Toronto Star

The different between collateral and conventional mortgage

January 6, 2022

Are you in the market for a mortgage and you’re not sure which one to take out? In this article we’ll look at the difference between collateral and conventional mortgages, so you can decide which one is the right one for you.

Collateral Mortgages

A collateral mortgage lets you borrow more money than your property is worth. A mortgage lender is able to do that because a collateral mortgage re-advances. This allows you to borrow additional funds as needed without needing your break your existing mortgage contract.

This is accomplished by registering a lien against your property. Lenders will register a lien for up to 125% of your property’s value. For example, if your home is valued at $700,000, you could register a lien for a maximum of $875,000.

When the charge is registered, you can leverage the equity as needed. The simplest way to do that is by setting up a Home Equity Line of Credit (HELOC). HELOCs are a lot like mortgages. HELOCs offer a way to borrow money cheaply, but with even more flexible repayment terms. With a HELOC you’re able to make interest-only payments on your mortgage to minimize your cash flow.

You could also set up a readvanceable mortgage whereby the credit limit on the HELOC increases as you pay down your mortgage. You could use the extra equity to finance home renovations or to buy your next investment property.

Conventional Mortgages

A conventional mortgage is the mortgage you probably already know. When you put down at least 20% on a property, you’re eligible for a conventional mortgage. This is different than an insured mortgage when you put down less than 20% on a property.

Since you are putting down at least 20% on the property, you’re able to borrow at least 80% of its value with a conventional mortgage. The value of your property is based on how much it’s appraised for.

If it’s appraised for more than you paid, you can borrow based on the purchase price. However, if it’s appraised for less, you can only borrow based on the appraised value and you have to make up the rest from your own pockets if you want to still put at least 20% down.

If cash flow matters most to you, the 30 year amortization makes the most sense. Otherwise, if rate matters the most, the 25 year amortization is usually the way to go.

This post was written by Sean Cooper, bestselling author of the book, Burn Your Mortgage. Sean is also a mortgage broker at mortgagepal.ca.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.


Nov 22: BEST FROM THE BLOGOSPHERE

November 22, 2021

New retirement plan’s goal is to “coast” into retirement

Writing in the Toronto Star, Lesley-Anne Scorgie reveals a new variation on the “financial independence, retire early” or FIRE plan.

This new variant, she tells us, is called the Coast FIRE plan.

But let’s backtrack. What exactly is the basic FIRE plan?

Scorgie writes that the FIRE movement was born in the late 1990s.

“These people were obsessed with early retirement and were willing to sacrifice just about anything to contribute significant sums of money to their nest egg as quickly as possible so that they could quit their jobs generally before age 50 and start to ‘live,’” she explains.

But, she says, for many this FIRE plan meant “going without vacations, eating beans daily and just being a cheapskate.” The idea was that foregoing the “extras” in life would allow one to put away thousands a month until having enough money to retire completely by age 50.

“I have two major issues with the concept,” she writes. “Firstly, the lifestyle of ultra-frugality is not appealing. Secondly, banking many thousands of dollars every month throughout your 20s, 30s and 40s is pretty unattainable for most people living in just about any city in Canada. The cost of living and debt are major preventative barriers.”

She goes on to point out “also, who retires at 50? You could have a whole other life, career and so on at that age!”

This is where Coast FIRE puts a different spin on the plan.

There is still an emphasis on financial independence, writes Scorgie, but “you steadily build up your nest egg until it reaches a point where it can grow independently through the power of compound interest and reinvested returns to the ultimate nest egg size you want, without you having to save another dime after you get to that initial savings point.”

So rather than having a hard stop to work, this variant of the plan has you basically creating a significant wealth creation nest egg that allows you to bolster your retirement income significantly when it’s time to log off for a final time.

And that’s the significant difference – the frugality and penny-pinching ends when your nest egg has reached its target amount.

“Once you reach the point where you no longer need to add another dollar to your retirement portfolio, you can have loads more freedom to do what you want like — work part-time or at a different job you like better, enjoy more cash flow for vacations and fun because you no longer have to tuck away 20 per cent of your income into your registered retirement savings plan (RRSP) and tax free savings account (TFSA),” she writes.

