more until next month’s budget,” reports The Classy Simple Life blog.

It’s true – we have read her books and if you follow her advice your debts will decrease.

Other cash advocates include billionaire Mark Cuban. He tells CNBC that while only 14 per cent of Americans use cash for purchases (pre-pandemic), he sees cash as his number one negotiation tool. “If you want to take a yoga class, and they say it costs $30, say `I’ve only got $20,’” he says in a recent Vanity Fair article. More than likely, he notes, they’ll take the cash.

Cash is great because it is (usually) accepted everywhere, there’s no fees or interest associated with using it, and it has a pre-set spending limit – when your wallet is empty, you stop spending. But these days, cash is no longer sitting on the throne of personal finance.

Globe and Mail columnist Rob Carrick notes that more than six weeks into the pandemic he still had the same $50 in his wallet that he had when it started.

“Paying with cash is seen as presenting a risk of transmitting the virus from one person to another – that’s why some retailers that remain open prefer not to accept it. Note: The World Health Organization says there’s no evidence that cash transmits the virus,” he writes. In fact, he adds, the Bank of Canada recently asked retailers to continue to accept cash during the crisis.

A CBC News report suggests that our plastic money may indeed present a risk, and that the COVID-19 virus may survive for hours or days on money. The piece suggests it is a “kindness” to retailers to pay with credit or debit, rather than cash.

“Public officials and health experts have said that the risk of transferring the virus person-to-person through the use of banknotes is small,” reports Fox News. “But that has not stopped businesses from refusing to accept currency and some countries from urging their citizens to stop using banknotes altogether,” the broadcaster adds. The article goes on to point out that many businesses are doing “contactless” transactions, where payment occurs over the phone or Internet and there is not even a need to tap.

Putting it all together, we’re living in very unusual times, and this odd new reality may be with us for a while. If you are still using cash, it might be wise to wear gloves when you are paying and getting change. Even if you aren’t a fan of using tap or paying online, perhaps now is a time to get your grandchildren to show you how to do it. The important thing is for all of us to stay safe – cash may be dethroned for the short term, but things will eventually return to normal, and it will be “bad” to overuse credit cards again.

And if that cash has been piling up during a period of time when there’s precious little to spend it on, don’t neglect your retirement savings plan. The Saskatchewan Pension Plan offers a very safe haven for any unneeded dollars. Any amounts you can contribute today will grow into a future retirement income, so consider adding to your savings 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

May 4: Best from the blogosphere

May 4, 2020

Pandemic crisis challenges some of our long-held financial beliefs

There’s no question about it, the COVID-19 pandemic and its disastrous impact on employment, the economy, and world markets is something we’ve not seen before.

And, writes Globe and Mail columnist Rob Carrick, the crisis is challenging some long-held notions about personal finance.

People used to think that, since the interest rates paid are so low, there was “no point in keeping money in a savings account,” Carrick writes. Instead, he notes, conventional pre-pandemic wisdom was to “access money when you’re in need from your home equity line of credit.”

However, now – given the sharply rising unemployment numbers – “piling on more debt to weather a layoff is a last resort, not a go-to strategy,” Carrick writes.

His next point is that up until now, most long-term saving by Canadians was for retirement, not for building an emergency fund. But retirement savings can’t be accessed – at least not without a big tax hit – for emergencies, so Carrick’s new rule of thumb suggests 75 per cent of savings go to retirement and the rest to an emergency fund.

Echoing his earlier point on the low rates paid via savings accounts and GICs, Carrick notes that those who invested their TFSA savings in fixed-income products can no longer be “mocked for their timidity and unworldliness.” They still have all their savings, while those in riskier TFSA investments have losses to deal with.

Given the high cost of housing, Carrick writes that most of us are used to “pushing (our) finances to the max to buy a house,” and dealing with “crushing” and huge mortgage payments. “But taking as much money as the bank will let you have means you have almost no ability to cope with a loss of income, particularly if you have kids and car payments,” he notes.

The other beliefs he shatters include carrying high debt – easy to do when you are working, less so otherwise – and “spending big” on your vehicles, particularly if you are getting your new truck or car through a car loan.

The takeaway points here are quite clear: paying for everything with debt is easy when jobs are plentiful, but it’s a recipe for disaster when times suddenly – and without any prior warning – get hard. Save with SPP knows more than a few people who have always “poo-poohed” savings because the interest rates are so low. Even if the interest rate was zero, having savings is a lot better than having debt when times get tough.

So perhaps Rob Carrick is right when he suggests going 75/25 on your retirement savings, with some money going to an emergency fund. Now that we’re in an emergency, some of us have that extra bit of security, while the rest must scramble. Now may not be the best time for much saving, but when better times return, let’s all remember this solid advice.

If you are looking for a good place to put away 75 cents of your savings dollar, be sure to check out the Saskatchewan Pension Plan. The SPP’s two major funds, the Balanced Fund and the Diversified Income Fund, are professionally managed, and when the markets are choppy, it’s good to know that there are experienced hands on deck, folks who know how to protect and preserve your savings for the long haul.

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

Dec 2: Best from the blogosphere

December 2, 2019

Experts say retirement planning should start in one’s 20s

Ah, the joys of being in one’s twenties. You’re young, you’re healthy, you’re newly educated and you’re ready to make your way in the world of employment.

And, according to the experts, you should have your retirement planning well underway!

According to The Motley Fool blog via Yahoo!, “the saddest tale you can hear from baby boomers is the regret of having not prepared early for retirement.”

Not saving enough while young is something your older you will experience – in a negative way – later in life, the blog advises. “Many baby boomers found out belatedly that their nest eggs weren’t enough to sustain a retirement lifestyle,” the blog warns.

Without an early head start on saving, the Motley Fool warns, “you might end up with less than half of the money you’d need after retiring for good. The best move is to invest in income-generating assets or stocks to start the ball rolling.”

What stocks should a young retirement saver invest in? According to the blog, “Bank of Montreal (BMO) should be on the top of your list,” as it has been paying out good dividends since 1829. Other good dividend-payers recommended by the investing blog include Canadian Utilities (CU) and CIBC bank.

“The younger generation should take the advice of baby boomers seriously: start saving early for retirement. Apart from not knowing how long you’ll live, you can’t get back lost time. Many baby boomers started saving too late, yet expected to enjoy the same lifestyle as they did before retirement,” the blog warns.

So the takeaway here is, start early, and pick something that has a history of growth and dividend payments.

The bigger question is always this – how much is enough to save?

A recent blog by Rob Carrick of the Globe and Mail mentions some handy calculators that can help you figure out what your nest egg should be.

Carrick says that while seeing a financial adviser is always recommended for goal-setting, the calculators can help. Three he mentions include The Personal Enhanced Retirement Calculator, designed by actuary and financial author Fred Vettese; The Retirement Cash Flow Calculator from the Get Smarter About Money blog; and The Canadian Retirement Income Calculator from the federal government.

You’ll find any retirement calculator will deliver what looks like a huge and unobtainable savings number. However, if you start early, you’ll have the benefit of time on your side. Even a small annual savings amount will grow substantially if it has 30 or 40 years of growth runway before landing at the airport of retirement. For sure, start young. Join any retirement program you can at your work, but also save on your own. If you’re not ready to start making trades, a great option is membership in the Saskatchewan Pension Plan. You get the benefit of professional investing at a very low price, and that expertise will grow your savings over time. When it’s time to turn savings into income, SPP is unique in the fact that it offers an in-plan way to deliver your savings via a monthly pay lifetime annuity. And there are a number of different types of annuities to choose from. 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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22