The Globe and Mail

Jan 1: BEST FROM THE BLOGOSPHERE

January 1, 2024

Is post-retirement work really a way to address a lack of savings?

We’ve long been told that if we haven’t saved enough for retirement, the “solution” is to just keep working, right?

A column in The Globe and Mail by Rob Carrick raises questions about whether the “just keep working” strategy is really helping today’s retirees.

Carrick writes that, for starters, the only folks who tend to work past age 65 these days are “very well-off men,” and that for the rest, retirement income comes from “the Canada Pension Plan (CPP), Old Age Security (OAS), personal investments, and a mix of pensions and registered retirement savings…. (only) a few will have employment income.”

Research from social-policy consultancy Open Policy Ontario seem to back this up, he writes.

“Summed up, the numbers highlight the importance of personal retirement saving and call into question the idea of backstopping your savings by working in retirement,” writes Carrick.

Researchers from Open Policy Ontario divided “income composition for people aged 65 and over” into two groups, or deciles.

For the first four groups – those with retirement incomes ranging from $12,500 to $24,800 – “CPP, OAS and the Guaranteed Income Supplement supply the most income,” the researchers found.

As incomes rise through the groups, “personal savings through company pensions, registered retirement savings plans (RRSPs), and registered retirement income funds (RRIFs) become progressively more important,” Carrick notes. By the ninth group, for folks with income at $66,700, these savings add up to more than 49 per cent of income, he adds.

Lots of math here, but the message is that those with retirement savings had a significantly higher income in retirement than those without, whether those savings were in a company pension plan, from personal investments, and/or registered sources.

Another recent study concluded that a lack of retirement savings could lead to the need for “lifestyle changes” by retirees – cutting back on what they expected to do, and/or where to live, in retirement, Carrick observes.

“The Open Policy numbers support this finding by documenting the importance of personal savings in rounding out CPP and OAS, and raising questions about contributions from working,” he explains. What he is saying is that while many talk about working past age 65 due to a lack of savings, few are actually doing it.

“Working past the age of 65 is an obvious solution for people who cannot save as much as they ideally should. But the Open Policy numbers lead to a surprising conclusion about people working in retirement: For the most part, they’re not generating much income,” Carrick writes.

“Employment earnings account for three per cent to nine per cent of the pie for middle earners 65 and up, which means people making $29,000 to $42,900. The richest seniors, those in the 10th decile with a median income of $99,900, get 26 per cent of their income from employment. Men aged 65 and up in the 10th decile got 33 per cent of their income from employment, compared with just 14 per cent for women in the same demographic,” he continues.

Carrick concludes his column with some important advice.

“The more you save on your own, the more latitude you have in retirement for setting a lifestyle. Working longer can help cover for lower savings, but the Open Policy analysis suggests it’s not generating a lot of income for most of today’s retirees. This will very likely change for retirees of the future,” he notes.

So, what’s the takeaway? If you have a company pension plan or group savings arrangement, make sure you are signed up and contributing to the max. If you don’t, have a hard look at the Saskatchewan Pension Plan. It’s an open, defined contribution plan that any Canadian with RRSP room can join.

Once you’re in, SPP does all the hard stuff for you, investing your savings in a professionally managed, low-cost investment pool, and then giving you retirement income options when you retire, including the chance of a lifetime annuity, or flexible income via our Variable Benefit.

Let your employer know about SPP – many across the country have begun offering SPP as their company’s retirement program!

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.


Multi-generational living – a way to beat the cost of housing?

November 13, 2023

We’ve all seen how expensive housing – either through home ownership or renting – has become in 2023.

Are we going to head back to the good old days, when two, three or more generations lived under the same roof to share the costs of housing? Save with SPP took a look around to see if multi-generational living is a thing.

Turns out, it is!

According to the Vanier Institute, data from the Canadian census show that multi-generational households “have become the fastest-growing census family household type in recent decades.” As of the 2021 census, the article continues, “there were nearly 442,000 multi-generational households in Canada,” and while this accounts for only 2.9 per cent of the total households, it represents “2.4 million people, or 6.4 per cent of the total population.”

As well, the Institute notes, “multigenerational households have increased in number by 50 per cent since 2001.” Additionally, in 2021 “nine per cent of children aged 14 and under (571,000) lived with at least one grandparent, up from 3.3 per cent in 2001.”

