Nearly one third of Canadians have no retirement savings

A fact-filled article by Nicole Blair for the Made in CA blog reveals some statistics – some positive, others a bit grim – about the retirement savings and income habits of Canadians.

She starts by posing this classic question – “have I saved enough money to retire comfortably?”

It’s a hard one to answer, but let’s dive into this well-researched piece.

Last year, she writes, 6.2 million Canadians received Canada Pension Plan payments. The average amount received, including Old Age Security, was $15,159, she continues.

She then looks at the main retirement savings vehicle in this country, the registered retirement savings plan (RRSP).

“Canadians,” she writes, “should save between $700,000 and $1 million for their retirement.” She later adds that you should save enough to replace 80 per cent of your “current spending… to maintain your current lifestyle once retired.”

To that end, 69 per cent of us have opened RRSP accounts. As well, she notes, “in 2019 there were over 6.4 million registered pension plans.. in Canada.”

However, not everyone has an RRSP or belongs to a workplace pension plan, and not all of us have savings, Blair notes.

“Almost a third of Canadians have not saved or thought about retirement,” she writes. “People living alone find saving for retirement harder than the average,” she continues. A total of “62 per cent of Canadians under 35 are saving for their retirement, but only one-fifth think they are on the right path to meet their goals,” she adds.

A slim “12 per cent of Generation X Canadians feel confident they will achieve their retirement saving goals,” Blair explains.

While the average amount Canadians have saved in an RRSP is an encouraging $111,922, Blair says, that figure falls short of the required amount.

“The opinion on how much you should save for your retirement varies. The average amount is around $700,000. However, some financial advisors would say $1 million is needed to retire comfortably in Canada. Of course, the amount you will need depends on where in Canada you plan to retire,” she notes.

“When calculating how much you will need, you need to consider all fixed costs as well as other expenses. Fifty-nine per cent of Canadians cannot estimate how much they would need to retire comfortably, while 50 per cent hope they will have cleared all their household debt by the time they retire,” she continues.

“A way to calculate how much you need is to take 70 per cent of your salary and multiply it by 25. The 25 represents living for 25 years after retirement. Using this formula, a person on a $60,000 yearly salary will need to save $1.05 million (70 per cent of $60,000 is $42,000, multiplied by 25 equals $1.05 million).”

This is a revealing article. The clear message that comes through is that without income from either a workplace pension plan or your personal savings, you’ll be living on a rather spartan $15,159 per year.

If you are eligible to join any kind of retirement program at your workplace, be sure to sign up and contribute at the maximum rates. If your organization doesn’t offer a pension program, consider using the Saskatchewan Pension Plan as your company’s program. SPP is open to individual members, but also organizations. Find out how SPP can help you build a strong retirement future!

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Emptying the nest egg – the challenge of finally spending your retirement savings

Our late father was in his early 80s when a financial adviser asked him if he was still saving up for a rainy day. “Yes,” said Dad. “Well,” the adviser said, “it’s raining.”

Many people, like Dad, are reluctant to finally start spending their hard-saved retirement nest egg dollars, reports Ritika Dubey of The Canadian Press.

“It can be a jarring switch from saving for retirement to spending in retirement,” she writes. “Financial experts say that transition is a process.”

Her article quotes Kurt Rosentreter of Manulife Wealth as saying we all need to “psychologically prepare” for retirement and need to start thinking about our retirement spending needs “at least two years before bowing out of the job.”

“It’s not just stop one day and all of a sudden, start living off your savings,” he tells The Canadian Press.

Anyone closing in on retirement needs to know things like your post-retirement “cost of living, tax impacts, and how to live off passive investment income or rental property income for the rest of (their) retired life,” writes Dubey.

And unlike the days of getting handed a paycheque every couple of weeks, retirement income is often a byproduct of investment, the article continues.

“All of a sudden, your food money and everything else — your fund money — is now tied to the stock market, bond market, politics, economics, tax rates,” Rosentreter states in the article. “That’s pretty intimidating.”

For Rosentreter, the answer is developing a written plan ahead of retirement, one that states, “here’s how much you have, here’s how you will access it over the next month, next year, 10 years, the rest of your life,” he tells The Canadian Press.

