If a farmer brought 64 rabbits to a deserted island, and left them alone to multiply, 60 years later there would be an astonishing 10 billion rabbits living on the island.

That example is how Ajax author Robert R. Brown explains the need for all of us to save early in our RRSPs, and then leave the money alone to grow.

Brown’s book, Wealthing Like Rabbits, uses lots of great metaphors and examples to drive home key points about not only saving, but avoiding debt and overspending.

Retirement savings grow in importance as you age, he writes. Given that the Canada Pension Plan and Old Age Security deliver only a modest benefit, “it is better to be 65 years old with $750,000 saved than it is to be 65 years old with $750 saved.”

Canadians have two great options for retirement savings, “the RRSP – don’t pay tax now, grows tax-free inside, pay taxes later,” or the TFSA, “pay taxes now, grows tax-free inside, don’t pay tax later.” Either vehicle, he writes, “is an excellent way to save for your long-term future,” and ideally we should all contribute the maximum every year.

Yet, he writes, just as his beloved Maple Leafs “swear that next year they will do better,” Canadians all swear they will put more money away for retirement, yet don’t.

If you do save, explains Brown, pay attention to the cost of investing. Many mutual funds have high management expense ratios, or MERs, that “range from around two per cent to three per cent. That doesn’t sound like a lot, but it is,” he warns. It’s like the power of compound interest, but in reverse, Brown notes. Index funds and ETFs have far lower fees, allowing more of your money to grow, he points out.

Brown’s key takeaway with retirement saving is “start your RRSP early. Contribute to it regularly. Leave it alone.”

The book takes a look at the ins and outs of mortgages, and why it isn’t always the best idea to get the biggest house you possibly can. Watch out, he warns, when you go for a pre-approved mortgage at the bank – they may offer you an amount that is more than you want to afford. “You shouldn’t ask the bank to establish the amount you’ll be approved for. That needs to be your decision. After all, McDonald’s sells salads too. It’s up to you to order one,” he explains.

Credit cards are another way to pile up debt, he says. Not only are the posted interest rates high, “as much as 29.99 per cent,” but there are late payment fees, higher interest rates and extra fees for cash advances, annual fees just to have certain cards, and more. “Credit card companies are always looking for some sort of new and innovative way to jam you with a fee,” he advises. The 64 per cent of Canadians who pay off their credit cards in full each month enjoy an interest rate of zero, he writes – “think about that.”

He provides some great strategies for the 36 per cent of us who carry a balance on their cards, including leaving the cards at home, locking them up or freezing them to cut back on use, and cutting back on the overall number of cards.

Home equity lines of credit, which are easy to get, can backfire “if you have to sell your house during a soft market,” he warns.

Finally, Brown offers some sensible advice on spending – don’t eat out as often, and avoid alcohol when you’re out. Consider buying a used car over a brand new one. “If spending cuts alone won’t provide you with the cash flow you need to pay off your debt, you’re going to have to make more money,” he says. Get a raise, or get a little part-time job like dog walking, lawn mowing, or washing cars.

This is a great read – the analogies and stories help make the message much easier to understand. Once you’ve set the book down, you feel ready and energized to cure some of your worst financial habits.

If you are looking for a retirement savings vehicle that offers professional investing at a low MER, consider the Saskatchewan Pension Plan. SPP has a long track record of solid investment returns, and the fee is typically around one per cent. That means more of the money you contribute to SPP can be grown into future retirement income.

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

The pros and cons of allowing emergency access to retirement funds

It’s been a grim time for all of us, coping with this pandemic, and Save with SPP and everyone at the Saskatchewan Pension Plan hopes everyone is staying safe.

With businesses closing, and the jobless rate rising, some experts are suggesting that raiding the retirement cookie jar be allowed – penalty-free – to help people access savings during the emergency.

Interviewed by Benefits Canada, noted pension expert and actuary Malcolm Hamilton was asked what he thought about a plan by Australia to allow folks there to withdraw up to $10,000 a year from their superannuation plans this year and next.

““It looks to me very creative and very sensible,” Hamilton, also a senior fellow at the C.D. Howe Institute, told the magazine. The magazine notes that the withdrawal option Down Under is open only to people “who are unemployed or who have had their working hours reduced by 20 per cent or more.”

