Tag Archives: TFSA

Sep 9: Best from the blogosphere

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

Three things we can all do to boost our savings: Motley Fool

If you’re just getting on the Retirement Savings train – or if you’re packing up your desk for the last time and getting ready for the main event of retirement – the Motley Fool Canada offers three tips on how you can improve your retirement savings.

According to an article posted on Yahoo! Finance Canada, the tips are billed as something “every single Canadian can do to help prepare themselves for a smarter, happier, and richer life in retirement.”

The writers at Motley Fool point out a fact that many of us tend to ignore – “the only way to consistently save money is by spending less, on average, compared to what you earn.” So if you are, for instance, earning $2,500 a month but spending (thanks to credit cards or lines of credit) $3,000 a month, you are in trouble.

The article says that the best way to ensure you are running your ship of state in the black is by preparing a budget, and sticking to it. The budget should not only include your usual repeat monthly items like rent, light, heat, gas, and other bills, but should factor in money for your vacation and other one-time events, the article says.

With budget in hand, the article recommends, you can follow savings tip number one – to “set aside at least 10 per cent to pay yourself at the end of every month or after each paycheque.”

By paying yourself first, you will grow your savings quickly and efficiently, the Motley Fool observes.

The second tip on offer is to “use Canada’s tax-incentivized savings programs to your benefit,” the article states.

The article cites the availability of the RRSP program, pointing out that contributions to such programs are tax-deductible. As well, money within an RRSP grows tax-free until that future time when you crack into it for retirement.

The article also notes the existence of TFSAs. While you don’t get a tax break on money you put into these savings vehicles, there’s no tax on investment returns and growth, “including capital gains and dividend or interest income,” the writers note.

The last tip from the Motley Fool Canada is a good one for those of us who invest in stocks.

“By investing in the stocks of high-quality businesses in which you possess a firm understanding — those run by experienced and competent management teams that companies that consistently pay their shareholders a regular monthly or quarterly dividend — investors can go a long way toward avoiding the mistakes that so often challenge those just starting out,” the article states.

Recapping the article, it’s important to include a strong commitment to savings in your budget, to take advantage of tax-sheltered savings programs, and to keep quality in mind when investing for the long term.

A nice addition to your retirement toolkit would be a Saskatchewan Pension Plan account. The contributions you make are, just like RRSP contributions, tax-deductible. You can “pay yourself first” by setting up automatic contributions that go from your account directly to SPP. And the money you earmark for savings is invested at a low fee by a highly competent plan with a strong track record of growth. Win-win-win.

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

Jun 17: Best from the blogosphere

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

A new retirement worry – the cost of healthcare as you age

They say the best things in life are free – however, the cost of healthcare, particularly for older Canadians, does carry a price tag.

And, according to recent Ipsos poll, conducted for the Canadian Medical Association and reported on by the CBC in Prince Edward Island, the cost of future care may prompt some Canadians to delay their retirement.

According to the polling, “58 per cent believe Canadians will have to delay retirement to afford health care. The poll also found that 88 per cent of respondents are worried about the growing number of seniors requiring more health care,” the CBC story reports.

Why are people concerned?

In the article, the CMA’s president Dr. Gigi Osler explains what people worry about.

“Our current health care system is already strained and already not able to meet the needs of our seniors, and will be even more strained in the coming years,” she states. “As our population ages, not only are people going to have to pay more for those services it’s going to cost our already strained health care system more in the coming years.”

Those concerns certainly seem to impact the thinking of older Canadians, the article notes. “Older Canadians (55 and over) are most concerned about how health care costs may affect their wallets. The survey found 77 per cent of those 55 and over were worried about the financial burden of health care costs, compared to 70 per cent of those 35-54 and 58 per cent of those 18-34,” the article reports.

The takeaway here is to be aware that costs of care can be fairly significant, particularly if you live to a long age and require some form of long-term care. Perhaps we all need to factor those future and often unexpected costs into our savings plans.

Another retirement thorn – carrying a mortgage after you’ve left work

The Financial Post runs a cautionary tale about a couple – who appear to have been great savers and investors – who are running into problems in retirement due to a “late life mortgage.”

