Recently, Save with SPP got an opportunity to speak with long-time pension expert Dr. John Por, whose 40-year career in pensions includes consulting work with large U.S. and Canadian pension boards and offering expertise on pension risk policy. He has also researched the tricky “decumulation” stage in which savings are turned into retirement income.

Our far-ranging interview covered decumulation, spending in retirement, frugality, advice on saving for retirement, and annuities.

Decumulation

Dr. Por says common mistakes with decumulation – the stage where retirement savings are used to provide retirement income – can include problematic asset allocation, lack of appropriate goal setting, high investment costs and, often, setting a withdrawal rate that’s too high or taking out too much money early in retirement.

So is there a correct withdrawal rate?

“At one point in time, maybe 20-25 years ago, four per cent was said to be the right withdrawal rate,” he explains.

Decumulation “depends on future interest rates, the stock markets, inflation, life expectancy and income needs,” says Dr. Por. A “correct” rate “is therefore unknowable.”

“It depends on the reigning circumstances, both personal and market,” he explains. “Who could have predicted, even five years ago, the current existing zero or the negative real rate of bond returns?”

“The problem is, though we desperately want to find a magic formula, how can you do this – we don’t know how it will be (in the future); no one knows.”

Noting the volatility in the stock markets in just the last couple of years, he notes that “even a Nobel Prize winner professed not knowing where the markets will go in the next 10 years, or how to invest your money after retirement.”

“This, of course, has not kept the retirement or investment industry from providing copious, and often prudent, advice, it simply means that looking for a, or the, magic bullet, or the infallible sage, will not be successful,” he adds.

Spending in retirement

While decumulation carries a lot of unknowns, much more is known about how much retirees actually need, Dr. Por says.

He says research by noted pension actuary Malcolm Hamilton shows that people need far less “replacement income” in retirement than the 75 per cent figure bandied about by the industry. 

Hamilton has for many years said the research suggests not everyone needs to save “heavily” for retirement, because of the existence of government income programs for retirees and lower costs once you are retired. (Here’s a link to a Globe and Mail interview with Malcolm Hamilton.)

Dr. Por agrees, calling an overall 75 per cent rule “misguided.”

“While this may be true for low-income people, they are supported by the above-mentioned government programs, so for them the 75 per cent is not a stretch, people at higher income levels are not likely to need 75 per cent of their earned income to pursue an age-appropriate lifestyle,” he says.

“One of the most important steps to understanding (retirement spending) is… knowing how much money you need to survive,” Dr. Por explains.

Rather than going through “painful” pre-retirement budget forecasting, he recommends a simpler approach.

“How much do you save in a month? If the answer is zero, your retirement budget will be what you spend now, minus what you won’t have to pay in retirement.” This can include things like your mortgage, tax savings when you earn less, childcare and education expenses, Canada Pension Plan and Employment Insurance, and so on. 

It’s a common-sense issue, he says. Individuals must decide “how much is necessary (spending) versus how much you would like to have.”

This knowledge is crucial for retirees, who have extremely limited options in dealing with income shortfalls, he explains. 

Working Canadians needing more money could “work harder – get a job that pays better, spend less, save more, take more investment risks, etc.… but when you are retired, you don’t have the same tools,” he explains.

 “Lifestyle becomes the main tool, you can cut back on your lifestyle (to save money), which is difficult,” he says. “Another tool still at your disposal is taking on more investment risk in retirement, but, if you’re not successful, it would easily lead to a further diminished lifestyle,” Dr. Por adds.

Frugality 

At 74, Dr. Por says he is “still engaged” and “living frugally.”

In this context, he defines frugality as bringing your lifestyle and realistic earning capability (and not your hoped-for future earnings) into a healthy balance. 

Living frugally is a key way to make your money last longer, and also that when in financial trouble, the cutback would be smaller thus less painful. Big expenses in the early years of retirement should be avoided, he says, because you may need your retirement savings for decades. “

While at age 65 it is hard to envisage how long you may live” he explains, “you may easily live beyond age 90.”