The plan should look at four key areas, he states in the article – fixed core costs (shelter, utilities), fixed variable costs (birthday gifts, etc.), discretionary expenses (i.e., dining out) and luxury costs (that expensive SUV).

“You start with the mathematics of what their cost of living is,” he tells The Canadian Press. “You can’t head into retirement without the numbers.”

Marlene Buxton of Buxton Financial tells The Canadian Press that you will also have to deal with income from multiple sources – many different pots of income.

You might, she notes in the article, have money in locked-in retirement accounts, registered retirement income funds, a defined benefit pension or tax-free savings.

She says it is not day-to-day spending that depletes your savings – “it’s the larger decisions, such as how long before downsizing or when to begin certain benefits such as the Canada Pension Plan or Old Age Security, or what age to retire,” she states in the article.

The article concludes by saying you need to revisit your cash flow plans every year after you retire and adjust them as required. “In the end, it’s putting all this on a spreadsheet and working with it and moving the numbers back and forth to see where it works based on what starts the conversation,” Rosentreter tells The Canadian Press.

With the Saskatchewan Pension Plan, it’s easy to automate your retirement savings. SPP allows you to make contributions via pre-authorized withdrawals from your bank account.

You can line up the withdrawals with your pay days so that you are saving the money before you even realize it’s there. Alternatively, you can contribute to SPP by setting it up as a “bill” in your bank’s online bill payment section. You can send us a cheque, or you can make a contribution with your credit card! It’s all part of the flexibility of being an SPP member.

Check out SPP today!

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Working past 65? Check to see if you’ll still have benefits

More and more Canadians – either because they need the money or love their work – are continuing to be on the job beyond age 65.

But, reports Money Canada’s Vawn Himmelsbach, “if you stay with your employer after age 65, your benefits could expire at a time you need them most.”

Mandatory retirement at 65 stopped being the law in 2009, she writes. Today, Statistics Canada figures show that “one in five seniors (21 per cent) aged 65 to 74 worked in 2022,” she continues, noting that while “some seniors enjoy their work or the sense of purpose it brings them… many others are working because they have to.”

Those in the “have to work” category are doing so for “financial security reasons, such as affording everyday expenses, paying off mortgage debt, or supporting adult children,” Himmelsbach notes.

But even though there is no longer a mandatory retirement age, your workplace benefits may be impacted by the candles you see lit on your 65^th birthday cake.

“Many group insurance policies terminate at age 65, which typically impacts disability and life insurance benefits,” she explains. She quotes Rajiv Haté, a senior lawyer at Kotak Personal Injury Law, as recently telling BNN Bloomberg that health and dental benefit coverage may also end at that point.

“Say, for example, you’re 66 years of age and have been working at the same company for 20 years, with full benefits. You’re injured on the job and make a claim, only to find out your insurance expired when you turned 65 and the insurer denies your claim. Since you don’t have coverage, there’s not much you (or even a lawyer) can do about it,” she explains.

It’s important to check with your employer about your benefits coverage, she stresses.

“Whether your health and dental benefits expire will depend on your employer’s policy. Some policies will continue past age 65, so long as you’re paying your premiums. Others will end at age 65, though there may be an option to convert it to private coverage,” she writes.

If you are able to convert your workplace benefits into a private policy, you might be able to do so without the need for a medical exam, the article notes. Getting your own private coverage is also a possibility (if you find yourself without coverage), but a medical test may be required and that could impact the price of premiums – or worse, you could be denied coverage.

Those without coverage should put aside money in savings to cover medical expenses, the article concludes.

As one who has retired from full-time work for a little over 10 years, it is for sure a great thing if you can continue to take part in your workplace program. The cost of prescription drugs, dental care, and new glasses – like everything else – keeps going up, and once you are retired, you will be living on less income (barring a lottery win) than you had while working.

Saving for retirement on your own can be daunting, particularly if you aren’t up on stocks, bonds, real estate, infrastructure, or other categories of investment. But there’s a solution – the Saskatchewan Pension Plan. SPP does the heavy lifting of investing your savings for you. And, once it is time to turn in your name badge, SPP provides ways for you to turn those savings into income, such as via a lifetime monthly annuity payment, or our more flexible Variable Benefit.

Check out SPP today!

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Saving for retirement is only half the battle: Brett Millard

While saving, investing and building wealth are key to retiring well, there’s a second factor to consider – drawing down those savings as income when you actually leave paid work.