“Telling people you’ve got to leave your money in your pension plan so you have enough money later, when you don’t have enough money now, is really stupid… who, given a choice, would elect to be hungry now instead of hungry later? You have to deal with the immediate needs first,” Hamilton tells Benefits Canada.

Other experts, the magazine reports, agree. Financial author Fred Vettese also sees the Australian policy as a good idea.

“Why not do this? What they’re doing is simply giving people access to their own money sooner. I don’t see anything wrong than that. And they’re not giving them all their money; it’s fairly limited and it’s also under fairly strict conditions,” he tells the magazine.

Other experts see downsides to allowing an early withdrawal of retirement savings.

Bonnie-Jeanne MacDonald of Ryerson University’s National Institute on Ageing tells the magazine she is concerned that allowing emergency access to retirement funds might be “short-sighted.” (Here’s a link to an earlier Save with SPP interview with her.)

“The idea is that this will pass and, if we can get beyond it without tapping into our nest egg, then that’s the better approach because life will need to go on,” she tells the magazine.

And Hugh O’Reilly, a senior fellow at the C.D. Howe Institute, says people who take their money out now, at the peak of a crisis, will be effectively selling low, and will miss out when markets rebound. “I think it’s going to do it much more rapidly than in a typical bear-market scenario,” he tells Benefits Canada.

There are already a few allowable reasons – making a down payment for a home, or paying for education – where Canadians can tap into their Registered Retirement Savings Plans (RRSPs) early. But in both cases, the money is supposed to be repaid, and those who don’t repay are taxed annually on what they should have repaid. And if you just withdraw RRSP money, there’s a withholding tax followed by a possible second tax hit when you file your income tax.

That all said, we have never seen times like these. Maybe the government will decide to permit withdrawals with some sort of repayment option down the road. Save with SPP worries about people taking money out of their retirement savings for other purposes and then not being able to afford to replace it, because that could lead to hardship when they are older.

One great thing about being a member of the Saskatchewan Pension Plan is that it is an open plan. You can decide how much to put into your account, and when times are tough, you can choose to reduce or even stop contributing until better times return.

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

Are you missing your weekly (or for some, daily) trip to the gym during the coronavirus crisis?

Save with SPP had a look around the Interweb to see how people are keeping fit when they are, by and large, confined to their own dwellings.

At the Patch blog, “bodyweight exercises… exercises that don’t require weights or machines,” are recommended. These can also be done anywhere, the blog tells us. Examples include the tried and true pushup, planks (familiar to yoga fans), and a similar “glute bridge.” The site recommends each exercise they list be done 10-15 times.

At The Health Site, the advice on exercise is particularly appropriate for the pandemic.

The site recommends carrying out some breathing exercises at home, so that you can “take precautions by boosting your lung power.” The post outlines deep breathing, “breathing through your diaphragm,” resistance breathing and other exercises. All of these, the blog suggests, will boost the strength of your lungs and “increase the amount of oxygen in your body” by filling and stretching your lung sacs.

TV station KHOU in Houston provides videos leading you through yoga, strength class, cardio class and a boot camp.

So does our own CBC, which provides videos for a couch workout, the “six minute Animal kingdom workout,” a towel workout, a workout for new moms, small-space yoga, and more.

Now why should we be looking up all these exercises when instead we could be watching Netflix or playing board games?

According to the Goodluck blog, keeping busy with exercise has many advantages. It improves your metabolism, it boosts your mental and physical energy, helps with your self-discipline and improves your sleep. The site strongly recommends that workouts take place in the morning.

We’re living through a very strange and scary crisis. Save with SPP has found that even getting out walking the dog seems to break the tension and reduces stress. Be sure, of course, to follow all public health guidelines and keep a safe distance from others if you’re walking, running, or cycling during these unusual times.

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

Stay the course on your retirement savings plans, experts say

If you’re a retirement saver, these past few months of pandemic-related market turmoil have no doubt raised your blood pressure and caused concern.

Experts tell us to take a deep breath, and to remember this crisis will eventually end, and things will move back to normal, reports The Record.