For example, he adds, if you are married, “the probability that either you or your spouse will live to age 93 is about 50 per cent. You can live for a very, very long time.” 

Working after retirement is a way to support your retirement spending and to keep your mind active, he says.

“Some people still work part-time after they stop working full time. You don’t realize how important your work is … not that many people spend their time well in retirement,” he says.

“Apart from the income work provides, it also structures your day, can add meaning to your existence after retirement (admittedly not everybody needs it), and equally important, it helps you maintain your links with the outside world and friends,” he says. His observation is that most people (especially men) form the majority of their extra-family relationships through work, and once they retired such contacts tend to fade away over time,” he says.

Dr. Por recommends that everyone consider living frugally at any age; he sees it as a great lifetime habit to get into.

Saving for retirement

While some people suggest you should save for retirement from early in life until the end of your career, Dr. Por says that view isn’t usually realistic.

“You can’t save in your 30s and 40s – you are paying for your kids’ education, your mortgage. So, save what you can, if you can, but (know) you may not be able to,” he advises. “No heroism is called for, as you also have to live a reasonable life.”

The optimum time to save “is in your 50s, and then, you can save 20 to 40 per cent,” he says. By then, “your children will be out in the world, your mortgage is paid… you can save.”

For savers, equities add the most value, but of course, it depends on the environment you happen to fall into. Bonds don’t provide as much income and growth, Dr. Por explains.

Pay close attention to investment fees, he advises. “With exchange-traded funds (ETFs), you can control costs – the management expense ratios are low.” However, financial advisers may not suggest this investment because they can make higher commissions on other products, Dr. Por says.

“Even a fee of one percent can, over 30 years, reduce your available assets significantly,” he says.

What you want to avoid is being forced to sell securities when the market is down, thus Dr. Por likes the concept of having a cash reserve to tide you through periods of market decline. 

“If you take on extra risk… by putting more money into equities, you should also have a cash reserve fund worth three to five years of spending,” he says. If equities perform well, you may wish to extend such cash reserves to cover longer periods. Overall, Dr. Por says, a chief problem with retirement saving is that most people “look at it as an investment issue,” and become focused on today’s investment risks, interest rates, equity return rates, and so on. Instead, you should be thinking about the income your investments will generate when you stop working. 

What’s going on today with investment risks and other factors “is not relevant 30 to 50 years out,” when you will be drawing income from your investments, he advises. Your focus should be on that long term, and not on volatility or return rates in a given year, Dr. Por says.

Annuities

Dr. Por talked about the “annuity paradox”. While financial experts like annuities, most people refuse to follow such advice. Most people shy away from the idea of taking a large lump sum of money – say $1.5 million – and turning it into an annuity that pays $60,000 a year. He noted that when he mentioned the concept to his wife (a highly educated professional, an MD), she refused the idea saying that “… if we die soon for whatever reason the children will get nothing.”

Also, retired people want to have cash available for future expenses, and, not always unreasonably, are afraid of inflation, and the potential extinction of the financial institution, which issued the annuity. 

But, he added, “annuities later in life is a good idea”. When you are getting too old to run your money – say by your late 70s or 80s – that’s the time to consider an annuity, he says. The older you are when you convert to an annuity, the cheaper the annuity is to buy. And today’s low interest rates make the conversion to annuities expensive. “The interesting phenomenon is though”, he added, “that when interest rates were exceptionally high, say in the late 1990ies, people still did not buy annuities, nor did the advisers promote the idea.”

Finally, he noted the importance of discipline. He speaks from experience, and says that had he followed all the major precepts mentioned in this piece, he would be now in a much better financial position himself. “Know your needs, be prudent in your expectations, live frugally, create a plan or direction and stick to it while making adjustments, if needed,” he advises.  

We thank Dr. Por for taking the time to speak with us.

Celebrating 35 years of operations, the Saskatchewan Pension Plan is a full-service retirement plan. SPP will invest the money you contribute, and at the time you retire, gives you the option of converting your invested savings into a lifetime annuity. Why not check out SPP today?