So writes Brett Millard in Castanet.

Saving is the “accumulation” phase, but drawing down that money, or “decumulation” also requires a lot of thought, he writes.

“Once retirees reach their golden years, a new challenge emerges: how to best withdraw those funds in a sustainable and tax-efficient way. This phase, known as ‘decumulation,’ is just as crucial to a retiree’s financial well-being as the accumulation phase. A well-thought-out decumulation strategy can make the difference between financial security and uncertainty in retirement,” he explains.

After a lifetime of saving in such vehicles as “RRSPs, TFSAs, pension plans and other investment accounts,” it’s important to get decumulation right, he adds.

“Without a proper decumulation plan, retirees risk depleting their savings too quickly, paying more in taxes than necessary and leaving less behind to their loved ones. To maximize the funds available in retirement, Canadian retirees need a thoughtful, carefully managed withdrawal plan that considers taxes, investment growth, longevity, and lifestyle needs,” Millard writes.

He offers up a number of guidelines to help people think through the decumulation process.

• Determine retirement income needs: You need to know how much you are going to be spending once you are retired, he explains, and then budget accordingly. “A thorough budget helps you understand how much income you’ll need each month, setting the foundation for your decumulation plan,” he notes.
• Calculate sustainable withdrawal rates: You want to try and determine how much money you can take out of savings as income per year at a rate that is sustainable, he explains – so that you don’t run out of savings when you are older. Some use the “four per cent” rule, if in doubt consider getting professional advice, he adds.
• Consider tax-efficient withdrawal strategies: “Withdrawing from different accounts in a strategic order can help minimize taxes and extend the life of a portfolio. Generally, but not always, it’s tax-efficient to withdraw from non-registered accounts first, then RRSPs or RRIFs, and finally TFSAs. By delaying RRSP withdrawals, you allow these funds to continue growing tax-deferred. Similarly, keeping withdrawals from TFSAs until last can help protect tax-free income. Again, everyone’s situation is different and a plan should be customized for you,” he writes. Will income-splitting be beneficial to you, tax-wise, he asks.
• Manage longevity and market risk: “Outliving retirement savings is a major concern for retirees and balancing growth with security is a critical part of any decumulation plan. One approach is to keep a mix of assets that allows for growth potential, such as stocks, alongside lower-risk investments like bonds or guaranteed income products,” he warns.
• Evaluate guaranteed income options: Millard says you may want to consider buying an annuity to provide guaranteed lifetime income. “Certain types of guaranteed income products, such as annuities, provide predictable income that isn’t subject to market volatility. While annuities often require an upfront investment, they can ensure a steady stream of income for life, which can reduce stress about market risk and longevity,” he writes. Again, consider getting professional advice to be sure an annuity is right for you.
• Review and adjust regularly: “Retirement circumstances, lifestyle changes, market conditions, and tax laws evolve over time. A regular review—ideally once a year—helps ensure your plan stays aligned with your goals and income needs,” he writes.

“By giving as much focus to decumulation as to accumulation, retirees can enjoy their retirement years with financial freedom and flexibility,” Millard concludes.

If you are a member of the Saskatchewan Pension Plan, you have several decumulation options when you retire. There’s SPP’s stable of annuity options, all of which provide you with a lifetime monthly payment so you can never run out of money. There’s also the Variable Benefit, which provides you with more flexibility in when and how much of your savings you draw down.

Check out SPP today!

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Less than half of Canadians feel they are on track with long-term savings: TD survey

Just 49 per cent of Canadians surveyed by The TD Bank Group believe they “are on track with their savings,” reports Wealth Professional.

And about two-thirds of those asked cite “the common theme of the cost of living as the main factor disrupting their ability to put more money into savings or investments for their future financial security.”

But 45 per cent, Wealth Professional continues, “said they lack investment knowledge, and many more are either concerned that they have ineffective long-term investments, don’t have a plan, or are holding back from making any investments at all.”

The survey found that “the current economic climate” is making Canadians “cautious,” the article notes. “Thirty-five per cent are opting for liquidity in their choice of savings accounts rather than Tax Free Savings Accounts (TFSAs), registered retirement savings plans (RRSPs), or First Home Savings Accounts (FHSAs), especially as just 30 per cent know when it is appropriate to choose an RRSP versus a TFSA,” the article adds.