To figure out this retirement math, you need to have a general idea of when you want to retire (age) and the approximate money you will need for financial independence at that age. Scorgie says there are many Coast FIRE calculators out there to help you figure out your numbers, but key to the calculation is “current age, desired retirement age, a safe withdrawal rate… and an inflation-adjusted growth rate.”

This is a great column, and Scorgie’s views make a lot of sense. Many of us, for instance, only put away enough money in RRSPs to get us a tax refund each year. Not putting away enough when you are young makes it harder to catch up later.

Scorgie concludes by recommending that we all get some financial advice to ensure our savings plan is sound, also a wise suggestion.

If you are looking for a retirement savings vehicle that can generate steady growth and good returns during the time between now and the time to “coast” into retirement, consider the Saskatchewan Pension Plan. While past performance is not an indicator of future growth, the plan has averaged returns of eight per cent since its inception in 1986. That’s helped many of us build our retirement nest eggs. Check out SPP today.

Written by Martin Biefer

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


Remembering the good old saving days of 1981

April 8, 2021

Before the pandemic, we read countless stories about how the savings rate among Canadians had fallen to its lowest level in decades.  Now, possibly due to the fact that the pandemic has limited our ability to spend money, the opposite is now true. We are reaching the highest personal savings rate we’ve experienced in 35 years.

According to a report in the Toronto Star, Canadians in 2020 “saved a greater chunk of their income than they had in three and a half decades.”  Canucks put away 14.8 per cent of their income last year, representing about $5,000 per person in savings.

“People weren’t able to spend on a lot of things they normally can, because of the lockdowns. And in some cases, they chose not to spend,” Pedro Antunes, chief economist at the Conference Board of Canada, tells the Star.

Save with SPP can still remember 1981, but at that time, working as a cub reporter, one’s focus was not on the long term, or savings. So, we had to check back to see what it was like the last time we had a high national savings rate.

At RatesDotCa, there’s a nice article that recaps what it was like 40 years ago for Canadian savers.

For starters, the article notes, interest rates were the opposite of what they are today – at all-time highs.

“If you’re not old enough to remember the recession of the early 1980s, your parents certainly will. In 1981, mortgage rates peaked at more than 20 per cent,” RatesDotCa reports.

“Many people whose mortgages were up for renewal during that period found themselves signing up for mortgage rates that were twice as high as they were just five years prior. Some resorted to paying hefty upfront fees to get private lenders to offer them rates in the mid-teens,” the article continues.

Other things – most goods and services – kept going up. The Inflation.eu website shows that throughout 1981, the consumer price index went up by more than 12 per cent. While your pay tended to go up to address higher costs of living, it usually didn’t go up as fast as prices did.

Save with SPP recalls getting a car loan at 16 per cent interest from CIBC. The effect of the high cost of borrowing was that we got a little used Plymouth Horizon – a little car for a big interest rate. Today, it’s the opposite – people are getting big houses and cars because it’s a low interest rate.

But we also recall the benefit of high interest rates on our savings back in the early 1980s. You could get a Canada Savings Bond that paid double-digit interest. It was the same story with GICs. Your parents and grandparents were probably chiefly buying interest-paying investments in those heady days. It was a thing, and payroll Canada Savings Bonds were commonplace.

Recently, we have begun to hear that our historically low interest rates may be on the rise once again.

The Globe and Mail reports that inflation went up 1.1 per cent in February, and one per cent in January. Rising gas prices are part of the upward push, the article notes. The Bank of Canada, the article notes, is expecting a 1.7% rate of inflation this year.

Will inflation hikes bring with them interest rate hikes – a return to the 1980s? It’s unlikely, says RatesDotCa.

“Although it’s unlikely that rates will hit the likes of 15-20 per cent again, we may very well see 5-7 per cent in the long run. That type of a jump may still be two to three times higher than your current mortgage rate.  Do you think you could afford paying nearly three times as much as you do today for your mortgage, and still afford those other essentials like heat and groceries,” the article warns.