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Could a pension model be the way to address the costs of long-term care in Canada?

Writing in the Globe and Mail, Professor Carolyn Hughes Tuohy of the University of Toronto offers up an interesting solution on how Canada could improve its long-term care sector – and part of her thinking relates to the way the Canada Pension Plan is funded.

Professor Tuohy notes that while there have been calls for “national standards” for long-term care facilities in the wake of the pandemic, a key problem is that long-term care is currently a provincial responsibility.

“How do we achieve a common threshold of provision while respecting Canada’s federal system?” she asks.

She writes about the idea of having some sort of “nationwide pool” of funding, so that the “longevity risk, that individuals will outlive their savings and be unable to afford long-term care,” could be addressed.

And, she writes, while provinces and local governments are “best suited” to deliver long-term care, that can lead to “inequitable variation across divisions.”

For instance, she notes, the fatality rate at long-term care facilities in Ontario has been about four times higher than that of British Columbia.

A solution, Professor Tuohy thinks, may be found by looking at the Canada Pension Plan/Quebec Pension Plan as a possible model.

“The Canada Pension Plan, paralleled by the Quebec Pension Plan, is jointly managed by federal and provincial governments. It provides a dedicated source of public finance, funded by contributions from workers and employers. It is designed to be sustainable and sensitive to demographic change, in contrast with the periodic haggling around the Canada Health Transfer. And it makes sense to think of a model of public finance for long-term care as more akin to a retirement benefit than to health insurance,” she writes.

She notes that the government spends more on providing healthcare for those over 65 than the rest of us – and that living past 80 carries with it “a 30 per cent chance of requiring long-term institutional or home care.” That risk currently carries a cost that might be addressed via “a steady, pension-like benefit stream,” she explains.

She proposes “a long-term care insurance (LTCI) benefit… (that) could be attached to the CPP/QPP as a supplementary benefit. It would pay out a capped cash transfer to the beneficiary, set according to the level of health need as assessed through existing provincial mechanisms. Unlike the CPP/QPP, the benefit would be assignable to a qualifying third-party provider of institutional or home care, as chosen by beneficiaries in consultation with their local assessing agency.”

Such a benefit, she concludes, already exists in countries like “Germany, the Netherlands, and Japan.” She calls the proposal a creative way “to bring the full advantages of our federal system to the pressing issues of long-term care.”

Long-term care is something we all hope we’ll never need, but could be part of our retirement expenses. A best defence against unexpected retirement costs is, of course, retirement saving.

And an excellent way to do that is to consider joining the Saskatchewan Pension Plan. The money you contribute is professionally invested at a very low cost, and SPP has averaged an impressive eight per cent rate of return since its inception 35 years ago. Check out SPP today.

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If you are one of the many Canadians who is a decade (or less) away from retirement, and haven’t had time to really think about it, there’s an ideal book out there for you.  The Procrastinator’s Guide to Retirement by David Trahair walks you through all the decisions you’ll need to make, and the strategies you may want to employ, to have a solid retirement – soon.

Trahair makes the point early that you need to track your current spending to have an accurate sense of how much you need to save to fund your retirement.  He says the old 70 per cent rule – that you will be comfortable if you can save up enough to live on 70 per cent of your pre-retirement income – is “problematic… it may be the right answer for one person, but totally wrong for you because your financial situation is as individual as your fingerprints.” Knowing what you spend now, and will spend when retired, is a key piece of knowledge when setting savings targets, he explains.

Through the deft use of charts, examples and worksheets, Trahair explains that most of us have “golden opportunity” years for retirement savings when we have surplus funds, thanks to paying off a car loan, or having a child graduate from university. What you do during these periods of excess money “can make or break” your retirement plans, he advises, noting that an obvious destination for some of this cash is retirement savings.