“While many Canadians may be panicking as they watch their retirement funds drop by tens or hundreds of thousands of dollars, financial experts say it’s important to stay the course regardless of how close to retirement they are — and even if they’ve already finished working,” The Record reports.

“I would certainly encourage all of us to take a big collective deep breath,” states Karin Mizgala, co-founder and CEO of Money Coaches Canada, in the article.

If you aren’t planning to access the savings for retirement income any time soon, you should “stay the course” on your retirement plan, Mizgala tells The Record.

And even if you are withdrawing funds from your retirement savings, it’s important to put the market downturn in perspective, financial author Kelly Keehn says in the article.

“It’s not like you have to cash it all out the year that you retire, and I think people forget that,” she tells The Record.

If your funds are in a Registered Retirement Income Fund (RRIF), the federal government is planning to put new rules in place reducing the amount you have to take out. (Full details on this rule change are covered in this article in Advisor’s Edge).

As well, the article says, you can choose to defer your withdrawals until later in the year, when markets are expected to start rebounding.

Noting that markets lost 35 per cent of their value in 2008/9, and then fully recovered and increased in value, Keehn makes an important conclusion.

“The takeaway is: If this was causing you sleepless nights, maybe in the future you need to adjust your risk tolerance and your risk exposure. But it doesn’t mean acting on it now. That’s for darn sure… This is not the time to make those changes,” she tells The Record.

If you are a member of the Saskatchewan Pension Plan, there’s a feature of the plan you should consider if, as Kelly Keehn says, the markets are causing you to worry and lose sleep. With SPP, one of your options at retirement is to receive some or all of your savings in the form of a life annuity. With an annuity, you get the exact same amount each month, regardless of whether markets are up or down. And you’ll get that amount for life – and can provide for your survivors too, if you choose to. It’s an option that offers peace of mind, so check it out on their website 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

A recent survey in The Wealth Professional found that nearly a third of us say they are in “bad” or “terrible” shape financially owing to the COVID-19 crisis.

And the article notes that the 60 per cent who told Angus Reid pollsters they were “in good shape” aren’t sure their finances will hold up forever if the pandemic lasts a long time.

Save with SPP had a look around to find any advice on how to do more with less as we wait out the coronavirus crisis.

At the C-Net site, tips include seeing if you can lower your auto insurance if you’re no longer driving to work. This should lower the premiums, the article says.

As well, C-Net recommends figuring out “which of your monthly subscriptions are useless right now.” Are you paying for a gym membership you can’t use, the article asks – if the gym isn’t waiving fees during the crisis, maybe it’s time for you to cancel. Ditto for commuter passes, parking fees at work, and so on – anything that can be cancelled while you’re not using it should be, the article suggests.

If you’re going to have problems with your mortgage, contact your bank to see if payments can be deferred, C-Net suggests. And, the article concludes, since you can’t go out to eat, “rattle some pots and pans” and cook at home.

The Motley Fool blog suggests that this is a perfect time to set up a budget, if you haven’t already. “Once you’ve mapped out all your expenses, the next step is to determine where you can cut back,” the article suggests. If you aren’t using something, time to drop it.

Also see if you can cut back on some of your “fixed” expenses, the Motley Fool states. Review your cable, home insurance, and cell phone rates – is there a cheaper plan for each?

This is a great time to get into coupon-clipping for groceries, the article adds, and to “look for a side gig that can earn you some cash while you’re stuck at home.” Ideas include taking paid surveys, starting a business such as tutoring, or freelance writing and editing, the Motley Fool suggests.

The How to Save Money blog tackles the problem from a different angle, and suggests donating your skills to help others in your community. And if you’re able to help others financially, the site provides a long list of worthy charities that are helping others during the crisis.

Save with SPP has talked – from a safe distance – with friends and neighbours. Many are baking their own bread; some are already gearing up for larger vegetable gardens; some are making wine and beer at home instead of lining up for it, and so on. As our late mother used to say, be sure that you are “using up” everything in the fridge – this isn’t a time to chuck the leftovers.

Retirement saving isn’t going to be the priority it usually is during this tough period. One nice feature about the Saskatchewan Pension Plan  is that you, as the member, get to decide how much you will contribute. If you’re not going to be working the same hours for a while, no problem – you can lower or even stop your SPP contributions and ramp them up when better times return.