The takeaway here is that things change. We have had low interest rates for so long, only us greybeards remember when we didn’t. Will savers start to pile into interest-bearing investments once again if rates begin to tick upwards? We’ll need to wait and see.

A balanced approach makes sense when you are saving for the long term. When interest rates are low, other investment categories – Canadian and international equities, real estate, and so on – tend to do better. But when you’re in a balanced investment fund, the experts are the ones who figure out when to rebalance, not you.

The Saskatchewan Pension Plan has a Balanced Fund that invests your contributions in Canadian and international equities, infrastructure, bonds, mortgages, real estate and short-term investments. All this diversity at a management fee of just 0.83 per cent in 2020. Put your retirement savings into balance; why not check out SPP today?

Written by Martin Biefer

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


Taking a look back at some of the things we started doing more of during the pandemic

May 21, 2020

There’s no question that one day, when we are telling our future grandchildren about what the pandemic was like, we’ll be asked “so what did you do when you had to stay home?”

Now that we are beginning to see the end of some of the daunting restrictions that have closed restaurants, stores, gyms, the Legion, hockey rinks, golf courses and other key parts of our lives, it’s worth remembering what people got up to while stuck at home.

According to a story in Patch magazine, many of us have desperately been trying to buy more yeast and flour.

“For so many who’ve been holed up in quarantine, cooking — and especially baking — has meant either a return to the comforting recipes of childhood or a foray into a whole new world of culinary creativity. Baking bread from scratch, a long-ago tradition, is suddenly a focus, along with Zoom cocktail parties, Netflix binges, and morning gatherings around the TV to listen to New York State Gov. Andrew Cuomo discuss coronavirus strategies, and yes, the meatballs and sauce of his childhood Sundays,” the story notes.

While various Internet-based teleconferencing apps, and drive-by birthday celebrations are a big deal, there are more basic ways to stay in touch with others, reports the CBC.

In the suburbs of Winnipeg, a group of seniors at a retirement home wondered how they would handle having to miss their usual weekly get-together in the facility’s restaurant.

“Every Sunday, dozens of people go onto their balconies or stand physically distanced in the courtyard at L’Accueil Colombien to bang on pots, ring bells and sing O Canada for about 15 minutes,” the CBC reports. And according to one of the founders of this new tradition, the goal is to stay in touch.

“I just thought of it because I had heard that somewhere, I think it was in France, at 6 o’clock they would come on their balcony and they would sing,” St. Vincent tells the CBC. “I’m not a singer, so I said, ‘Well, we can ring [bells], we can make noise.'”

Those of us who could continue working at home did, and for some it was quite an eye-opener, reports Global TV.

“A recent survey from Statistics Canada found that approximately 4.7 million Canadians who do not usually work from home did so during the week of March 22 to 28,” the network reports.

“I think this has been a revolution. It was something that was thrown at us, but we have found that working from home has really been working quite well,” consultant Barbara Bowes tells the network.

“I think that from an employer’s perspective, they can save so much money from rental spaces; they will seriously take a look at how they can balance how much time and who is in the office through technology. It is going to change the way we work altogether,” she says in the interview.

Another unexpected fringe benefit to the pandemic – a time when few are driving anywhere, since there is essentially nothing to do but shop for groceries, hit the drug store, or refresh your beer supply – is cleaner air, reports the Toronto Star.

“When you clean up the air, you see a reduction in mortality,” Stanford Professor Marshall Burke tells the newspaper. “It highlights the things we may want to change when we don’t have an epidemic.”

Finally, one last thing some of us are finding is that we aren’t spending as much money.

“If you add it all up, the average family is saving $1,700 a month when you factor in commuting costs, childcare costs, the amount of money folks are saving by not going out to eat, especially not going to the bars,” researcher Nick Johnson tells Milwaukee’s WISN.

It’s certainly been a strange time that none of us will ever forget, a once-in-a-lifetime thing – hopefully.

If you are among the fortunate few who have been able to keep working and have a few extra dollars left over, don’t forget to tend to your retirement savings. Those savings need a little care and occasional watering to grow, so any extra bits of cash you can spare today could be directed to your Saskatchewan Pension Plan account. You’ll be able to harvest those dollars, which will be professionally invested and grown, when you reach retirement age. Your future self-will, no doubt, thank you.