He looks in detail at whether it’s a good idea to save for retirement in a registered retirement savings plan (RRSP) or pay off debt, like credit cards or mortgages, first. Trahair says anyone with high-interest credit card debt should pay that off first before saving for retirement, because of the “rate of return” you get by eliminating the debt.

“A lack of cash outflow is as good as a cash inflow, and better if that inflow is taxed,” he explains. In other words, all the money once spent on paying down the credit card is now in your pocket instead.

Whether to pay down the mortgage versus saving for retirement is a trickier calculation (Trahair has a spreadsheet for you to make your own choice). He says the “commonsensical” approach is to make an RRSP payment and then put the refund on the mortgage. However, later in the book he warns of the dangers of not paying off the mortgage until after retirement.

“If you went into retirement with a $200,000 mortgage, you’d need $293,254.75 extra in your RRSP just to break even,” he writes. “Put another way, you’d be just as well off as someone who had a zero-mortgage balance and $293,254.74 less in their RRSP.”

There’s a lot of good stuff here. There’s a chapter on selecting an investment advisor, and good advice for those investing on their own. He warns that those saving later in life often look for higher returns, which can be risky. “Hoping for a 10 per cent rate of return to solve your problems will mean you’ll have to take extreme risk… chances are good this strategy will result in dismal failure. So, he advises, have a disciplined investment approach, and manage risks. A rule of thumb he likes is the one that suggests 100 minus your age should be the percentage of your portfolio that is in fixed income. The rest should be in the stock market.

Later, he explains how GICs are his favourite investment, especially when held in RRSPs, Registered Retirement Income Funds (RRIFs) and Tax Free Savings Accounts (TFSAs).

He examines the concept of how much you’ll spend in retirement, noting that some costs, like Canada Pension Plan (CPP) contributions, car operating costs, dining out and dry cleaning will drop once you’re no longer going to work, well-dressed.

He talks about how you can maximize both CPP and Old Age Security benefits by deferring them until later – and covers the pros and cons of doing so.

Later chapters cover the “risk” of living a long life, the “snowball” versus “avalanche” methods of debt reducing, and estate planning.

This is an excellent resource for all aspects of retirement planning, and – even better – it is written for a Canadian audience.

If your retirement plan includes the Saskatchewan Pension Plan, you’re already getting professional investing help at a low fee of just 0.83 per cent in 2020. SPP manages investment risks for you – and has chalked up an impressive rate of return of 8 per cent since its inception 35 years ago. Why not to check out SPP today!

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How will Canadians spend their $180 billion pandemic nest egg?

While the pandemic, now into its second year, has been brutal for most people’s finances, some of us – for instance, those able to keep working – have experienced a savings boom of historic proportions.

According to a recent article in US News and World Report, Canadians are sitting on a record $180 billion – what the article calls a “pandemic nest egg.”

“The pandemic put more than three million Canadians out of work at the depth of the crisis. With travel and social outings on hold, spending plunged, while stimulus and government aid boosted disposable income and the household savings rate soared,” the article tells us.

“A year later, most Canadians are back at work and many have saved like never before,” the article reports. In fact, the piece adds, by late winter 2021 a record number of new jobs had been added to the Canadian economy.

So what are people planning to spend this money on?

According to the article, there’s a long to-do list. After all, the publication advises us, “if 15 per cent of the cash hoard is spent through 2023, it would speed up Canada’s recovery.”

The article mentions backyard renos, domestic (i.e., within Canada) travel plans for the summer, and “sales of pleasure vehicles” all being up.

A Harley-Davidson dealership in Toronto says sales are up 50 per cent over last year, the article reports. As well, the article says, people expect to let their hair down a little bit once pandemic restrictions are over.

“Canadians are getting ready to return to restaurants, bars and theatres once vaccinations become widespread,” the article predicts. “Generally, when people buy clothing, it’s almost like they’re preparing for better days,” states RBC economist Rannella Billy-Ochieng in the article. She says there is “pent up demand” for restaurants and bars, in person movies, live theatre and of course, travel.

A whopping two-thirds of Canadians hope to travel once the coast is clear, the article explains.