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

It’s clear to most of us – especially older Canadians – that younger people have a very different way of doing things. So that said, what do they think about retirement?

Save with SPP spoke recently to David Coletto, founding partner and CEO of research firm Abacus Data. His firm has carried out a lot of research on millennials – indeed, he has a book in the works – and he has noticed quite a few things about how younger people approach money and saving.

“No one young Canadian is going to be the same,” he says. As well, he adds, the current COVID-19 situation was not yet a factor when he carried out his research. However, he notes that the data suggests that some millennials are “as well off as the previous generation,” but others, less so. It really comes down to whether or not they live somewhere where they can afford a home, he explains.

There are reasons why housing affordability is an issue for millennials, he notes. For starters, housing prices in Canada’s major cities are near all-time highs. As a group, millennials do tend to have debt, and “the debt levels are much higher” than those of older generations, he explains. Dealing with heavy debt from student days, or the cost of raising kids, tends to “delay key milestones” for millennials.

“So much of their experience is different,” he says, “that it is difficult for them (millennials) to think of retirement when they are still focused on today. About one-third of this generation is struggling more than their parents did, and they will be less well off as a result.”

Abacus recently did some research with the Healthcare of Ontario Pension Plan that found, among other things, that 80 per cent of respondents would take a job that paid less money if it offered a pension.

Job security isn’t what it once was, Coletto explains. “There’s more freelance work, more part-time work – what we call precarious work, and less pensions available.”

When there’s no workplace pension, the onus for retirement saving falls on the individual. “It’s lower on the list for them, and saving (for retirement) is difficult to do,” he explains. “They are having to manage a lot of other expenses. And we are talking about the pre-COVID era, here.”

“It’s a big chunk that has to go to savings for a down payment, or to pay for a mortgage,” he says.

And it’s not just the workplace that has changed. Millennials are dealing with “a climate change crisis that is existential.” Some “are putting off having a family” over climate concerns, he says.

Millennials therefore tend to want to do things now, while they still can, instead of deferring life experiences and grand trips until they are older. “If the experiences won’t be there, or are not possible, what’s the point of trying to save? Especially when you can’t afford to,” asks Coletto.

Statistics show that only “one in four millennials put any money into an RRSP, and even those that do don’t have a lot of equity in them,” Coletto explains. And while Tax Free Savings Accounts are more attractive to younger people (due to the fact they aren’t locked in) take-up is pretty low there as well.

Absent personal savings, Coletto is concerned that the gap between those with pensions – such as their parents – and those without will create a real split. “There’s an inequality there which will continue to grow,” he predicts.

A way to avoid that scenario might be for Canada to adopt the Australian model for retirement savings, he explains. There, a percentage of every worker’s salary is automatically placed into retirement savings, no matter where you work. The money is then invested by large funds offering pooling and low-cost investing. Moving to an Australian model is “something that needs to be seriously discussed,” he says.

A final piece of advice from Coletto for millennials is this – look at what your parents did for their retirement, and see what you can learn from them.

We thank David Coletto for taking the time to speak with us.

There’s no question that access to a workplace pension is a great benefit for an employer to offer. The Saskatchewan Pension Plan can help. Please contact us for more details.

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

With CPP, the longer you wait, the more you’ll get

For quite some time now, the Canada Pension Plan (CPP) has been available as an early retirement benefit – you can get it, with a reduction for taking it early, at age 60.

But is taking it at 60 the “no brainer” many seem to think it is?

An article in the Flin Flon Reminder suggests otherwise.

The article, quoting financial advisers, says it rarely makes sense to take CPP at 60, and “there are even fewer reasons to start drawing retirement funds while you’re still working.”

“I don’t advise taking CPP until you’re actually retired,” states Willis Langford, a Calgary-based investment planner, in the article. He adds that CPP, along with Old Age Security (OAS), “form the very base of a retirement income plan and you shouldn’t tap into it until you’re ready to start accessing all of your sources of income in retirement.”

Yet, the article notes, about 12.6 per cent of all CPP beneficiaries are taking their benefit early, and face a reduction in the benefit of 36 per cent – “0.6 per cent per each month… before you turn age 65,” the article explains. Those who can wait until age 70 to start CPP get an increase in their benefit of 42 per cent – 0.7 per cent for each month after age 65 that they are not collecting the CPP.