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

Is there a trick to sticking to resolutions?

February 13, 2020

Here we are, rolling along through the second month of a new decade, and already many of us have left our various New Year’s resolutions well behind. In the dust, even.

Save with SPP scoured the internet for an answer to this question – are there any tactics out there to help you keep your resolutions? What do the experts say?

The MSN Money blog has several ideas.

First, the blog recommends, “the way to achieve your big dreams is to start small… no one begins by lifting heavy weights seven days a week, they start with light weights and build muscle over time.”

Another suggestion from MSN Money is to develop “daily habits that support the results you want in the future.”

At the Men’s Journal site, there’s more interesting advice.

They suggest bribery as a resolution-meeting aid. “Say what? Yep, make a pact with yourself that you’ll get those new ski goggles only after you complete a month’s worth of consistent progress toward your new year’s fitness resolution,” the magazine suggests.

Another good bit of advice is setting written, specific goals, Men’s Journal advises. “I want to get fit” is not specific enough, instead you should write down “I want to run a mile in less than eight minutes and do 10 pull-ups.”

Other ideas include getting support for your efforts on social media, signing up for specific events, and forgetting perfection. “If you get sick and need to take a week off of training, or you get slammed at work and literally can’t carve out a block of time to get in the pool, acknowledge it and move on. Literally. Get back into your routine as soon as possible rather than staying away because of one small blip,” the magazine suggests.

The Toronto Star has a few more for us to ponder.

Don’t be afraid to “switch up your plan” if it isn’t working, and examine you’re plan to “look at why you’re failing.” If the plan’s not working, change it, the Star advises. The paper advises you to be realistic in goal-setting, and to “make new habits,” so that you have things to do instead of the old bad habits you are trying to break.

Save with SPP can add a couple ideas to this list. Start small, and then ramp up over time. If you’re saving money, or paying off debt, this is a good tactic – chipping away works over time. This approach is good for a lot of things.

So if you’re lagging behind in a New Year’s goal of saving for retirement, take a look at the Saskatchewan Pension Plan. Unlike a workplace pension plan, where contributions at some pre-set amount are deducted from your pay, you can start as small as you want and then step up your contributions when you can. You contributions are professionally invested at a low fee, and when it’s time to retire, SPP can set you up with a lifetime pension. 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 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

10 Simple Ways to Save Big

February 6, 2020

With credit card bills coming in after the holidays, many Canadians are looking to save money. Saving money is a popular New Year’s Resolution, but unless you figure out how you’re going to save money, your goals like buying a home and saving towards retirement aren’t as likely to happen.

Saving money doesn’t have to painful. Here are 10 simple ways to save big in 2020.

  1. Disposable Products

Not only do disposable products cost money, they hurt the environment. Instead of using plastic cutlery, use metal cutlery. Skip the paper napkins and go with reusable cloth napkins. Cloth dishrags are a good alternative to pricey paper towels.

  1. Lottery Tickets

You have a better chance of being struck by lightning than winning the lottery (no, I’m not making this up). Instead of spending $5 a week on a lottery ticket, consider putting that money toward your savings.

  1. Smartphone In-App Purchases

Most apps these days are free, but that doesn’t mean you don’t have to watch your spending here. The new trend is in-app purchases. If you’re having trouble solving a crossword puzzle, the app may offer you a hint that you pay for. To avoid the temptation, turn off in-app purchases or add a passcode so you think twice before paying.

  1. Fuel

Although the price at the pumps isn’t as high as it once was, it still makes sense to plan out your driving trips ahead of time. GPS makes doing this a lot easier. Plan out your errands so you’re not driving too far out of the way because you forgot to pick up milk and bread. Research driving techniques for fuel efficiency.

  1. Books, Blu-rays, Digital Movies and TV

When’s the last time you read a book or watched a movie more than once? Save yourself some money and use the public library. Most libraries in big cities have an excellent selection of books, e-books, movies and TV shows. If you don’t have cable, nothing beats Netflix.

