Is 70 the new 65? Canadians are retiring later: Global News

Regina’s Diane Clark tells Global News that retirement is not working out the way she planned it.

“We don’t travel anymore, we don’t buy as good of food as we used to buy, basically, and we stick at home a lot,” the 75-year-old tells Global News. Her pension investments took a big hit in the 2008 credit crisis, the broadcaster reports, and that plus post-COVID inflation has cramped her retirement income and lifestyle.

Asked what she would advise others to do, her answer was simple – “save, save, save,” Global reports.

Recent research from CIBC shows that more Canadians – perhaps mindful of the fact that a dollar doesn’t goes as far as it once did – are planning to exit the workforce later than planned, Global notes.

“About 66 per cent of Canadians are changing their plans for when they retire,” the Global article notes. “As a result, some retirees are looking to save more, while those already retired told CIBC they’re cutting back on planned travel or leisure activities, reassessing investments and adjusting their budget.”

So what can soon-to-be-retirees learn from this?

Global talked to CIBC’s Jamie Golombek, who suggested people should develop “an actual budget, and part of that budget should include retirement savings and making sure we’re taking advantage of all the different registered plans.”

If savings don’t generate enough income, work becomes less likely to become a thing of the past, the article continues.

The CIBC research found that “70 per cent say they anticipate having to work during their retirement either through a phased or semi-retired approach, with some working well past the retirement age of 65,” Global reports.

Other options, Golombek tells Global, include part-time or “gig economy” jobs.

Many older Canadians worry about having to depend on their adult kids in their later years.

“They’re absolutely terrified about outliving their savings and becoming a burden on their family,” Rudy Buttingol, president of the Canadian Association of Retired Persons (CARP), tells Global News.

CARP, the article says, wants to see the current registered retirement savings plan/registered retirement income fund rules become more flexible. The current rules, the article explains, “force some seniors who are still working to receive income that would better benefit them later in life.”

Bonnie-Jeanne MacDonald of the National Institute on Ageing is quoted in the article as noting that those who wait until 70 to collect their Canada Pension Plan and Old Age Security benefits will get a higher monthly amount.

“If you wait from age 60 to age 70, you’ll more than double this pension, which is guaranteed for life, it’s inflation indexed and it’s … a great deal when you do the math. It’s almost like an arbitrage opportunity because the incentives are so good,” she tells Global.

Members of the Saskatchewan Pension Plan have an option of interest to those who don’t want to draw down their retirement savings until later in life. With the Variable Benefit, you get “control over how much retirement income you wish to withdraw throughout the year,” with the rest of your funds continuing to be invested in either SPP’s Balanced Fund or Diversified Income Fund.

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In the U.S., these millionaires see no need to retire

We all imagine the dream of suddenly having millions in the bank — and being able to instantly leave the workforce for a life of travel, leisure and fun.

But according to Business Insider, there are more than a few folks south of the border who – despite already having made those millions – plan to keep working into their 80s and beyond.

What? Let’s hear out their thinking.

“Many older Americans continue working into their retirement years, even though they’re millionaires,” the Business Insider article begins. And while many keep working “for financial reasons,” others just “want to keep their minds fresh and social lives full,” the article continues.

Jack Bishop, an Air Force vet and five-decade veteran of the restaurant industry, says he could have retired early, but chose not to. “My plan was to be retired at 55, but I felt like I was in my prime, and we were doing great,” Bishop tells Business Insider. “I wanted to keep my mind alive.”

Lawyer and real estate investor Michael Mosher, 74, is still hard at work running his 300-acre ranch in Texas, the article notes.

“You need to do something productive that engages your mind and body,” Mosher tells Business Insider. “As long as my brain holds up and my back and knees don’t go away, I’ll be a lawyer or rancher. I have the ability now to control my docket with the lawyer part so that I can run the ranch and not vegetate.”

Florida’s Anne Sallee tried retirement, but re-entered the workforce in her 60s, the article tells us.