The article cites a number of factors for this increase. First, there’s the fact that the population is aging, and life expectancy is rising. “Population aging intersects with other trends such as intergenerational care needs, rising housing costs, and growing population of groups more likely to share a roof with younger generations, contributing to the growth in multigenerational households.”

So what is it like when two or more generations share the same dwelling?

Writing in The Globe and Mail Ben Mussett cites the example of Vancouver’s Stephen Reid.

“Every morning, before his three-year-old granddaughter heads to daycare, Stephen Reid is waiting at the bottom of the stairs to wish her a good day. Unlike many grandparents, Mr. Reid hasn’t had to forgo seeing his only grandchild during the pandemic. In fact, he’s spent time with her nearly every day of her life,” writes Mussett.

“This is possible because Mr. Reid and his wife, Melanie, have lived with their daughter Michelle Cyca and her family for the past three years in Vancouver. Their living arrangement allows the Reids to provide child care in a pinch. Likewise, Ms. Cyca and her husband have been there for her 71-year-old parents, who both deal with chronic health and mobility issues,” he notes.

So, three generations, one house, and they are all looking after each other. Nice!

Over at the National Post we learn about Ottawa’s Yi Jiang.

“About a year after Yi Jiang and her family moved to Ottawa from China, they found themselves sharing a two-bedroom apartment with her parents,” the article notes.

“After living together in Shenzhen, it seemed only natural that once the entire family was in Canada, her parents would live with her, her husband and their young son, she said. The couple has since had another child, and last year all six moved to a house in the suburbs,” the Post reports.

“It’s very important for me to live with them … they are the most important people in my life and I am the only child,” Jiang, a producer for a Mandarin radio show, tells the Post.

The article goes on to note that multi-generational living is a new trend that has roots in long-ago times.

“Right now, the proportion of multigenerational households is high, relative to recent history, but if you go back pre-war, most households were multigenerational; somebody always took in Mom or Dad,” Nora Spinks of the Vanier Institute tells the Post.

“It was only through that weird blip post-war 1950s, 1960s where every generation had their own household, and you moved out at 18 or 19, and you got your own apartment and you never returned home and everybody had their own toaster and everybody had their own everything,” she states in the article.

There is also some hope that multi-generational housing can be part of the solution to the general housing shortage crisis, the CBC reports.

Recently, the article notes, the federal government “introduced a tax credit for families looking to renovate their homes and accommodate more people,” the broadcaster reports.

“It provides a one-time 15 per cent tax refund for renovation costs up to $50,000 for a secondary unit with a private entrance, kitchen, and bathroom,” the CBC reports, adding “to be eligible, the resident of the renovated unit must be a family member who is a senior or an adult with a disability.” The maximum refund amount is $7,500, the article notes.

It will be interesting to see if this trend continues during this odd period of high rents and high mortgage rates.

Whether you retire on your own, or as a couple, or with your folks in one room and the kids in another, you’ll need money to cover expenses, even if they are shared. If you are fortunate enough to have a retirement program at work, be sure to join it and participate to the max. If you don’t have a program, or want to augment the one you have, take a look at the Saskatchewan Pension Plan.

With SPP, you decide how much you want to contribute – your contributions are tax-deductible. SPP then does the heavy lifting of investing your savings in a low-cost, professionally managed, pooled fund. When it’s time to call it a day for good at the office, SPP will help your turn those savings into retirement income, with the option of you receiving a lifetime monthly annuity payment in respect of some or all of your savings.

Great news! SPP’s flexible Variable Benefit option is no longer limited to those members living within the borders of Saskatchewan. Now all retiring SPP members across the country can take advantage of this provision, which puts you in control of how much income you want to withdraw, and when you want to withdraw it. You can also transfer in additional savings from other unlocked registered sources. For full details see SaskPension.com.

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.


In retirement, is it better to own or rent?

October 12, 2023

We run into lots of fellow seniors as we line dance our way around town, and we’re always running into discussions about whether — as retirees — we should ditch the family home and rent, or hang on.

Save with SPP decided to see what others have to say on this topic, which seems to become more and more important with each passing birthday.

The folks at MoneySense took a look at this topic a few years ago, and had some interesting thoughts.