  1. Deal Websites

Deal websites like Groupon are a great way to save money, as long as you don’t become addicted. Avoid buying stuff you don’t need by only visiting them when you plan to buy something. A further caution: only visit reputable websites. Avoid those with cheap copies of branded goods, expensive shipping costs to return items and short deadlines for refunds.

  1. Gym memberships

I’m all for people going to the gym and getting in shape, as long as they show up. But two-thirds of people with gym memberships never step foot inside a gym. If you’re joining a gym for the first time, consider hiring a personal trainer for the first couple of weeks to show you the ropes. Once you get the hang of things, why not exercise with a buddy to keep each other motivated? If your condo has a decent gym, you can skip the gym membership fees altogether.

  1. Premium Cable Packages

Do you really need 500-plus channels? Consider downgrading to basic cable or cut the cord altogether. Netflix and antennas are great cable alternatives.

  1. Utilities

Do you sometimes forget to turn down the heat when you’re leaving your home? In a typical home, about 60% of energy costs are from heating and cooling. Install a programmable thermostat, and in the wintertime set it so the temperature automatically goes up before you wake up, goes down when you leave home and then goes up again for when you arrive back home. Reduce the temperature by four to five degrees at night and when you’re away to save 15% on your heating bill.

  1. Ready Meals and Prepared Food

If you’re a foodie, it might be hard to imagine giving up your favourite dishes. You don’t have to—you just have to be willing to find thrifty alternatives. Instead of picking up ready-made dishes like pasta, lasagna and side dishes at the supermarket and paying top dollar, consider taking cooking classes and learn to prepare them yourself, if you don’t already know how. Weekdays can be hectic, so prepare your culinary masterpieces on weekends when you have more time.

 About the Author
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

Dec 9: Best from the blogosphere

December 9, 2019

Year end – time to make sure you’re taking full advantage of employer retirement programs

The end of the year is always a highlight – the festive season, the New Year, family and friends; it’s an endless list.

But, according to a report from the Toronto Star, there’s another little item that should be on your growing year-end list – retirement, and particularly, any program you’re in at work.

“Many medium-to-large-sized employers offer some form of savings program for their staff; some with a matching component, such as the employer matches 50 per cent of the contribution that the employee makes up to a certain maximum value, while other programs are simply to facilitate savings exclusively from the employee. The draw for employees is that the funds are typically deducted right off one’s paycheque, and of course, the free money if a match is offered,” the Star notes.

You could be leaving that free money on the table if you haven’t signed up, the article warns.

Be sure, the article advises, to find out which employer-sponsored program you’ve signed up for.

“Have you enrolled in a defined benefit or defined contribution pension? Do you contribute to an RRSP or TFSA? Are you funding an RESP for your children? Is your company offering non-registered plans? Which accounts offer a company match, as these should be your priority to fund,” the Star notes.

You may have options to choose from if you are in a company retirement program – often mutual funds, ETFs, or target-date funds (or a combination of each).

Know what you’re paying into, the Star suggests. “Grab a list of what your fund options are and compare historical rate of return, risk level, the composition of the fund and read up on the fund’s objectives. In most cases, your company will be covering a large portion of the fees associated with these investments,” the article notes.

Finally, the article notes, be sure that if there is a company matching option, that you are signed up for it. The Star recommends that you “find out how to get the maximum matching dollars. For example, sometimes they scale the match up (or down) depending on how much you contribute. Simply take advantage of all the free money that’s available to you. It’s the easiest ‘return’ on your investment you’ll ever make,” the article advises.

Those without retirement programs at work must do the job on their own, the article concludes. If you are in this situation, “it’s then up to you to save independently.”

An option for that self-managed saving is the Saskatchewan Pension Plan . With SPP, your contributions are invested professionally and at a low fee. As of the end of September, 2019, the SPP’s balanced fund is up more than 10 per cent. In addition to growing your savings, SPP is equipped to offer you a multitude of ways to turn savings into lifetime income via annuities – SPP’s Retirement Guide provides full details.

There’s still time to sign up and join SPP prior to the RRSP deadline in 2020, so check them out today and make them part of your year-end to-do list.