The survey found that the percentage of respondents who are actually investing is low.

“More than a third of respondents… have never invested and 58 per cent only do so once a year,” Wealth Professional reports. “Thirty per cent don’t have a personalized investment plan, with 29 per cent of that group believing they don’t save enough money to need one and 20 per cent not knowing where to start,” the publication adds.

“It’s no secret that Canadians are feeling the impact of the current economic climate in how they approach their investments, and that’s why it’s more important than ever to seek trusted advice,” Pat Giles, Vice President, Saving & Investing Journey at TD, tells Wealth Professional. “It’s encouraging to see that Canadians would feel more confident reaching their financial goals if helped by a financial professional. Having the right financial support can make a significant difference when it comes to planning for both short and long-term financial goals.”

The good news from the survey, the article notes, is that “the youngest cohort of adults, Gen Z, are already showing good financial habits.”

“While 44 per cent across all respondents recognize the benefit of improved financial planning in helping to achieve their financial goals, this includes just 32 per cent of Boomers and 43 per cent of GenXers, compared to 59 per cent of Gen Zs and 55 per cent of Millennials, with 68 per cent of Gen Zs also having the highest level of respondents who invest at least once a year,” reports Wealth Professional.

“Balancing competing saving and spending priorities can be challenging,” states Giles in the article. “It’s possible to enjoy the present while also investing and saving for the future. Setting financial goals doesn’t require a large amount to start; it’s about cultivating a habit of investing and sticking to it.”

Members of the Saskatchewan Pension Plan can start small when starting their retirement savings journey. You can contribute any amount up to the limit of your own RRSP room. You can also transfer in funds from any RRSPs you have. SPP will take your hard-earned savings and grow them in a low-cost, professionally managed pooled fund. When it’s time to turn savings into retirement income, your options include a lifetime monthly annuity payment or the more flexible Variable Benefit.

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Six smart money moves for the younger set

When this writer thinks of his own terrible money habits in his 20s – no budget, no savings, living payday to payday, high debt – the memory is cringeworthy.

We wish we had been able to read CNBC Select’s article, “Six Money Moves to Make in Your 20s,” back in the day. But for those of you blessed to be young, this article has some great concepts.

First, the article recommends, “create a budget and stick to it.”

“While it may seem like a lot of work to create a budget, there are numerous online resources and apps that can help you. Plus, once you have one, the majority of the work is done, and you can tweak it as your spending habits or income change,” the article advises.

“After you create a budget, it’s important to stick to it. Regularly check-in with your budgeting goals so you don’t spend more than you can afford to repay. And if you share expenses with someone else, make sure you both have access to the budget and hold each other accountable,” the article continues.

The next tip is to “build a good credit score.”

“Establishing a good credit score is key to qualifying for the best financial products, like credit cards and loans. Plus, the higher your credit score, the better terms you’ll receive, which can save you thousands of dollars in interest in the long run (we always recommend you pay your balance on time and in full each month),” the article explains.

If you get a credit card, “the easiest way to improve your credit score is to use the card, be mindful to spend within your means, make sure you pay at least the minimum on time every month and pay it in full when possible,” CNBC Select suggests.

Tip number three is to build up an emergency fund, for unexpected expenses like car repairs, the article notes. “The money in your emergency fund can help you avoid taking out a loan or carrying a balance on a credit card, which can save you money on interest charges,” the article adds.

Your emergency fund should be in a “high yield savings account,” and experts recommend building it up to cover “three to six months of expenses.” Start small but build it steadily, the article suggests. “Saving $20 a week (roughly $3 a day) adds up to $1,000 in a year, which is a good cushion to get you started,” the article continues.

The next tip is to save for retirement.

“It’s never too soon to start saving for retirement, and the earlier you start putting money toward your future, the more it can grow,” the article begins. If your employer offers any kind of retirement savings program, be sure to sign up and contribute to the max, the article continues. Otherwise, you can save on your own – here in Canada, you can contribute to a registered retirement savings plan, a Tax Free Savings Account, and (of course) the Saskatchewan Pension Plan, a voluntary defined contribution plan.