“Those who criticize renting over home ownership often ignore some costs of owning a home. Beyond a mortgage payment and property tax, home insurance is higher when owning versus renting. Condo fees may also apply. There are maintenance costs, repairs and renovations. If mortgage rates rise to more normal levels, you can expect your mortgage payment to be higher in the future. Home ownership has costs as well as benefits,” the article tells us.

An article in The Globe and Mail looks at the issue a little differently.

Noting that two-thirds of Canadians own their own homes, the article asks if home ownership still makes financial sense for the older folks among us.

“With many older Canadians approaching retirement with little savings – and some even carrying significant debt – selling the family home and renting may mean the difference between just getting by and living a life free from financial worry,” the article suggests.

The article quotes Scott Plaskett of Ironshield Financial Planning as saying those of us with homes “can be equity-rich and cash-poor: you are worth $5 million on paper, but you can’t pay for dinner because you have no liquidity.”

Selling the house and then renting fixes the liquidity problem, the article contends.

There are pros and cons to renting, writes Jean-François Venne for Sun Life.

He quotes real estate broker Marie-Hélène Ouellette as saying “you first have to consider the pros and cons of being an owner versus a renter. The biggest difference between the options is in the level of responsibility and freedom.”

“You obviously have more freedom when renting since you can leave when your lease is up. And you have fewer responsibilities because the owner takes care of the maintenance. But renters can also have less control than owners over things like decorating, repairs and even pets. And if you’ve been a homeowner for a long time, losing control and choice isn’t always easy to handle,” she states in the article.

The article makes the point that while owning a home usually means its value increases over time, “values do sometimes drop. And as a retiree, you won’t have a lot of time to make up for a decline in value.”

As well, your money can be tied up for a while when you sell or purchase a property, the article adds.

In the article, financial planner Josée Jeffrey says that it can be an unpleasant surprise, for those who have paid off their mortgage, to have to pay rent again. And, she adds, while you no longer are paying property taxes, they may be built into your rent, which usually goes up every year.

There’s a lot to unpack here. Owning means a long commitment to paying a mortgage, as well as property taxes, maintenance, but also your heat, light, and water bill. If there’s a driveway or a lawn it’s on you to clear away the snow and weed-whack the lawn. “Maintenance” involves fixing things that break, like toilets or garage doors or ovens and fridges.

Renting liberates you from many of these responsibilities. But rent can go up — and go up quite a bit if, for instance, the place you’re renting changes ownership. Not all landlords are quick to fix things that break (some are, and bless them), and it’s true — if you are used to owning prior to renting, you’ll have an inescapable urge to bang a few nails into the wall and hang up some artwork, which is typically frowned upon.

So this is a decision you will have to think long and carefully about, concludes an article in Yahoo! Finance.

“Don’t discount emotional issues when making this important decision,” the article advises. “Do you love the idea of owning your own place and fixing it up the way you want? Or will it be a big relief after years of ownership not to worry about the lawn or a broken sump pump?”

The article concludes by stating “while your decision needs to be financially sound, make the decision that makes the most sense for you. Not being a homeowner can be freeing, scary or both. Your home, its location and amenities should fit the life you lead now.”

If you are renting or paying for a mortgage, be sure to still put something away for retirement. A little extra money when you’re older will help with things like future property tax or rental increases. A wonderful retirement savings program open to all Canadians with registered retirement savings plan room is the Saskatchewan Pension Plan. A not-for-profit, open, voluntary defined contribution plan, SPP has investment experts who will invest your retirement savings in a low-cost, pooled fund. When you’re over the walls and away from work, SPP can help you convert those savings into income — including the possibility of a lifetime monthly annuity payment. 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 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 3: BEST FROM THE BLOGOSPHERE

July 3, 2023

Runaway cost of living, debt raises questions over traditional `rules of thumb’ for money

Writing in The Globe and Mail, Saijal Patel notes that inflation and the related higher cost of living are driving people’s money concerns — and calling old rules of thumb for handling the money into question.

In her opinion column, Patel, who leads a financial consulting firm aimed at “empowering women’s financial independence and security,” says she’s noticed a shift in people’s priorities from “investment strategies and retirement planning, to now finding ways to maximize limited resources and preventing overwhelming debt.”

“There’s a prevailing sense of hopelessness in achieving financial goals,” she writes. 