“I consulted for free and volunteered in my community, but I can vividly remember the first time the doctor’s office asked me if I was retired, and I said yes. It was a painful moment,” Sallee tells Business Insider. She returned to the workforce after a two-year hiatus and now works as her city’s economic development coordinator.

“I had to be up and dressed at a desk at 8 every morning, which was a shock to my system,” Sallee states in the article. “I was used to a little more flexibility in my day, but I’ve been here now two years, and I absolutely love it.”

Deb Whitman, the American Association of Retired People’s chief public policy officer, tells Business Insider that “the number of people 55 and older who work or seek work is twice as high as in the 1990s, with Americans overall working longer.”

“One thing you’re seeing about people working longer is this fear of holding onto the job that they have because they might have lost one before or fear that they’ll be pushed out any day,” Whitman tells the publication.

We would estimate that about half of our old high school classmates, now in their mid-60s, are still on the job. The rest are either fully or semi-retired, doing other things. Building a retirement savings nest egg is certainly a factor in figuring out, one day, whether you can ease out of full time work into a part-time or consultant-type role – or to volunteer, or learn something new.

A great savings partner to know about is the Saskatchewan Pension Plan. With SPP, you decide how much to save, and how to get the savings to us – it can be preauthorized contributions from your bank account, it can be by cheque, it can be by a lump sum transfer and it can even be via credit card. We’ll take care of your money’s future by investing it in a low-cost, professionally managed pooled fund. When it’s time to ease out of your role, you’ll have income options that include a lifetime monthly annuity payment, or the more flexible Variable Benefit.

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Canadians saving less, sharp drop in RRSP contributions: Edward Jones

Only 39 per cent of Canadians planned to contribute to their registered retirement savings plans (RRSPs) for the 2024 tax year, a sharp drop of 10 per cent from the previous year.

“Canadians’ ability to save for retirement is taking a significant hit,” begins a media release from Edward Jones Canada, discussing their most recent polling numbers.

The release suggests that “high living costs and debt burdens” are what’s preventing Canadians from saving.

The research, the release continues, found that just 15 per cent of Canadians planned to max out their RRSP contributions for 2024, “a drop of six points from the previous year.” And, the release adds, while 60 per cent of younger Canadians (aged 18 to 34) planned to contribute for the 2023 tax year, only 41 per cent planned to make contributions for 2024.

Worse still, Edward Jones Canada reports, “one in 10 Canadians indicate they cannot afford to invest in their RRSP at all.”

So what’s behind this retreat from saving?

“When it comes to the single biggest barrier Canadians face in saving for retirement, more than one-third (39 per cent) point to financial challenges caused by insufficient income, high cost of living and debt repayment,” the release points out.

“Amid economic uncertainty, it’s clear that Canadians are prioritizing their current expenses and putting retirement planning on the back burner” states Julie Petrera, Senior Strategist, Client Needs at Edward Jones, in the release. “And despite the crucial role a well-defined plan plays in overcoming financial barriers, many Canadians admit to not having a specific retirement savings strategy, underscoring a need for comprehensive financial guidance that balances short- and long-term financial priorities.”

No money to save, and no plan – that’s a problem. Let’s read on.

Just 26 per cent of those surveyed said they faced no savings “barriers,” the release continues, and “are on track to saving for their ideal retirement.”

There was, Edward Jones found, variations on this theme by age band.

Just 15 per cent of Millennials and 10 per cent of Gen Z respondents agree they have no barriers and are on track, the release notes. For younger Canadians barriers to saving also include “not knowing where to start without trusted financial advice (14 per cent of Millennials, 15 per cent of Gen Z), or that retirement feels too distant to plan for now (15 per cent of Millennials, 21 per cent of Gen Z),” the media release notes.