Let’s hope some of us are able to hang on to a bit of the “nest egg” for our retirement.

According to the Edmonton Journal, research from RBC shows that “70 per cent of Canadians felt they are behind in saving for retirement.”

The article says only about 14 per cent of Albertans surveyed feel their cash flow has improved during the pandemic – 33 per cent say it got worse. The article says that the pandemic and its financial repercussions represent a good reason for people to seek financial advice on managing debt, cash flow, and retirement savings.

Saving for retirement is not always top of mind, especially during what is becoming an unprecedented national public health crisis. But even if you have to take small steps to start your plan, you’ll appreciate the effort later on. If your retirement savings program has stalled, or needs to get started, an excellent program to consider is the Saskatchewan Pension Plan. SPP has helped deliver retirement security for 35 years – check them out today!

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For more than a year now, Canadians have had to deal with restrictions – sometimes fairly light, other times more of the “stay at home” variety – on what we can and cannot do.

Save with SPP took a look around to see what sort of things people are doing to keep busy at a time when so many of our usual activities are temporarily closed down or otherwise restricted.

A report from CTV News suggests that today’s situation is somewhat akin to the Great Depression of 90 years ago – so many people were out of work, or working reduced hours, that there was a huge growth in hobbies. “Stamp collecting, music making, woodworking and birdwatching” all grew in popularity in the 1920s, the article notes.

“In this time of uncertainty and instability, and a world and existence we no longer recognize, people need an anchor to familiarity and what once brought them comfort, stability, safety, and happiness,” clinical psychologist Dr. Jeff Gardere tells CTV.

Today’s pandemic hobbies include things like “tie-dying clothes, attending PowerPoint parties and partaking in TikTok challenges,” the article notes. These join more traditional activities such as walking and cooking, CTV reports.

Physical activity is of critical importance, even during the pandemic, reports CBC International.

Citing a report from the World Health Organization, CBC reports that “regular physical activity is said to be key to preventing and helping manage heart disease, diabetes and cancer and reducing depression and anxiety, cognitive decline and boosting brain health.”

The article suggests 150 to 300 minutes per week of “moderate to vigorous aerobic activity for all adults.” This can include walking, cycling, dance, play, and even “household activities like cleaning or working on your lawn and garden,” the article says.

“Every move counts, especially now as we manage the constraints of the COVID-19 pandemic,” WHO Director-General Dr Tedros Adhanom Ghebreyesus states in the article. “We must all move every day – safely and creatively.” 

Country Living magazine agrees that creative approaches to keeping active are being used – and some things that were more popular in the past have made a comeback.

The article lists such things as home gyms, handheld gaming consoles, jigsaw puzzles, swimming pools, and trampolines as ways you can do more without leaving home.

The Reviewed.com site adds a few more. TV choices, thanks to the many streaming services out there, are more numerous than ever before. Reading, arts and crafts, yoga, DIY home improvement projects and meditation are among the ideas listed.

Putting it all together, finding something to do will keep you feeling more positive – and more optimistic that we are starting to near the end of this bizarre, unhappy and eerily quiet crisis.

One activity that you might want to revisit during the pandemic is dusting off your retirement savings plan – if you have one. If your savings efforts haven’t started, are stalled, or if you want to add on to what you’re doing now, consider the Saskatchewan Pension Plan, currently celebrating its 35^th year of operations. Your pension savings, small or large, are expertly invested at a low cost, and grown for that future date when you walk away from the office for the last time. With an average rate of return of 8 per cent in the balanced fund since inception, SPP is an option you should take some time to check out!

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Canadian millennials now focused on long-term saving: report

It’s hard to find many silver linings to the dark, terrible cloud that is COVID-19, but a report from Global News suggests the crisis has caused millennials to think longer-term when it comes to savings.

Carissa Lucreziano of CIBC tells Global that Canadians aged 24-35 “are very committed to saving more and investing.” That’s great news for this younger segment of our society, she states, “as actions now can have long-term benefits.”