Citing a recent Worry Poll from the Bank of Nova Scotia, Patel reports that “73 per cent of those surveyed had high levels of concern over the rising cost of living.” Leading topics that induced stress included “paying for day-to-day expenses (44 per cent), paying off debt (39 per cent) and saving for emergencies (38 per cent).”

This new reality of money worries tends to throw accept “rule of thumb” solutions into question, Patel writes.

“Take for example, the 50-30-20 rule in budgeting that many personal financial experts tout. It recommends that 50 per cent of your net income go toward living expenses and essentials (needs), 30 per cent toward discretionary spending (wants), and 20 per cent toward savings (emergency funds and future goals),” she notes.

However, she continues, if you do the math, this idea doesn’t work very well.

“According to Statistics Canada, the median after-tax income for households was $73,000 in 2020. Based on this, no more than $36,500 or $3,041 per month should be allocated to one’s essentials. Yet the average monthly rent in Canada stands at approximately $2,000 (rising to $3,000 in the Greater Toronto Area), and the average monthly grocery bill is $1,065 for a family of four.”

This makes the 50-30-20 rule “unattainable for the majority of Canadians,” Patel concludes.

Another rule of thumb that Patel says is no longer valid is the idea that “housing costs shouldn’t be more than 32 per cent of one’s gross income.” (Our late father used to say it should be 25 per cent — but that was about 50 years ago, and things have certainly got more expensive in the intervening years.)

Patel cites the National Bank of Canada’s recent Housing Affordability Report as saying that “the average Canadian would need an annual income of $184,524 to purchase a `representative home.’” That, Patel notes, is more than twice the median after-tax income figure she cited earlier.

Along with high housing costs, Patel cites high taxes as the two most expensive things for Canadians. Taxes, she argues, are not something individuals can control.

Patel concludes that “financial education is the key if we are to ensure individuals, and collectively, our society, is prosperous.”

This is a thoughtful article. When we think about our parents buying a fairly big house in the ‘burbs for $23,000 in the mid-1960s, a house valued at close to $1 million today, you can really see the impact of inflation over time. One has to ask if wages are keeping up with the cost of living — it sure doesn’t seem like it.

Living cheque to cheque is a reality for many of us, but we have to all remember that a day will come when a paycheque doesn’t — and you’ll be retired. Yes, budgets are squeaky tight today, but if you can save even a small amount each month for retirement, you will be taking a lot of money pressure off the future you.

If you have access to a retirement program at work, be sure to take part as fully as you can. If you don’t, and you are saving on your own for retirement, take a hard look at the Saskatchewan Pension Plan. SPP is a do-it-yourself retirement program. You decide how much you want to chip in, and SPP does all the rest — professional investing at a low cost, growing your savings, and providing retirement income options when you punch out for the last time. Check out SPP today.

News flash — there’s no longer any SPP limit on how much you can contribute to the plan. You can transfer in any amount from your other registered retirement savings plans, and can contribute annually any amount up to your RRSP room limit. The savings possibilities are limitless!

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.


Jun 5: BEST FROM THE BLOGOSPHERE

June 5, 2023

More Canadians need access to better pensions: Ambachtsheer

Writing in The Globe and Mail, noted pension expert Keith Ambachtsheer says our ever-growing senior population would be better served if they — and the rest of us — had access to better workplace pensions.

He notes that Canada’s retirement system is ranked 11th out of 44 countries via the Mercer CFA Institute Global Pension Index. What’s needed to boost that ranking, Ambachtsheer contends, is to make the type of pension plans that public sector workers have widely available to the rest of the population.

“Canada,” he writes, already has “one of the best occupational pension systems in the world for its public-sector workers. Globally admired as `the Canadian pension-fund model,’ it efficiently converts regular contributions into lifetime retirement income streams for its public-sector members. At the same time, investment organizations using the model are at the leading edge of converting retirement savings into sustainable, wealth-producing capital. This system needs to be expanded to everyone else.”

The number of senior citizens, he observes, is on the rise. Citing Peter Drucker’s 1976 book The Unseen Revolution, Ambachtsheer notes that the author foresaw “the young, outsized baby boomer generation of the 1970s eventually becoming an outsized generation of retirees, and advocated creating pension organizations with two key features: legitimacy and effectiveness.”

Ambachtsheer lists governance as an important attribute of the most effective pension plans. “Pension arrangements must be structured to always act in the best interests of the plan risk-bearers,” he explains.