“The couple has a late-life mortgage because they sent their children, now in their mid-20s, to private schools and paid their university costs. As a result, the kids have no education debts — but the parents have a big debt in retirement. On top of that, the kids are still living at home,” the article notes.

The couple are having cash flow problems, despite owning a $1.5 million home, having more than $500,000 in RRSPs and $100,000 in TFSAs, and a further $20,000 of investments, the article adds.

The solution from the Post is for the couple to sell their home and downsize. The article quotes Derek Moran, of Smarter Financial Ltd. In Kelowna, as saying that “more cash and less house” would give the couple more financial security. “Moreover, selling the house would give the kids a nudge to move out,” he states. “They should have independent lives.”

You can’t fault these parents for helping out their kids, but putting themselves behind the eight ball impacts their retirement and limits their ability to help the kids further.

If you’re still a long time away from retirement, and haven’t yet begun to put money away, a great choice for you is the Saskatchewan Pension Plan. Those savings will add to your income when you retire, allowing you to roll with the punches should health or family issues arise. A nice little extra chunk of income is never a bad thing when you’re too old to work.

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

May 6: Best from the blogosphere

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

Tax-free pension plans may offer a new pathway to retirement security: NIA

With workplace pensions becoming more and more rare, and Canadians generally not finding ways to save on their own for retirement, it may be time for fresh thinking.

Why not, asks Dr. Bonnie-Jeanne MacDonald of the National Institute on Ageing, introduce a new savings vehicle – a tax-free pension plan?

Interviewed by Yahoo! Finance Canada, Dr. MacDonald says the workplace pension plan model can work well. “Workplace pension plans are a key element to retirement income security due to features like automatic savings, employer contributions, substantial fee reductions via economies of scale, potentially higher risk-adjusted investment returns, and possible pooling of longevity and other risks,” she states in the article.

Dr. MacDonald and her NIA colleagues are calling for something that builds on those principles but in a different, tax-free way, the article explains. The new Tax-Free Pension Plan would, like an RRSP or RPP, allow pension contributions to grow tax-free, the article says. But because it would be structured like a TFSA, no taxes would need to be deducted when the savings are pulled out as retirement income, the article reports.

“TFSAs have been very popular for personal savings, and the same option could be provided to workplace pension plans. It would open the pension plan world to many more Canadians, particularly those at risk of becoming Canada’s more financially vulnerable seniors in the future,” she explains.

And because the money within the Tax-Free Pension Plan is not taxable on withdrawal, it would not negatively impact the individual’s eligibility for benefits like OAS and GIS, the article states.

It’s an interesting concept, and Save with SPP will watch to see if it gets adopted anywhere. Save with SPP earlier did an interview with Dr. MacDonald on income security for seniors and her work with NIA continues to seek ways to ensure the golden years are indeed the best of our lives.

Cutting bad habits can build retirement security

Writing in the Greater Fool blog Doug Rowat provides an insightful breakdown of some “regular” expenses most of us could trim to free up money for retirement savings.

Citing data from Turner Investments and Statistics Canada, Rowat notes that Canadians spend a whopping $2,593 on restaurants and $3,430 on clothing every year, on average. Canadians also spend, on average, $1,497 each year on cigarettes and alcohol.

“Could you eat out less often,” asks Rowat. “Go less to expensive restaurants? Substitute lunches instead of dinners? Skip desserts and alcohol?” Saving even $500 a year on each of these categories can really add up, he notes.

“If you implemented all of these cost reductions at once across all of these categories, you’d have more than $186,000 in additional retirement savings. That’s meaningful and could result in a more fulfilling or much earlier retirement,” suggests Rowat. He’s right – shedding a bad habit or two can really fatten the wallet.

If you don’t have a retirement plan at work, the Saskatchewan Pension Plan is ready and waiting to help you start your own. The plan offers professional investing at a low cost, a great track record of returns, and best of all, a way to convert your savings to retirement income at the finish line. You can set up automatic contributions easily, a “set it and forget it” approach – and by cutting out a few bad habits, you can free up some cash today for retirement income tomorrow. It’s win-win.

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