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

Nov 4: Best from the blogosphere

November 4, 2019

Figuring out how much is enough to save for retirement

The idea that saving for retirement is a good thing – a must, even – is repeatedly drilled into our collective heads.

But how much is enough, when it comes to retirement savings?

A recent article in the Toronto Star estimates that a Canadian making $65,000 a year would need to save “a nest egg of between $1 and $2 million for retirement, not including one’s house.”

That’s a big number!

The number, the article explains, “is higher than a few decades ago because we’re living longer in a more expensive Canada.” The article then goes on to provide some savings benchmarks – a list of what you should have saved at various age points in your life.

Those of us in our 20s “live paycheque to paycheque” and are unlikely to have any savings.

By your 30s, you should be putting away 15 per cent of what you make, the article explains. “You’ll need to bump that up by one per cent each year,” the article advises. The article advises signing up for any retirement program your workplace offers, whether it’s a pension plan, a group RRSP, or a TFSA. A couple should end their 30s with $250,000 as their retirement savings target, “not including their house,” the article warns.

By your 40s, “you and your partner are saving between 15 and 20 per cent of your gross earnings by making sure you follow healthy budgeting principles,” the article continues. This is the decade when many people have bought a home and are paying it down, the Star notes. You should have $500,000 in savings by the end of your 40s, the article proclaims.

The 50s is said to be the “burn your mortgage” era, but the cost of kids going off to university because a new stressor, the Star reports. You ought to have $700,000 in savings by the end of this decade.

Once you are in your 60s and mortgage free, the article suggests you put away half of your money (what you paid on the mortgage) towards your retirement savings, which will get you to $1 million by age 65. The article recommends that you make your investments less risky at this point, moving to “lower-risk, often ‘fixed income securities,’ which are investments that kick off a regular stream of income that you can use in retirement. You’ll also want to understand your pension, CPP, and OAS benefits.”

If you haven’t hit the million dollar plateau, the article concludes, “no problem – you can typically make up the shortfall by working a bit longer or downsizing your home.”

It’s interesting that this article makes no mention at all of any restrictors on savings, such as high personal debt. The implication is that, like when you are trying to lose weight and get fit, that you shouldn’t be coming up with excuses as to why you can’t do it.

The article gives a good guideline for savings. Many people choose not to join pension arrangements through work, a decision that saves them a bit of dough today but costs them a lot of money down the line. Be sure to take full advantage of what’s out there – don’t leave money on the table.

If you don’t have a workplace pension plan to join, or you are self-employed, you should set up your own savings plan. A great place to begin your savings journey is the Saskatchewan Pension Plan, open to all Canadians. They have a great track record of turning savings into retirement income – 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

Sep 16: Best from the blogosphere

September 16, 2019

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

High housing costs are throwing a wrench in peoples’ retirement savings plans

In the good and now gone old days, people finished paying for their mortgages, hit age 65, and then collected their workplace pensions. They also got Canada Pension Plan and Old Age Security – bonus!

But those days appear to be gone.

Research from the Toronto Board of Trade, reported on in the Toronto Star, suggests the old way of doing things is no longer working, especially for big-city dwellers.

The story says that 83 per cent of those surveyed by the Board of Trade believe “the high cost of housing in the (Toronto) area was impeding their ability to save for retirement.”

The story quotes Claire Pfeiffer, a Toronto resident, as saying that she bought her home for $430,000 in October 2007, and it is now worth more than $1 million. But the $1,800 monthly mortgage over the last 12 years has taken up over half of her take-home pay in the period, the article says, leaving her with no money to save for retirement. This, the article says, occasionally keeps her up at night.

There are other factors at play, the story says. “Financial experts say the impact of the region’s affordability challenge extends all the way to the relatively well-off and better-pensioned baby boomers, who are hanging on to big houses longer and sometimes risking their own financial well-being to help their kids,” the article says.

As well, the article notes, “high house costs are set against a backdrop of declining defined benefit pensions, a rising gig economy and record household debt.”

