Millennial homeowners said to have easier time saving for retirement

Those of us of a certain age worry about our millennial kids and grandkids, chiefly because of the massive costs they face in order to own a home, and the higher interest (and mortgage) rates they are dealing with.

If there’s a silver lining, it may be that those home-owning millennials will have an easier time saving for retirement than their peers who rent — so says an article in the Financial Post.

“Owning a home could make all the difference between millennials having enough money to retire or being forced to work longer than their parents did,” the article explains.

“If millennials — who today are in their late 20s to early 40s — rent throughout their working lives, then they must save a lot more than homeowners in order to retire in their 60s, according to the 2023 Mercer Retirement Readiness Barometer,” the article continues.

“This is a generation where being able to retire is one of the top three challenges when we look at unmet needs,” Mercer Canada’s Jillian Kennedy states in the article.

The article says millennials who rent “will need to save eight times their salary over the course of their career to be able to retire at age 68.” But a millennial homeowner needs to “only” save 5.25 times their salary to be able to retire three years younger, at age 65, the Post reports.

These figures are based on a millennial earning $60,000 annually and saving 10 per cent of their salary to a monthly savings plan, starting at age 25.

OK, so why are the homeowners able to save so much less?

“Homeownership gives retirees flexibility, as retirees who downsize may be able to access a significant amount of money. Renters, conversely, must pay rent every month or face eviction – whether they are 25 years old or 85 years old,” the Post reports, citing a Mercer media release.

As many of us worrying parents and grandparents already know, the big problem millennials face with housing is its cost.

“The composite benchmark price of a home in Canada rose 87.4 per cent over the last decade to February 2023, according to date from the Canadian Real Estate Association,” the article notes. These days, the article continues, “mortgage payments as a percentage of income on a ‘representative’ home stood at 64.6 per cent in the fourth quarter of 2022.”

Housing is said to be “affordable” when it represents one-third of disposable income, the article concludes.

Things sure have changed. Our late dad used to tell us, when we were kids growing up, that a mortgage should cost no more than “two years’ salary,” and that housing costs were affordable as long as they represented 25 per cent of salary. Those rules of thumb probably worked in 1965 but you’d have to make a heck of a lot of money to be able to follow them today!

The article tells us that even those millennials fortunate enough to enter the housing market still need to save a lot of money to be able to retire at 65 — we assume this is absent a pension plan at work. If you are saving on your own for retirement, check out the Saskatchewan Pension Plan. SPP will take your contributions, invest them in a pooled fund at a very low cost, and — when it is gold watch time — will help you turn your invested savings into retirement income, including the option of a lifetime annuity payment.

SPP no longer sets any limits on how much you can contribute to the plan. You can make an annual contribution of any amount up to your available registered retirement savings plan (RRSP)room. And you can transfer any amount into SPP from an existing RRSP.

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Investing is a lot like golf. Anyone can get some clubs and play the game, but very few of us get to the point where we’re breaking par. That level of skill tends to be the exclusive domain of professionals, or well-trained amateurs, rather than those teaching themselves via social media, websites, and “can’t miss” tips from friends.

With investing, again like golf, there are common mistakes to avoid that will improve your results. Save with SPP had a look around the Interweb to find out what folks think you should not do when it comes to managing your investments.

Writing in the Financial Post, Peter Hodson warns of the danger of “anchoring.”

“Do not anchor your expectations to where the stock has been in the past. Anchoring can cause you to keep a stock far longer than you should (it used to be $100, so it must be cheap now), but it can also keep you from buying a stock that has already risen (it is too expensive now). The only thing that should matter is what a stock may do going forward,” he writes.

He also warns about focusing too much on the yield of a stock.

“If the stock declines 25 per cent then of course that seven per cent (yield) was only just the `hook’ that got you into a sinking ship. It is far better to focus on companies with lower dividends that have the ability to raise them. Dividend growth stocks have been proven over time to be much better performers than high-yielding stocks.”

At the Morningstar site, we learn that diversification — often touted as a way to avoid downturns — isn’t always a safe harbour.

“2022 is an example of a year where more assets in the portfolio would not have offered more diversification. The only asset classes that have delivered positive returns are the energy sector, the U.S. dollar and some ‘niche’ markets such as Brazilian equities,” states Morningstar’s Nicolò Bragazza.

