Tag Archives: Yahoo! Finance

Jan 7: Best from the blogosphere

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

Think hard before you start spending a lottery win or inheritance: BMO

If you ask Canadians about their financial goals, you’ll get a sensible answer – most want to “achieve lifestyle goals in retirement.”

But a recent survey by BMO Wealth Management, released via Yahoo! Finance, suggests common-sense goals may got out the window if people get a “sudden windfall.”

Pre-windfall, which BMO defines as “winning the lottery,” or getting an inheritance, legal settlement or insurance payout, Canadians seem to have reasonable goals. The “lifestyle in retirement” goal was shared by 55 per cent of those surveyed. A further 49 per cent had the goal of increasing their wealth, followed by “protecting current wealth (40 per cent), managing taxes in retirement (27 per cent),” and “helping grandchildren (20 per cent),” the study notes.

Post-windfall, it’s a totally different story. Sixty-four per cent of those surveyed would “share, with family, friends and charity.” An equal percentage would “pay off all debts.” Forty-seven per cent say they would “invest in the stock market, a business, or a property.” Other choices were “buy the big ticket items I always wanted (17 per cent),” and “splurge and spend freely (10 per cent).”

Only 38 per cent of those surveyed said they would carry on with the same pre-windfall goals.

You’re probably thinking hey, who wouldn’t go a little bit nuts if they won millions, and it is hard to disagree with that thought. However, BMO says that this sudden change of thinking – tossing sensible plans out the window – is worrisome given the fact that “approximately $1 trillion in personal wealth will be transferred from one generation to the next by 2026.”

“While the significant investment opportunities can be exciting, be cautious of psychological issues associated with sudden wealth syndrome,” states Chris Buttigieg , Director, Wealth Institute, BMO Wealth Management in the release. “It is important to seek expert advice to discuss how a windfall will alter your financial goals and which causes matter most to you and your loved ones.”

The advice from BMO is to take your time if you’re in the lucky position of receiving an unexpected financial windfall. “Remain calm… think about how a windfall will affect your financial goals,” BMO advises. They also recommend developing a wealth plan so that the goals you establish can be met. As well, they say it’s wise to get rid of high-interest debt as quickly as possible.

A good retirement plan can be improved dramatically through the addition of newfound wealth. If you have unused RRSP room like millions of other Canadians, a good strategy would be to fill that room. The Saskatchewan Pension Plan provides a great place to save some of that unexpected cash for the many happy days of retirement that lie ahead.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Home is where the hat is – unless it’s cheaper somewhere else

At the office, where we were involved in pension plan communications, we used to joke (as 30-somethings) about what our future retirement would look like.

One theory at the time was that where you would be in retirement would depend on your future income. If you had a big income, you’d be in the Big Smoke. If you didn’t, you’d be shopping for a double-wide trailer in rural New Brunswick.

While that’s an extreme example, our predictions from the ‘90s are coming true. Sometimes your retirement income will impact where you’ll live.

“If retirees could take their pick,” notes an article in Pay Day, posted on Yahoo! Finance, “most would probably want to spend their golden years somewhere warm, beautiful and affordable.” However, if a retiree is relying only on CPP and OAS, the article says, the list gets a little shorter.

The article suggests Moncton, NB; Lacombe, AB; Stratford, ON; Brandon, MB and Halifax, NS as places where limited dollars go the longest. These cities are selected because real estate is affordable, they have great services and healthcare, and the quality of life is high. Taxation rates and value for the dollar are also factors.

A similar list can be found in MoneySense.ca. The top seven retirement destinations are Moncton; Joliette, QC; Ottawa, ON; Winnipeg, MB; Canmore, AB and Victoria BC.

The MoneySense list looked for places that had “a thriving arts scene… a strong sense of community… easy access to airports… and pleasant weather.” Good transit is also important, the article notes.

We see many of our friends selling their big houses in Toronto and moving to smaller, more affordable communities elsewhere in the province. The idea here is that the proceeds from the sale of the house in the city are more than enough to buy a house in a smaller town, and you can bank the difference.

An important step you can take today to deal with tomorrow’s retirement living decisions is to bank a bit of your salary for life after work. The Saskatchewan Pension Plan provides you with an end-to-end system that turns your savings into investments, and those investments into future income.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

What do people tend to give up when they retire?

For most of us, retirement is a time when we are expected to make do with less income. That led us to wonder what, if anything, people give up when they decide to take the retirement plunge.

The news isn’t all that bad.

According to CNBC, via Yahoo! Finance, it is recommend that – by age 40 or so – you begin to give up “mindless spending, lifestyle inflation, excess living space, and a willingness to wait and see.” You won’t, the article suggests, be able to afford these things when you are retired.

The “wait and see” advice refers to your expected future spending, the article says. You’ll give up commuting and being stuck in traffic “and will probably spend more in other categories, like entertainment, recreation and travel,” the article states. You should factor these expected future changes in expenses into your savings plan, the article advises.

An article in the Globe and Mail offers a slightly less rosy viewpoint.

When you retire, the article notes, citing findings from a CBS Moneywatch article by Steve Vernon, we can lose our “engagement with life” when we stop working. “You can get engagement with life from working, but you can also get it from taking up causes, volunteering, pursuing hobbies, and contributing to your family and community,” the article notes. Failing to do that can, in some cases, actually shorten your life – so it’s an important thing to avoid giving up.

Another thing we often give up, notes Casey Research, is our active income from working. Not working means we lose our work contacts, and giving up on active income means “your ability to make smart investment decisions drops because of your dependence on passive income.”

On balance, however, there are more things that are good to give up than bad, suggests US News and World Report. You can, the article says, give up on “the drug of ambition,” and can stop worrying about promotions, better titles, or offices with a window.

You can give up not having time for movies, books and TV shows, and can still choose to not give up working altogether, the article adds. Never again will you not have time to volunteer, travel, and spend time with family – you will be “living the dream” in retirement, the article concludes.

You’re in charge of that future dream, both the financial and lifestyle side of things. A great way to save for retirement on your own is through the Saskatchewan Pension Plan, which is open to all Canadians. Be sure to check it out today.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22