Pay off your debt, the article advises – if you have “student loan or credit card debt, you should make paying it off a priority in your 20s.” Carrying debt, the article says, not only can lower your credit score and make it harder to borrow money, but it will cost you “a lot of money in interest charges the longer you carry the debt.”

Finally, the article concludes by recommending we develop “good money habits,” such as regularly reviewing your money situation, avoiding high fee banking, and “spending within your means.”

This is a nice overview and makes sense for older people as well as young.

If, as the article suggests, you want to start saving on your own for retirement, the SPP may be of interest. It’s a government-run, not-for-profit plan, so the fees are low – less than one per cent. SPP takes the money you contribute (which you get a tax deduction for), invests and grows it in a professionally managed pooled fund, and then will turn it into retirement income for the future you. Options include a lifetime monthly annuity payment or the more flexible Variable Benefit.

Get SPP working for you!

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Homeowners with pensions faring better than others: Stats Canada survey

New research from Statistics Canada finds that “Canadians… 55 to 64 who have both a principal residence and an employer-sponsored pension plan” have, on average, a net worth that is “$1.4 million more than those who have neither.”

The Statistics Canada Survey of Financial Security, based on 2023 data, was covered in an article by Money Canada’s Nicholas Sokic.

The article notes that “those near retirement age who rented and did not have an employer-sponsored pension plan had a median net worth of $11,900.”

“The longstanding expectation is that families build up their assets and reduce their debts over their working years and spend down their assets during their retirement years,” Money Canada notes, quoting from the report. “Canadian families with low net worth will be more likely to need to work longer, may need more government support and may be at greater risk of poverty.”

What about those in the middle of those two examples? Let’s read on.

“Families with only one of these two assets formed another, separate group,” the article explains.

“Families who owned their principal residence but who did not have an employer-sponsored pension plan had a median net worth of $914,000 in 2023. At the same time, those who had an employer pension plan, but who did not own their principal residence, had a median net worth of $359,000,” reports Money Canada.

The article notes that younger people without houses or pension plans are building net worth “in other ways.”

“Many young families are trying to build their wealth in other ways, given the economic challenges of that generation. Among young families who rented their principal residence and who had no employer pension plan, 15 per cent had a net worth greater than $150,000 in 2023, compared to five per cent in 2019,” the article explains.

“Members of this group commonly held assets in real estate that was not their principal residence with a median of $350,000. The median in their RRSPs was $35,000, and the median in their TFSAs was $20,000,” the article continues.

“The median net worth of Canadian families in 2023 was $519,700,” the article concludes.

If there’s a message here, it’s that if you can’t get into the housing market – and it is increasingly difficult for younger people to do that – you need to set aside some long-term savings in other ways, such as through a workplace pension plan or personal retirement savings.

If you have such an arrangement at work, be sure to sign up and contribute to the max. Often, there is an employer contribution match that speeds up the building of your nest egg.

Don’t have a workplace pension plan to join? Don’t worry. An answer for you may be the Saskatchewan Pension Plan. Any Canadian with unused registered retirement plan room can join. Once you’ve joined as an individual member, you decide how much to contribute, and SPP does the heavy lifting of investing and growing your savings. When it’s time to retire, you can choose from such options as a lifetime monthly annuity payment, or the more flexible Variable Benefit.

Check out SPP today!

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Two-thirds of millennials fear money shortfall in retirement: CPPIB study

A whopping 67 per cent of “Canadians aged 28 to 44 are afraid they won’t have enough income during retirement,” reports The Financial Post.

The Post highlighted this, as well as other findings, from a recent report by the Canada Pension Plan Investment Board (CPPIB). While the millennials are most concerned about income shortfalls, overall, 61 per cent of Canadians share their fear, the article notes.

CPPIB’s Frank Switzer tells the Post that “planning for retirement can be intimidating, especially for younger Canadians.” He says that building a plan – one that factors in the retirement benefits you’ll receive from the Canada Pension Plan – “provides a roadmap to ensure your savings will last in your retirement years.”

The article includes the views of Dylan Wilson of Verecan Capital Management, who states that “inflation, the rising cost of living and market shocks over the past few years” may be making younger people more anxious about their retirement nest eggs.

“You’ve got an entire generation that was raised on cheap money that financed everything, and now that inflation has returned and there’s more uncertainty globally going forward, I can see why people would have anxiety,” he tells the Post.