The release also notes that Canadians “recognize the importance of being financially resilient in retirement,” and that:

• 84 per cent say they will account for inflation while retired
• 84 per cent “want to be able to maintain their current lifestyle” in retirement
• 83 per cent agree healthcare in retirement “is an important priority”

“When it comes to determining how much to save for retirement, an alarming one-fifth (20 per cent) of Canadians report not having a specific strategy. Approximately half (51 per cent) say they rely on their income and budget to dictate their contribution, while 22 per cent rely on advice from financial advisors. Looking at age cohorts, Gen Z shows a distinct reliance on family or friends for guidance (28 per cent),” the release notes.

Final word to Julie Petrera, who states “at Edward Jones, we recognize that money is a thing, but it’s not everything. That’s why we work with clients to understand all of their unique priorities—both immediate and long-term—and then help them establish a plan to address all their goals.”

If there’s an overall takeaway from this research, it would seem that making saving a priority despite all the hurdles the economy can put in your way is a strategy worth considering. Many experts say you should make your savings automatic, so that the dough is in the piggy bank before you have a chance to spend it.

That sort of automated savings is easily available through the Saskatchewan Pension Plan. SPP members can set up automatic, pre-authorized contributions to SPP from their bank accounts; many make these coincide with pay day. You’re then paying your future self first and leaving SPP to do the heavy lifting of growing your savings through low-cost professional investing in a pooled fund.

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Canadians think they’ll need $1.5 million to retire: BMO survey

Inflation is carving away at Canadians’ retirement nest eggs, a new BMO survey has found – making it harder to reach the $1.54 million savings target they think they’ll need.

A Yahoo! Finance article by Alicja Siekierska breaks down this and the other results of BMO’s research.

“According to BMO’s annual retirement survey of 1,500 Canadians, 76 per cent of respondents are worried they won’t have enough money in retirement due to rising prices. Another 63 per cent of Canadians say rising prices over the last year have hampered their ability to save for retirement,” she writes.

What are savers doing to offset inflation?

They have, the article notes, begun “cutting other spending,” or saving less for retirement. Other strategies include planning to work longer – or to “put off retirement savings completely,” Yahoo! Finance reports.

“Inflation is a major concern for Canadians, and the spike in prices as the economy emerged from the pandemic is a stark reminder rising prices can affect spending, investment and savings plans,” states Robert Kavcic, senior economist at BMO, in the article. 

“Inflation should always be a major consideration when saving and investing for retirement and if investors have concerns about how rising prices may impact their retirement savings, it might help to seek guidance from a financial professional,” he tells Yahoo! Finance.

The $1.54 million Canadians think they need to save is down from last year’s survey, where Canadians estimated they would need $1.7 million, the article notes.

And, despite inflationary pressures, the article points out that average registered retirement savings plan (RRSP) contributions have gone up, “rising 14 per cent over last year to $7,447. That’s also above the average contribution record of $6,822 set in 2021, when the COVID-19 pandemic saw savings rates go up.”

What can we do to offset the impacts of inflation, so we can keep saving for retirement?

According to an article from The Punch, there are a number of possible strategies.

Focus, the article suggests, on “priority” expenses and see if you can cut non-priority spending. Stick to a budget, the writers suggest. Save on transport costs by using public transport, The Punch continues, and consider additional streams of income such as “freelance work, taking up part-time jobs, monetizing skills, or venturing into a small-scale business.”

Be efficient with the energy you use, the article concludes, reduce dining out, and “haggle” for lower prices.

If you can keep a stream of retirement savings dollars going into your nest egg, your future you will thank you profusely. And if you are saving on your own for retirement, consider partnering-up with the Saskatchewan Pension Plan. SPP offers professional money management at a low cost – your savings dollars will be invested in a diversified, pooled fund. When it’s time to give back your ID badge, your SPP retirement income options include a lifetime monthly annuity payment, or the more flexible Variable Benefit.

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Living costs, debt are main barriers to saving: IG research

A recent study by Winnipeg’s IG Wealth Management took a hard look at what’s preventing Canadians from saving for retirement – and the high cost of living, and personal debt, are near the top of the list.

A recent article on Advisor.ca, authored by Jonathan Got, took a look at the survey’s key findings.