The plans should ideally “have an accumulation pool that focuses on investment return generation, and a separate decumulation pool that provides lifetime income.” You contribute to the investment pool during your working life and receive benefits from the decumulation side when you retire, he explains.

The Canadian model pension plans also feature cost-effective management and “value-adding investment programs that turn retirement savings into wealth-producing capital,” writes Ambachtsheer. Another feature is the ability to provide lifetime pensions to plan members, he adds.

So how do we go from what we have now — a situation where there are many workers without any sort of retirement program at work — to one where most of us are in a Canadian model plan? Ambachtsheer sees three ways to achieve this change.

First, “existing Canadian pension-fund model organizations” could “offer their pension management infrastructure to private sector employers,” he notes. This is already being done by a few larger pension funds, such as Ontario’s Colleges of Applied Arts & Technology Pension Plan (CAAT).

Save with SPP interviewed CAAT’s Derek Dobson on this topic a few years ago.

Another approach would be to have “a government entity decide to create a Canadian pension-fund model organization for private-sector workers and retirees,” an idea that has worked in some U.S. states and in Great Britain, he writes.

Finally, he suggests that the private sector create “one or more new Canadian model offerings,” making better pension plans available to the private sector. He writes that Common Wealth and Purpose Investments offer programs that provide end-to-end coverage, including lifetime pensions.

Our own Saskatchewan Pension Plan, which is open to any Canadian with available registered retirement savings plan (RRSP) room, already has some of the Canadian model features — investments are pooled, professionally managed and governed at a low cost. SPP offers, through its annuity features, a lifetime pension for its members. If you don’t have a pension plan at work, you can join SPP as an individual — or, if you are an employer, you can look into offering it as a pension for your employees. Check out SPP today!

Great news — the savings opportunities with SPP are now limitless! You can transfer any amount you want into SPP from an RRSP, and you can make contributions based on your entire available RRSP room. It’s a great way to build your SPP retirement nest egg more quickly!

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.


May 29: BEST FROM THE BLOGOSPHERE

May 29, 2023

Canada, unlike France and the U.S., is not dealing with a pension crisis: Keller

In an opinion column for The Globe and Mail, Tony Keller explains why Canada isn’t having a crisis with its pension system like France and the United States are.

In France, he writes, there are protests in the streets and strikes over plans to raise the national retirement age to 64 from 62. In the U.S., he writes, there’s a “quiet… slow motion” crisis as Democrats and Republicans fail to agree on steps to stabilize the U.S. Social Security system.

“The Congressional Budget Office says that unless premiums are raised, the deficit is increased or taxpayers kick in cash, pension benefits will have to shrink 23 per cent by 2033,” Keller writes, noting that the Social Security system “continues to wend its gentle way toward the iceberg.”

There’s no crisis here, he says.

“Canada is not having a pension crisis. You may not have noticed. ‘`Absence of Crisis Expected to Continue Indefinitely, Experts Say’ is not a headline we tend to put on the front page,” he writes.

That’s because actions taken decades ago stabilized our system, Keller explains.

“Back in the 1990s, Canada was headed for a crisis. The Canada Pension Plan (CPP) (and the parallel Quebec Pension Plan (QPP)) had been created three decades earlier, and like most public pensions they were built on a pay-as-you-go model. CPP premiums deducted from workers’ paycheques paid retirees’ pensions, and once you retired, the next generation of workers would pay your pension. The CPP was a chain of intergenerational IOUs,” he writes.

The French and American systems also operate under the “pay-as-you-go” model. But such systems run into problems when there are fewer workers than retirees. Here in Canada, 19 per cent of us were seniors as of 2021; in France it is 21 per cent, Keller explains.

You have to change things up when demographics change, Keller contends.

“In the 1990s, then-Finance Minister Paul Martin and his provincial counterparts chose to face the arithmetic. They gradually doubled CPP premiums, to ensure that promised pensions would be paid, today and tomorrow. To make that possible, a large chunk of premiums now go into a savings account. The Canada Pension Plan Investment Board (CPPIB) manages the growing pile, which at the start of this year stood at $536-billion. Your premiums today partly fund your retirement tomorrow.”

This is a somewhat complex concept, but what it means is that we are still operating a “pay-as-you-go” system, but when we get to the point when there are not enough workers to pay for the pensions of retirees, money in the CPPIB cookie jar will be tapped into until the ratio returns to a sustainable level.