Participation in workplace pension plans is also facing a decline, the article reports.

“The Office of the Chief Actuary reported that the proportion of active registered pension plan members in defined benefit plans declined from 90 per cent in 1989 to 67 per cent in 2019. In the private sector, this had plunged from 85 per cent to 39 per cent, especially as more employers switched to offering defined contribution plans instead,” the Post tells us.

A defined benefit plan provides a lifetime pension based on a formula that typically factors in your years of service with your employer and salary. A defined contribution plan is the kind where how much you pay in is defined – your future income isn’t known in advance but is based on how much has been saved in the plan at the time you want to retire.

While those who bought houses decades ago have seen gains in real estate value that might help fund their retirement, the same is not true for those just entering the market, the Post reports.

“Younger Canadians who either cannot afford homeownership in the current market or are grappling with hefty mortgage payments may not be as confident when it comes to relying on real estate assets for their retirement,” the article notes.

Other findings from the CPPIB report:

• “Day-to-day financial stress was 42 per cent for the 18-24 age group and 12 per cent for the 65-plus age group. As for general anxiety about money, 64 per cent of the 18-24 age group experienced this, compared with 33 per cent of those over 65,” the Post reports.
• “Retirement planning stress climbed to a peak for the 45-54 age group — Generation X starting to inch closer to retirement — and steadily dropped for older age groups,” the article adds.
• “The study found Canadians now have higher expectations of how much money they will require in retirement. The typical amount non-retirees expect they will need each year rose from $50,000 to $55,000, while their expected total savings required climbed from $700,000 to $900,000 over the past year,” the article states.

Wilson tells the Post that “it is important for Canadians to start saving for retirement now, even in small amounts.”

Automating your savings – by transferring an amount directly from your bank account to retirement savings one or two times monthly – was recommended in the article by Wilson, as was getting your spending under control to make room for saving.

“Life’s an expectations game,” Wilson tells the Post. “Everything you take today, you’re giving up tomorrow.”

The availability of workplace pension plans has declined over the years, with many of us having no such program to join at work. If you’re in that boat, check out the Saskatchewan Pension Plan, which you can join either as an individual or an organization. You decide how much to contribute (and you can automate those contributions), and SPP invests your savings in a professionally managed, low-cost pooled fund.

At retirement, your choices include a monthly lifetime annuity payment that guarantees you’ll never run out of money, or the more flexible Variable Benefit.

Check out SPP today!

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Should RRIF rules be modernized?

Is it time to revisit the rules regarding converting registered retirement savings plans (RRSPs) to registered retirement income funds (RRIFs)?

Commenting in The Globe and Mail, Tim Cestnick is of the opinion that modernization of the rules is in order.

Cestnick’s neighbour has reached the age when he has to begin taking money out of his RRIF.

“Thousands of Canadians are worried about outliving their RRIFs and the rules that require withdrawals starting in the year they reach 72. The government is aware of the concerns,” writes Cestnick.

Right now, you must stop contributing to an RRSP by the end of the year in which you reach age 71, he explains. “The most common strategy is to convert the RRSP to a RRIF by that date, with mandatory withdrawals from the RRIF starting the following year,” he continues.

Ah, those mandatory withdrawals.

“The withdrawals required from a RRIF are calculated as a percentage of the assets in the RRIF on Jan. 1 each year. The older you get, the higher the percentage you’ve got to withdraw. These percentages were set by the government to allow you to preserve enough savings to provide a constant income stream, indexed to inflation, from age 72 to 100. The rules also assume that you can earn a three per cent real (after inflation) rate of return on your portfolio each year, and that inflation is an average of two per cent annually.”

There are some flaws with the status quo, Cestnick explains.

“One key issue is that folks are living longer, and longer. In the early 1990s, when registered plan reform took place, life expectancy at age 71 was 13.7 years. This has increased to 16.2 years as of 2020 (the most recent data available). The 2020 data shows that 14 per cent of the population will live to age 95 (the figure for women is 18 per cent), which has increased from 5.6 per cent in the early 1980s. And the proportion of people making it to 100 has nearly doubled over that time,” he writes.

The idea that you must make three per cent annually on your investments is also a bit of an issue for Cestnick.