An overwhelming 80 per cent of the 1,500 Canadians surveyed cited “the rising cost of living” as their chief barrier to saving for retirement, the article notes. A significant percentage of the sample – 38 per cent – said they “put off saving for that goal (retirement) to repay debt.”

Only 18 per cent of those surveyed took the position that living in the now is more important than saving for retirement – they said they “preferred to enjoy their current lives,” the article tells us.

Forty-six per cent of the sample felt that their priorities should be on current living costs. They said, “they prioritize spending on their current needs and wants, despite many wishing to save for retirement to travel or take on other hobbies,” the article adds.

“Rising costs and mounting debt repayment challenges often undermine Canadians’ ability to save for retirement,” states Christine Van Cauwenberghe, head of financial planning at IG Wealth Management, in the article.

The article goes on to note that those surveyed spent “roughly 67 per cent of their income on basic living expenses, 20 per cent on leisure activities and 12 per cent on retirement.”

Other findings cited in the article:

• One-third of respondents planned to keep working in retirement “to afford basic living expenses, supplement income, or maintain social connections.”
• Thirty-eight per cent of respondents want to travel in retirement; “one third would focus on hobbies and 17 per cent saw themselves working part-time or consulting.”

The figure that jumps off the page from this research is that people are spending 67 per cent of their income on basic living expenses.

The Statista Consumer Insights survey reveals another concern – that people are having to dip into their savings to pay for current living costs.

Fifty-nine per cent of Canadians say their cost of living has increased “notably,” the study notes, with 26 per cent of Canadians saying they had to dip into their savings to make ends meet.

Only Australians (at 29 per cent) were dipping into their savings more than Canadians.

What does all of this suggest? Obviously, saving for retirement is a difficult thing to do, particularly when you have no control over increases in the cost of housing, food, fuel, and overall living. You may have to start small, or reduce the amount you’re saving, but it’s important to keep that nest egg building, to help you in a future where you are no longer bringing home a paycheque.

If you have a pension program at work, be sure to sign up and contribute to the max. If you don’t, a smart option is to join the Saskatchewan Pension Plan. SPP will take on the hard part of retirement saving – the investing part. SPP will grow your savings in their low-cost, professionally managed pooled fund. You can make savings automatic by transferring money in from your bank account each payday – start small, and increase your savings when your income goes up.

At the finish line – retirement – your options will include a monthly annuity payment for life, or the more flexible Variable Benefit.

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Looking for ways farmers can thrive in retirement

Writing in Country Guide, Helen Lammers-Helps notes that farmers have some unique challenges when it’s time to park the tractor for the last time.

“For many farmers, being a farmer is part of their fundamental nature. It’s who they are and they can’t imagine a time when they won’t be a farmer. Who hasn’t heard a farmer say they want to die farming,” she writes.

However, she continues, the day will come when farmers have to exit the vocation they love.

They may need to retire “for health reasons, to make room for the next generation,” or to fulfill a promise to a spouse that they would “slow down,” or for financial reasons, explains Lammers-Helps.

But even an unexpected exit from farming can be managed – with a little advance planning, the article suggests.

“The good news is that each of us has been through many life transitions, and with some effort to plan to use the supports and resources available, the post-farming years can actually be looked forward to with anticipation,” she continues.

The article quotes Waterloo, Ont.-based psychotherapist Chad Bouma as saying there is no “one-size fits all” strategy to assist farmers in retiring. Help from accountants and lawyers, he tells Country Guide, will help them with the complexity of leaving the farming business and (if applicable) dealing with succession planning.

There’s also the change in routines, perhaps after many decades of farming, the article notes.

Burlington, Ont.-based grief and trauma therapist Selena Jones tells Country Guide that “while retirement can initially bring relief, she has noticed the loss of routine leaves some people feeling anxious and listless, which can manifest as sleep difficulties, frustration, irritability and anger.”

She says the retiring farmer needs to focus on next steps.