Keller’s article goes on to note that the Old Age Security (OAS) system, which is paid entirely out of tax dollars rather than employer and member contributions, has the potential for problems in the future; its costs keep rising as the senior population grows. One way to save money on OAS would be to increase the so-called “clawback” so only those seniors needing OAS the most would get it.

CPP was intended to supplement the workplace pensions Canadians were supposed to have; increasingly, workplace pensions are becoming less common. And OAS was designed for those who did not work (and contribute to CPP) during their careers. For a lot of people, CPP, OAS and even the Guaranteed Income Supplement are all they have to live on in retirement, and it’s a pretty modest living.

If you don’t have a workplace pension, there’s a great made-in-Saskatchewan solution out there for you — the Saskatchewan Pension Plan. SPP is a voluntary defined contribution pension plan that any Canadian with registered retirement savings plan (RRSP) room can join. Employers can also offer it as a workplace benefit. Contributions made to SPP are professionally invested in a pooled fund at a low fee. SPP grows the savings until retirement time, when options for turning savings into income include a stable of annuities. Check out SPP today!

And there’s more good news! Now, you can contribute any amount to SPP each year up to your RRSP limit. And if you are transferring money into SPP from your RRSP, there’s no longer an annual limit! Saving with SPP for retirement is now limitless!

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.


Jan 30: BEST FROM THE BLOGOSPHERE

January 30, 2023

Higher interest rates spell trouble in ’23 for borrowers

A wise colleague once told us that debt was “the slayer of retirement dreams.”

And, according to an article by Pamela Heaven in the Financial Post today’s rising interest rates are giving that slayer even more teeth.

The article notes that at least one more rate hike is expected from the Bank of Canada early this year, which will bring the policy rate to 4.5 per cent. That compares to a rate of 0.25 per cent at the beginning of 2022, the Post reports.

The article quotes a TD Economics report that suggests that the impact of a rising policy rate for Canadian borrowers has “only just begun.” That’s because there is usually a lag between the start of higher rates and the end of a mortgage period or car loan, the article explains.

“Debt service costs rise with a lag as mortgages and loan payments are renewed at current market rates,” state the authors of the TD Economics report in the article.

While household debt levels actually dipped during the lockdown years of the pandemic, they are experiencing a sharp rise today, the article notes.

“Canadians who piled on debt when it was cheap now have to contend with interest payments on debt that is more expensive, and could get even more so,” the article adds.

“Up to 18 per cent of fixed-rate mortgages come up for renewal (this) year and borrowers looking to renew will be facing the highest interest rates in 20 years,” the article says, again quoting the TD Economics report.

“In the third quarter of (2022), a borrower who took out a $500,000 mortgage in 2017 was paying $700 more a month on renewal,” notes the TD report.

Well, one might think, it’s good that we all saved so much money during the pandemic’s lock-downiest days, right?

“One bright spot is the personal savings that Canadians accumulated during the pandemic, which could provide a cushion to rising debt costs. However, with interest rates expected to remain at higher levels over 2023, TD expects much of these savings will go to paying debt costs,” states the article.

If there is any positive news about higher interest rates, it’s the fact that Guaranteed Investment Certificates (GICs) are suddenly looking more attractive.

Writing in The Globe and Mail, noted columnist Rob Carrick asks why people are risking investment dollars in the volatile stock market when GICs and other fixed-income investments are offering interest rates close to five per cent.

“In the low-interest decades of the past, stocks were essential to reach your investing goals. But with 5-per-cent returns available from both bonds and GICs, how much do investors need stocks?” he asks.

It will be interesting to see, as we move along in 2023, whether more investors do begin to shift some of their investments towards less volatile fixed-income. Save with SPP can remember that crazy days of the late 1970s and early 1980s when interest rates were in the teens, and you could expect 18 per cent interest on a car loan. It doesn’t seem (today) like we are anywhere near those bad old days — thank heavens!

A balanced approach is usually a wise one when it comes for investing, and members of the Saskatchewan Pension Plan are aware of the “eggs in different baskets” nature of the SPP Balanced Fund. Looking at the asset mix of this fund, it appears that 40 per cent of investments are in Canadian, American and global equities, and the rest is in bonds, mortgages, private debt, short-term investments, real estate and infrastructure. Keep your retirement savings in balance, and 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.