“The government report shows that, in order to achieve this return, based on average historical data, you’d have to invest about 30 per cent of your portfolio in equities for 25 years (basically, from 70 to 95 years) – or perhaps invest more in equities to begin with, reducing this percentage as you age,” he explains. That’s a high exposure to risk and volatility for older people, as “the more equities they hold in a portfolio, the more nervous they get.”

He also notes that “there’s no shortage of experts who would suggest” the target inflation rate of two per cent for 28 years is not reasonable.

He concludes with three suggested reforms to the RRIF system to make things more sustainable.

• “There should be an increase in the age at which RRIF withdrawals must start – perhaps to age 75;
• The minimum required RRIF withdrawal schedule should be reduced; and
• RRIFs under a certain amount should be exempt from minimum withdrawals.”

Another less popular option when you reach end of life for your RRSP is to use some or all of the funds to purchase an annuity. The annuity option is best suited for times when interest rates are higher, so it is now beginning to be mentioned as an option again.

Are you saving on your own for retirement? Why not partner up with the Saskatchewan Pension Plan. All you need to do is direct some savings into your SPP account, and we will do the heavy lifting of investing your money in a low-cost, professionally managed, pooled fund. At retirement, your options include a lifetime monthly annuity or the more flexible Variable Benefit.

Get SPP working for you!

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Why saving is so hard – and ways to move forward on it

Over the decades, based on countless conversations with friends, family and work colleagues, it’s safe to say that most people find saving difficult, if not impossible.

Save with SPP decided to try and pin down why some folks find it so tough to direct a few bucks into a piggy bank.

An article in the Lemonade blog says science is to blame.

First, the article points out that the majority of Americans “save between zero to five per cent of their money each month,” compared to the recommended rate of 15 per cent.

Most people get their paycheque and spend all their money immediately, the article continues. “Studies show that poor financial choices are associated with high levels of in-the-moment living,” the Lemonade article suggests, citing research from the American Psychological Association.

“It’s hard for us to save up because we tend to value the ‘now’ over the ‘later.’ In behavioral economics speak, this is called ‘present bias,’” the article explains.

The Opportun blog cites a few other reasons besides the “living in the now” theory.

“Thinking is hard, and takes effort,” the blog suggests. Rather than “figuring out the perfect amount to save, or how much extra we can afford to pay on our credit card debt, we might do nothing.” Doing nothing is easier, the article suggests.

Putting money away (by making it harder to access) also requires a lot of willpower, the article says, which not everyone has. Procrastination – not even starting a savings plan – is seen as another culprit, the article adds.

The Finance over Fifty blog lists a number of “barriers to saving money,” which include “living beyond your means, (not) having a budget, (having) too much credit card debt and “not making enough money,” among others.

“If your expenses exceed your monthly income, there’s nothing to left to save,” the blog explains. “Plus, living beyond your means only sets you up to get deeper in debt because you don’t have any cash savings to cover a financial emergency.”

You’ll need to track your expenses, develop a budget, and then reduce spending until there is money left over each month, the blog recommends.

“A budget will help you be more intentional with your money. When you give every dollar a purpose, you maximize your income,” the blog notes. “One way to be purposeful with saving more money is to include it in your budget. Assign your monthly savings goal as a regular expense, and pay it like it’s any other bill.”

Let’s boil all this down. Basically, we are not naturally wired to set money aside for the future. We do what’s easy – spending money – rather the harder ideas of budgeting, living within our means, and being able to save. And that’s the problem – unconscious spending.

Our late Uncle Joe recommended that we put away 10 per cent of what we earn, and live on the rest. “You’ll never have any problems if you do that,” he advised. We are doing that now, but only because we are retired and without a mortgage. But when we were paying down the mortgage and other debt, we always put something away, even one or two per cent.

So, if saving looks impossible, start with a small, affordable amount, and ratchet it up.

If you are saving on your own for retirement, consider joining the Saskatchewan Pension Plan. With SPP, individual members decide how much they want to contribute – so you can start small. You can have money automatically deposited in SPP from your own bank account, and as you work to free up money, you can increase that amount when possible. SPP will invest your hard-saved dollars in a low-cost, pooled investment fund, and when you are ready to retire, you’ll have options like a monthly lifetime annuity payment or the more flexible Variable Benefit.

Check out SPP today!

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