The report also cites data from Semrush, an online data analysis company, as showing 23.6 per cent of millennials regularly visit their online banking websites, as compared to 20.7 per cent of older Canadians aged 35 to 44.

Semrush’s Eugene Levin tells Global this suggests younger people “are more conscious moneywise… they are using this time (the pandemic) to plan out their finances to either mitigate their financial insecurity or improve their financial security.”

Other findings – more people are searching for information on Tax-Free Savings Accounts (TFSAs), and investment apps like Wealthsimple and Questrade, the article reports.

CIBC data noted in the Global report found that 38 per cent of millennials have decreased spending, 34 per cent plan to add to TFSAs or Registered Retirement Savings Plans (RRSPs), and to establish emergency savings accounts.

While there is also interest in topics like payday loans and installment loans, the article finds it generally positive that younger people are thinking about long-term savings.

For sure it is positive news. Data from Statistics Canada reminds us why long-term savings are so important.

The stats show that as of 2019, 70 per cent of Canadians are saving for retirement, either on their own or via a workplace savings program – that’s up from 66 per cent in 2014, Stats Canada reports.

“Interestingly, this may reflect the fact that over the past five years, Canadians have become increasingly aware of the need to save for retirement,” reports Stats Canada. “For example, almost half of Canadians (47 per cent) say they know how much they need to save to maintain their standard of living in retirement—an increase of 10 percentage points since 2014 (37 per cent).”

Those who don’t save for retirement on their own (or via a workplace plan) will have to rely on the relatively modest government benefits, such as the Canada Pension Plan, Quebec Pension Plan, and Old Age Security, the article notes. And surely, the terrifying pandemic era has more of us thinking about our finances, both current and future.

So that’s why it is nice to see the younger generation is focusing on these longer-term goals. The best things in life, as the song goes, are free, but many other things carry a cost. The retired you will certainly be thankful that the younger you chose to stash away some cash for the future.

If, as the article notes, you don’t have a workplace pension plan and are saving on your own for retirement, there’s a plan out there for you that could really be of help. For 35 years, the Saskatchewan Pension Plan has been delivering retirement security; the plan now manages $673 million in assets for its 33,000 members. Check them out today!

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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?

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Will your retirement dreams align with retirement realities?

Let’s face it – if you asked a bunch of folks what they think retirement looks like, more than a few would imagine it involves a sunny beach, a cool tropical drink, feet up, and full relaxation.

And maybe it does. But a new U.S. study has found that in reality, retirement isn’t always what we expect it will be.

An article in Yahoo! Finance, citing research from the Employee Benefit Research Institute (EBRI), notes that retired American seniors find they are “wrestling with spending worries, forced retirement and an identity crisis.”

EBRI’s Lori Lucas tells Yahoo! Finance that “We expect retirement is going to be one thing and then when you actually get into retirement, as your priorities have changed, you’re not as excited about doing things that you thought you were going to be excited about.”

The survey, the article continues, found that “fewer than one in four Americans think their current retirement lifestyle aligns with what they planned for their retirement to be.”

Travel, the story notes, takes a back seat to health and wellness as a top concern – 81 per cent put it first, with “quality time spent with family and friends” next at 68 per cent.

“You’re more excited about the quality of your relationships, and things that are not going to cost as much as we thought they were going to cost,” Lucas tells Yahoo! Finance.

The article also notes that after a lifetime of saving for retirement, there is a genuine reluctance to start tapping into the nest egg – even though that’s exactly why we saved it!

Six of 10 respondents in the EBRI survey “wanted to spend down only a small portion of assets, spend none at all, or grow their assets,” the article tells us.

Two other bits of advice the article provides are these:

• Once you are in your 60s, retirement could come at any time – even before you plan it. “Layoffs, health or other reasons” can be behind an “unplanned” exit from the worforce, the article says.
• There can be an “identity crisis” for retirees if they are leaving a job that they really felt defined them as people. Even retired people get asked what they did when they were working, which “almost makes it (retirement) seem like a less important existence,” the article adds.