 “Pay attention to what sparks your interest but also what you know you don’t want to do. Think about what you liked to do when you were younger. Make note of what you’d like to explore when you have more time,” she states in the article.

As well, she suggests people think about what gives them a sense of purpose and fulfillment beyond farming, the article notes.

“Is it being more involved in their community or have they been so involved that they need to take a step back? What do they need to feel like they are in equilibrium,” she asks in the article.

Be open, she tells Country Guide, to “trying a new hobby or checking out a new group.” She urges retirees to “have fun with it. It can open the door to something we had no idea we’d enjoy,” she adds.

Social connections are “incredibly vital,” she notes, saying retirement offers more time to spend with “nieces, nephews, and grandchildren, or to nurture old friendships.” Mentoring younger farmers is another way to find purpose in your life after farming, the article adds.

The article concludes by saying that it’s all right to reach out for help if your retirement from farming is not working out for you – there are plenty of resources to help. “We can’t always do it on our own – and we don’t have to,” notes Jones.

If you are self-employed, you are in charge of your own retirement savings plan. If you find the idea of investing daunting, consider joining the Saskatchewan Pension Plan, a do-it-yourself retirement system open to any Canadian with registered retirement savings plan room. SPP will look after the investing for you, growing your savings in SPP’s low-cost, professionally managed pooled fund. And when it’s time to retire, you can opt for the security of a lifetime monthly annuity payment, or the flexibility of SPP’s Variable Benefit.

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Fourteen per cent of Canadians over 65 have “poverty-level” living standard: NIA

A new study from the National Institute on Ageing (NIA) suggests a sizeable number of Canadian seniors have a “poverty-level” living standard.

The NIA’s findings were the subject of a Wealth Professional article recently, written by Steve Randall.

The article notes that our aging citizens are “facing challenging times, with many dogged by poor finances, weak social connections, and a lack of retirement savings.”

The NIA study, the article continues, found three “key areas of concern” for over 50s in Canada, including “well-being, financial security and health.”

Only 32 per cent of those surveyed reported having strong social connections, with 36 saying their connections are weak, the article reports.

“While 39 per cent of respondents said they engage in social and recreational activities at least weekly, those with poor finances are more likely to be among the 20 per cent who said they engage in these activities only once a month or the 23 per cent who do so rarely,” Wealth Professional reports.

The research indicated that “long-term financial security” among Canadians over 50 was also pretty weak, the article continues.

“Just one in three think they will be able to retire when they want to, with one in four having just $5,000 or less saved, despite working,” the article reports.

A startling finding, Wealth Professional reports, is that “a new measure called the Material Deprivation Index reveals that one in five older Canadians has a poverty-level standard of living including 14 per cent of over 65s.”

A quarter of those surveyed said “their income is not enough for their current or long-term needs, especially among 50-64s without a workplace pension and those with fair or poor health.”

While most of the respondents said they were able to access healthcare, only 48 per cent of those “who said they need home-based services were able to access them,” the article adds. A whopping 80 per cent want to “age in their own home,” with only three per cent showing a preference for moving into a long-term care facility, Wealth Professional notes.

“As Canada’s population ages, this research underscores the urgent need for bold, evidence-based action to combat ageism, strengthen financial security and ensure equitable access to health and social supports. Now is the time for policymakers and communities to come together to build a Canada where older adults feel valued, included, supported and better prepared to age with confidence,” NIA’s Alyssa Brierly tells Wealth Professional.

Last year, the plight of seniors facing a low-income retirement was covered off in an interview Save with SPP did with B.C.’s Carole Fawcett, one of the backers of the Tin Cup lobby group. You can see that article on their website here.

The research suggests that those without a workplace pension plan tend to have more income problems than those who do.