The article explains this with a couple of examples. Someone earning $50,000 a year would get $10,760 in CPP benefits ($897 per month) if he or she starts at age 65. If the same person starts at age 60, they would get “just $551 per month – about $6,600 a year.” As well, if the early collector continues to work while they receive CPP, they would have to make $2,300 a year in CPP contributions.

These extra contributions would boost the CPP benefit at age 65 to $658 a month ($7,896 a year) – still much less than what you get if you start at 65, the article notes. And if the person waits until age 70, he or she would get $1,422 per month ($17,064 a year).

Why, the article asks, do some folks take it early, given all this?

“If you knew you were going to live for a very, very long time, generally you would wait. The longer you wait, the more you would get,” Brad Goldhar of BMO Private Wealth tells The Reminder. “But if you knew at age 60 that your family history suggested not many years of longevity, you might take it early,” he states.

The bottom line – be sure you know the rules for CPP when you’re thinking about taking it.

Similarly, if you are a member of the Saskatchewan Pension Plan, and decide on a life annuity when you retire, be sure to get an estimate. Just like with CPP, the later you start your annuity, the more you will get per month. And generally speaking, more is usually a good thing when it comes to retirement income.

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

A decade ago, Save with SPP was in the audience to hear Sherry Cooper present the chief findings of her then-new book, The New Retirement.

A lot has happened since then, but the noted financial writer’s thoughts stand up well a decade later.

Cooper was among the first to predict that boomer retirements would be different from those of their parents. “Boomers see retirement as a period of regeneration rather than degeneration,” she notes.

However, she adds, boomers are far less frugal than their parents. “Early boomers were the first in their generation to enter schools, the job market, and the housing market,” she explains. Late boomers “had very different life experiences and have found it tougher to amass wealth.”

Cooper noted early that women generally are in better health than men, and as a result, will live longer – a key retirement income consideration. That fact, she writes, “is all the more reason why women should understand their household finances and have a large-enough next egg and long-term insurance to assure comfort and security in later years.”

The author, an economist, correctly notes that people would tend to work later than expected. “Older workers have higher productivity and deal with problems more effectively than younger workers,” she writes. At the event Save with SPP attended, a slide showing Mick Jagger popped up when this point was raised, and it’s interesting to note that Sir Mick is still rocking his way into yet another decade.

She anticipated the need to expand the CPP, noting that back in 2008, CPP was “far less generous than Social Security. In today’s dollars, maximum annual CPP payments are only $10,365.” She pointed out that Old Age Security provided about half as much at maximum and is subject to clawbacks for some.

Other correct prophecies – increased private spending by boomers on healthcare, such as the “considerable burden of long-term care,” plus costs to society for the increasing number of retired boomers needing medical care – are made.

Cooper advocates pre-retirees to adopt a “lifestyle plan for retirement,” indicating that knowing how you want to live will tell you how much you need to fund that particular lifestyle. She says we should think of retirement as a “multi-stage” event, decades long, so planning ought to consider what you’ll be doing in your 60s versus 70s, 80s and 90s.

She talks about the “financial nightmare” of longevity risk, the danger of outliving your savings, and was one of very few financial experts at that time period who talked about the value of having annuities as part of your retirement plan.

The book also sets out a “default” investment portfolio for retirement savers – 15 per cent of the nest egg should be invested “in high quality stocks and real return bonds,” and 85 per cent equally invested in stocks and bonds. This, she says, should get you to age 85, and at that point, you can annuitize what’s left for lifetime income.

This book was one of the first Save with SPP added to our retirement library, and it stands up very well today. It’s a well-recommended read, beautifully and clearly written with frequent recap sections to make sure you’re following along.

It’s true that government benefits, while improving over the years, still don’t provide much more than a basic retirement income for Canadians. If you have retirement savings of your own, or through a workplace pension plan, you’ll have more income for the decades-long retirement phase of life. A good way to augment your retirement savings is by joining the Saskatchewan Pension Plan, a do-it-yourself open defined contribution plan. You provide the money, SPP will grow it over time and provide you the option of a lifetime pension at retirement. All good.

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