The article says it is important to “fill your time with meaningful activities to give yourself that sense of purpose that you might lose” once you are retired. Another option is to ease into full retirement via retiring part-time – keeping busy with consulting, part-time work or “professional mentorships,” the article concludes.

Save with SPP, out of the full time work force for a seventh year, can attest to these latter points. You need to do something to replace the 40 hours – more if you count commuting time – that you’ve spent earning money to support your family. New interests, and reviving old ones, are among the keys to making your time more meaningful.

Fun is often expensive, however. Be sure you have a regular plan to save money for retirement. If you lack a plan, and really aren’t sure how to go about starting one, take a look at the Saskatchewan Pension Plan. You can start building an SPP nest egg slowly, and then ramp it up as you earn more. And when it’s time to give up your parking spot at work, SPP will help turn those saved, well-invested dollars into a stream of income to help finance your retirement “to-do” list. SPP, after all, has been in the business of securing retirement futures for 35 years.

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Asked if Canadians are paying enough attention to the importance of retirement saving, Janet Gray of Money Coaches Canada has a simple answer. “No,” says the Ottawa-based financial planner.

“It’s always a case of `out of sight, out of mind,’” she explains over the phone to Save with SPP. A lot of people “don’t really look at it (retirement saving) until five to 10 years from their perceived retirement date.”

Some, she says, belong to pension plans and expect those will look after them. Most don’t have such workplace plans.

A key question, then, is whether or not your retirement savings from all sources will be enough, explains Gray. “You need to know your numbers – have you got enough?” she says. Will you be able to cover your costs after work is over?

And your perceived retirement date may change, she explains. Many of us find that poor health, or changes at work, force them to start retirement earlier than they expected. Again, the question for them is will they have enough, she explains.

When it comes to retirement savings, Gray says she has noticed that many have a sort of “all or nothing” mindset on the topic. People are either fully engaged savers, or they aren’t doing anything.

That said, some people are doing well on the retirement savings front.

“I’ve got clients in their 30s, professionals, who are doing well,” she explains. They want to have an enjoyable retirement, and unlike their parents, “they don’t want to work forever.” But not everyone is so organized, especially at a young age, she warns.

“We really need more financial literacy in Canada,” she says. Retirement savings, she explains, is really a case of “pay me now, or pay me later.” As an example, to match the money saved by someone who starts putting away $100 per month in their 30s, a 50-year-old would need to start putting away thousands a month (due to compound growth and early start), she says. And if you can’t do that, “you’re working until a later age than first planned,” she notes.

With retirement savings, “every little bit helps.” The stats show that most people live on average well into their 80s and even beyond, so without some sort of savings plan, you “won’t have as much money as you’d think you would have.”

It takes discipline to save. “Our culture is really hinged on a `spend now, buy now, live now’” theme, she says. People use credit, which works against them. “A $5,000 purchase plus interest on a credit card would take the average Canadian, making the average income of $29 per hour (from Stats Can), 211 hours to pay off,” Gray notes. Before you buy something for $5,000 on credit, remember that it could take 200 hours of work to pay for it, she warns.

So, how do people change their habits?

“The first step is awareness,” she explains. Once you get the need to have savings, “it’s like the old Nike ad – just do it. Starting small, say $25 a pay, is a good way, because once you’ve started and the money starts to pile up, you will be able to say to yourself “this is working!” and then keep doing it–or more, she says.

There are so many thousands who never take that first step, she says. Many have high levels of debt, which “holds people back so much,” she says, but even if you are restricted by debt you need to set aside what you can for retirement. The biggest mistake people make, therefore, is never getting started on retirement savings, she says.

We thank Janet Gray for taking the time to speak with us. Check out her Facebook page.

Starting small, and making automatic contributions, is something the Saskatchewan Pension Plan can help you with. SPP contributions can be made via automatic transfers from your bank account, and you can choose to increase those contributions when you earn more, or owe less. Why not check them out today?

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