If you can join a retirement savings plan at work, be sure to sign up and contribute to the max. If there isn’t such a plan at your workplace, no problem – you can join the Saskatchewan Pension Plan, a voluntary defined contribution plan that’s open to any Canadian with registered retirement savings plan room. With SPP, you decide how much you want to contribute, and SPP can do the rest. You can automate your contributions, which will then be invested in the low-cost, professionally managed, pooled SPP fund. At retirement, you can opt for the security of a lifetime monthly annuity payment, or the more flexible Variable Benefit plan.

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Retirement savers can do a big “catch up” in their 50s

By the time you’ve reached your 50s, the kids are usually fully educated and gone from the back room, your mortgage is close to paid off, and you’re making the most you ever have – a perfect time to catch up on those neglected retirement savings.

Writing for Money Canada, Romana King takes a look at the “catch up” years – your 50s.

“According to a data report released by Money.ca, the average retirement savings for Canadians aged 55 to 64 is $833,696 — a significant increase compared to the $183,067 saved by those in the 45 to 54 age range,” she writes. “This sharp rise suggests that many Canadians focus heavily on increasing their retirement contributions in their 50s in an effort to close the gap before they retire,” she continues.

So, she explains, if you haven’t actually got around to retirement saving and you have hit the big 5-0, don’t get stressed. “If you’ve fallen behind on your retirement savings, don’t panic — there’s still time to make meaningful progress towards this goal,” she notes, reassuringly.

Her article shows a recent social media post by a 49-year-old woman who confesses that she is “almost 49 and I have zero retirement savings. No exaggeration. Absolutely nothing…. And I know I can’t be the only one.”

It’s not a surprise, continues King, that those among us who are middle-aged aren’t finding a lot of spare dollars to tuck away for their golden years.

“Many middle-aged Canadians report feeling unprepared, often due to competing financial responsibilities such as mortgages, children’s education, and daily expenses. A survey by YouGov found that only 19 per cent of Canadians aged 35 to 54 feel confident in their retirement savings, compared to 26 per cent of those over 55. This growing concern underscores the need for proactive financial planning, even for those who feel behind in their savings journey,” she adds.

So how to catch up? Take a look at how much room you have in your registered retirement savings plan (RRSP) or Tax Free Savings Account (TFSA), she advises. If you haven’t been contributing, you may have quite a lot of room in either of these savings vehicles, she explains.

Next, make savings automatic.

“Automate contributions to your RRSP, TFSA, or other savings accounts to ensure that you’re putting aside money regularly. Payroll deductions or pre-authorized transfers make it easier to stay disciplined,” she writes.

Consider meeting with a financial adviser to “maximize investment returns” through balancing your portfolio “between high- and low-risk assets,” taking advantage of tax-efficient savings vehicles, and looking at adding “dividend-paying stocks, mutual funds, or bonds that align with your risk tolerance and retirement timeline.”

Have you calculated when you think you want to retire, and how much you’ll get from government or company retirement programs? King says this is a crucial bit of research to carry out.

As well, in your high-earning 50s, it’s time to “pay off high-interest debt” and consider “downsizing or simplifying living arrangements,” she continues.

If it doesn’t look like you’ll have saved enough by your chosen retirement date, consider working longer, or part time, or developing a “side hustle,” she suggests. If you find yourself retiring after age 65, you can delay the start of your Canada Pension Plan and Old Age Security payments, increasing what you’ll get per month.

“Catching up on retirement savings in your 50s is not just possible — it’s achievable with a well-thought-out plan. By taking advantage of tax-advantaged accounts, reducing debt, optimizing investments and boosting income where possible, you can bridge the gap and retire comfortably. Remember, the best time to start was yesterday, but the next best time is today,” she concludes.

The Saskatchewan Pension Plan is an invaluable partner for your retirement savings. SPP’s Balanced Fund features exposure to Canadian and international equities, fixed income, real estate, and more – all provided via a low-fee, professionally managed, pooled fund. If you want to make your contributions automatic, SPP can do that, via pre-authorized contributions from your bank account that can coincide with payday.

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Serious illness not factored into many Britons’ retirement plans: study

One of the unfortunate possible side effects of having a longer lifespan could be that you will develop a condition that will require long-term care.