The article notes that only about 25 per cent of today’s workers have a workplace defined benefit pension, “the kind that offers an employer-guaranteed payout,” down from 36 per cent from “10 years earlier.” Coupled with the reality that pension benefits at work are less common is the reality of today’s high debt levels. Quoted in the article, Jacqueline Porter of Carte Wealth Management states “more and more Canadians are retiring with a mortgage, which 30 years ago would have been unheard of. People are retiring with debt, with a mortgage, because they just didn’t plan very well.”

She concludes by saying the notion of “Freedom 55… is out the window.”

Michael Nicin of the National Institute on Ageing states in the article that while debt and high housing costs are definitely restrictors for retirement savings, human behavior needs to change. He thinks automatic savings programs are an answer, the article notes.

“Most people in general don’t consider their future selves multiple decades in advance. They’re more concerned about current priorities — getting ahead, staying ahead, buying a home, going through school, daycare, kids’ education,” he states.

The takeaway here is quite simple – you’ve got to factor retirement savings into your budget, and the earlier you start, the better. Any amount saved and invested today will multiply in the future, and will augment the income you get from any workplace or government program. You need to pay yourself first, and a great tool in this important work is membership in the Saskatchewan Pension Plan. You can start small, and SPP will help grow your savings into a future income stream. Be sure to check them out.

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 28: Best from the blogosphere

May 28, 2018

Of the 500+ blogs I have written for savewithspp.com, monitoring the blogosphere to link you with the best of the personal finance world has been the most rewarding. While some personal finance bloggers generate money from google ads on their websites,  forge corporate relationships, sell courses or develop an enhanced reputation in their chosen field, the vast majority write for free, just because they have information they want to share with others.

Here is a completely unscientific list of some of my favourites who I have featured time and time again in this space. If you want to continue following them, sign up to receive emails notifying you when their latest blogs are posted.

Boomer&Echo: Rob Engen and his mother Marie Engen are the writing team that generate a consistent stream of always engaging blogs about everything to do with saving and spending money.

Cait Flanders: Cait Flanders has written about all the ways she continually challenges herself to change her habits, her mindset and her life. This includes paying off debt, completing a two-year shopping ban and doing a year of slow living experiments. And in January 2018, she published her first book, The Year of Less  (a memoir), which became a Wall Street Journal bestseller.

Canadian Dream: Free at 45: I have been reading Tim Stobbs since we blogged together on moneyville for the Toronto Star. He has beat his initial target, retiring recently at age 40, but his blogs about retirement are still a great read.

Jessica Moorhouse:  Jessica Moorhouse is a millennial personal finance expert, speaker, Accredited Financial Counsellor Canada® professional, award-winning blogger, host of the Mo’ Money Podcast, founder of the Millennial Money Meetup and co-founder of Rich & Fit. Don’t miss How I Survived a Trip Across America Using Only Chip & Pin.

Millenial Revolution: Firecracker and Wanderer are married computer engineers who retired in their early 30s. They blog on Millenial Revolution. They opted to not buy a home because they believe home ownership is a money pit. Instead they travel the world living on their investment income. Reader case studies where Wanderer “maths it up” are particularly fascinating.

Money After Graduation: Money After Graduation Inc. is an online financial literacy resource founded by Bridget Casey for young professionals who want to build long-term wealth. Whether readers are looking to pay off student loans, invest in the stock market, or save for retirement, this website has valuable resources and tools including eCourses and workshops.

Retire Happy Jim Yih and his team of writers publish top quality financial planning information. They believe there is a need for timeless information because too many financial and investing sites focus on minute-by-minute investment ideas, changing markets and fast paced trends.

Sean Cooper: Sean Cooper’s initial claim to fame was paying off his mortgage by age 30 which he has documented in his book “Burn Your Mortgage.” Since then much of his writing has focused on real estate-related subjects. He has recently qualified as a mortgage broker and will be leaving his day job as a pension administrator to launch a new career.

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For me, retirement beckons. This is my last Best from the Blogosphere for savewithspp.com. My own blog RetirementRedux has been dormant for some time as I have focused on writing for clients but I plan to revive it now that I have more time. Feel free to subscribe if you are interested.

May all of your financial dreams come true, and when the right time comes, I wish you a long, healthy and prosperous retirement.

 

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.