Canadians “gotta giddy up on saving for retirement,” warns the Free Press

Despite the many benefits that registered retirement savings plans have – including tax-deductible contributions, and creating a nest egg for your future you – Canadian RRSP balances are declining, reports the Winnipeg Free Press.

According to the Free Press, citing information from BMO and Statistics Canada, “the average RRSP account was about $113,000 in 2023. That’s actually down from about $144,000 in 2022.”

While the newspaper reports that a recent market correction in 2023 may be behind the drop in the average account balance, another reason could be “a likely disconnect between retirement goals and action.”

The Free Press notes there is a “under-saving” problem in the land.

“Canadians 50 and older are coming to grips with under-saving for retirement, too,” the article notes. “The National Institute on Ageing, based in Toronto, released its annual survey in January and found only one-third of working Canadians aged 50 and older say they can retire at their desired time. It further revealed four in 10 Canadians in this age group stated they are not in a position to retire at all,” the Free Press adds.

“All of this is to say that working Canadians gotta giddy-up on saving for retirement,” the newspaper warns.

What’s causing people to save less?

Debt, reports the Free Press, is a definite barrier to saving.

The article quotes Natasha Macmillan of Ottawa’s Ratehub.ca as saying “If you have high-interest debt, the best use of your money is to pay that off first.”

The newspaper adds that while Macmillan is specifically referring to high-interest credit card debt, “even additional mortgage payments in this high interest-rate environment may be a better use of extra cash than contributing to retirement savings.”

The Free Press goes on to note that retirement savings is just one type of savings vehicle. There is the Tax Free Savings Account (where there’s no tax on the money you invest, and no tax consequences when you take money out), registered education savings plans (RESPs) for kids and grandkids, and the new First Home Savings Account for prospective home buyers.

The article suggests you seek financial advice on which savings vehicle is best for your situation.

But, the article concludes, retirement savings is always an important priority.

“But just to keep things simple: if you have extra cash, contribute to your RRSP — tax efficiency considerations aside — because fattening up retirement savings is never a bad thing,” the article notes. “Even if you contribute more to your RRSP than is optimal for your 2023 taxes, you can still carry that deduction forward to use for tax years to come,” Yannick Lemay of H&R Block Canada tells the Free Press.

This is a good, thorough article that provides the perspectives of a number of experts. We can add this, from the perspective of a semi-retired senior – if you don’t have a pension plan at work, it is imperative that you save for retirement, because once you get to the age where you can’t work, you’ll need something to augment the rather modest benefits we get from the Canada Pension Plan, Old Age Security, and even the Guaranteed Income Supplement.

Your future you will be very thankful for any savings you are able to put away now, in your younger years.

If you’re saving on your own for retirement, a great partner is out there waiting to help you. The Saskatchewan Pension Plan is a provincially run, not-or-profit retirement savings program open to any Canadian with RRSP room. SPP will take the money you save and invest it for you in a low-cost, pooled, professionally managed pension fund. When you retire, your options including receiving a lifetime monthly annuity payment, or SPP’s Variable Benefit option, where you decide how much you want to take out of your nest egg, and when.

Check out SPP today!

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Answer these questions to see if 2024 is your year for retirement: Ibbotson

Writing in the Winnipeg Free Press, noted financial writer Christine Ibbotson outlines ways you can confirm whether or not you are ready to hit the silk, and start your retirement.

She says she is frequently asked about retirement before 65 by folks who dream of “finally being free” of work – even the at-home variety.

But, she says, there are things to ask yourself before taking the retirement plunge.

“Is all your debt paid off,” she asks – credit cards, mortgages, lines of credit and car loans?

Next, she asks, “are you really ready to give up working, or are you just tired of your current position and need a change?”

A third thought is this – is someone else depending on your current income? “Will you need to support anyone other than yourself? If so, for how long, and how much will that cost annually?”

Do you have the flexibility to “downsize your residence or move to a less-expensive area to lower your monthly expenses,” she asks.

Are you clear on what your retirement income will be, she asks. “Will you have a consistent monthly revenue stream that is long-lasting and able to sustain you during times of uncertainty? Preferably in addition to Canada Pension Plan and Old Age Security government benefits.”

She asks if prospective retirees have any upcoming “large future expenditures” they have yet to save up for – and if the expense can be cancelled.

Do you have a realistic budget for retirement income, she asks – one that is as exact as possible, is costed out in today’s dollars, and factors in inflation and taxation?

Finally, she asks about socialization – do you belong to any clubs or social organizations, and have you factored in the cost? And do you have a plan on how to fill in your retirement hours? “Does your retirement partner want the same things as you and are they willing to make the same sacrifices to retire early?”

This is one of the best pre-retirement quizzes we have ever seen, and we sure wish we had read it years ago when we planned our own retirements.

We did get estimates from our pension plan at work about how much our retirement income would be, and they advised us to do a “net to net” comparison on income. This is key, since your pension is almost always less than what your work wages were – and usually is taxed at a lesser rate. So, know your take home pay after retirement to help you plan.

If you don’t have a workplace pension plan, don’t worry – the Saskatchewan Pension Plan may be just the thing you’re looking for. SPP is open to any Canadian with registered retirement savings plan room.

You decide how much to contribute each year – contributions are tax-deductible like an RRSP – and SPP does the heavy lifting of investing and growing your savings in a large, professionally managed, low-cost pooled fund. At retirement, your choices include the possibility of a lifetime annuity, or SPP’s Variable Benefit which allows you flexibility in how much income you want to collect.

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