Yet in the U.K., only about one-fifth of retirement savers (19 per cent) are factoring that possibility into their savings plans, reports Zoe Wickens of Employee Benefits.

She writes that research from Barnett Waddingham found that “25 per cent of respondents under the age of 50 have prepared for this possibility, compared to just 16 per cent of those aged over 50. Two-fifths (43 per cent) of this older age group have thought about it but not included it in their retirement planning, and 32 per cent have not considered it at all.”

In fact, she continues, only 17 per cent of respondents to the survey have “considered the possibility of having to go into care.” A surprising 39 per cent of respondents say they thought about it but did not factor it into their plans, and 35 per cent “have not considered it at all.”

Interestingly, while 21 per cent of respondents “have fully planned for their children needing urgent financial support during their retirement,” only 12 per cent are planning to provide financial support to parents during retirement.

Barnett Waddingham’s Mark Futcher states in the article that “poor planning is almost as bad as not saving. The evidence shows we’re at risk of waving goodbye to a lost generation of retirees, cut adrift by insufficient planning, a myopic attitude to the harsh realities of financial shocks, and an unwillingness or inability to ask for help.”

“The industry needs to urgently engage and educate people, especially those in their 50s and above,” he continues. “It’s not just about instilling in them the importance of planning but about making sure they have the necessary tools to do so and a true understanding of the hurdles ahead and their familial financial ecosystem.”

He concludes by recommending people look for professional advice in their retirement planning and saving.

Are you the owner of a business, looking for ways to attract and retain good employees? Having a company pension plan is one of those ways, and the Saskatchewan Pension Plan makes it easy for you, the employer, to offer SPP as your firm’s pension plan. SPP will handle the lion’s share of administration once the plan is set up, including providing your employees with tax slips, annual statements and all benefit-related communication.

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Are annuities making a comeback?

More and more defined contribution (DC) pension plans in the U.S. are seeing an old retirement staple – the annuity – as a way to meet “the rising demand for lifetime income products” within those plans.

According to an article by Leo Almazora in Investment News, research from TIAA, who surveyed “insights gleaned from 500 C-suite decision makers” sponsoring DC plans, 76 per cent feel interest in annuities will grow over the next five years.

For background, a DC plan (like the Saskatchewan Pension Plan) is the type of retirement savings program where what goes into the plan, in terms of contributions, is what’s defined.

At retirement, the job is to turn a lump sum of money into an income stream.

An annuity is a way to turn a lump sum into a guaranteed income stream. You can’t run out of retirement savings with an annuity; you’ll get a payment – typically on the first of the month – for each month of your retired life.

Almazora notes that “among sponsors who do not currently offer an annuity, more than 40 per cent say they plan to introduce one within two years.”

There is one problem, however, the article notes – understanding what an annuity is and how it works and then explaining it all to plan members.

“Even though the interest in lifetime income solutions is real, the report points to a lack of `annuity fluency’ as a potential challenge, with only 37 per cent of respondents feeling confident in explaining the value and importance of these products,” the article explains.

Kourtney Gibson of TIAA tells Investment News that DC plans are on the rise in the U.S. due to the decline of traditional defined benefit (DB) pension plans. With a DB plan, the amount a member will receive in retirement each month, for life, is what’s defined.

“Now, with growing uncertainty around Social Security and people living longer lives, we need to help people manage their savings to last through retirement,” Gibson states in the article.

A whopping 85 per cent of the DC plan sponsors surveyed felt that “employees require guaranteed income beyond Social Security,” but 43 per cent feel that understanding how an annuity works and explaining it will require help – perhaps via consultants – to boost adoption.

Members of the Saskatchewan Pension Plan already have the option our U.S. DC friends are thinking about. Members can convert some or all their account balance to an annuity when they retire. With an annuity, you will get a lifetime, guaranteed monthly payment for as long as you live. And SPP’s stable of annuity products includes options that can provide benefits for your surviving spouse.

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