In plainer terms, moving eggs into different baskets in 2022 would have led to quite a few broken eggs.

He also adds these ideas — the false belief that “history always repeats itself” when thinking about past market performance, and “trying to predict the future” of the markets. No one knows what’s going to happen next, he explains.

The Motley Fool blog offers up a couple more.

Don’t, the blog advises, “have a short-term focus” when investing.

“Having a longer-term focus can help you wait out a crash until the market recovers, which it often does within only a few months. Indeed, the average stock market drop takes about six months before changing direction — and most take less than four months,” the article tells us.

Similarly, if things are going south with the market, don’t sell off your holdings in a panic.

“One mistake many make when the market crashes is selling out of it. They’re doing the opposite of the old investment chestnut to `buy low, sell high.’ If your portfolio plunges by, say, 30 per cent, you haven’t technically lost any money until you sell your shares and lock in that decline. Hang on and you’ll often be able to sell later, at a significantly higher price.”

We have done most of these mistakes over the years, as well as a few other ones, like plunking down money on “can’t miss” hot tips from friends that turned out to be big losers. Buying shares in a company teetering on bankruptcy because of the belief that it will make a comeback probably has paid off for some folks — not us!

It’s a place where expertise is necessary. Most professional money advisers we know advise that ordinary people get help with their investments. Fortunately, that professional investing advice is included when you become a member of the Saskatchewan Pension Plan. SPP will invest your retirement savings in a low-cost, pooled fund that is managed by experts. You can leave the heavy lifting of reading the tea leaves on ever-changing markets to them.

News just in — contributing to SPP is now limitless. There is no longer an SPP limit (you can contribute any amount up to your full registered retirement savings plan room) on how much you can contribute to the plan each year, or transfer in from a registered retirement savings plan. Check out SPP today!

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Nearly half of Canadians say they’re unprepared for retirement

New research from H&R Block Canada has found that “nearly half of Canadians are unprepared for retirement, lack enough savings, and are planning on working part-time in retirement years to make ends meet.”

The survey was carried out in February of this year, reports H&R Block via a media release, and the findings suggest that Canadians are beginning to realize that they won’t have the same kind of retirement their parents had.

“Not so long ago, the traditional vision of retirement was that at around 65 years old, Canadians ‘hung up their hats’ and celebrated the end of full-time employment. Enjoying the steady income of their company/government pension, they were ready to embrace new life ventures in pursuit of the things they never previously had time for,” states Peter Bruno, President of H&R Block Canada, in the release. “What we’re seeing now is that the vision for retirement has evolved dramatically – fuelled by shifts in tax-friendly savings plan options, evolving workforce realities, the gig economy, and the prevailing economic environment.”   

Some other key findings from the research, cited in the release:

• 50 per cent of Canadians say they plan to have a side gig when they retire
• 55 per cent say they need to better understand tax-friendly retirement savings options
• 52 per cent don’t feel they have enough money left at the end of the month to save for their retirement
• 19 per cent plan to rely on government-assisted retirement plans; 13% have not made retirement savings plans
• 32 per cent believe they put away enough money each month for a retirement fund
• 46 per cent feel good about their retirement strategy

While Statistics Canada says the average retirement age in 2022 was age 64 and six months, the release notes that 44 per cent of respondents “anticipate retiring before they hit the 64-year mark.”

At the other end of that spectrum, five per cent said they plan to retire “between 45-54 years old,” and 36 per cent don’t believe they ever will retire, the release notes.

The research found that Canadians seem to have a fairly good understanding of “tax-friendly” savings plans, such as registered retirement savings plans (RRSPs) and Tax Free Savings Accounts (TFSAs). (With an RRSP, your contributions are tax-deductible — savings grow tax free until you start taking money out in retirement, where taxes apply. With a TFSA, there’s no tax deduction for contributions, but no taxes are owed when you take money out.)

According to the release, the survey found that:

• 56 per cent of Canadians report having an RRSP; six per cent plan to set one up in the future
• 54 per cent have a TFSA; six per cent plan to establish one at some point
• 37 per cent have an employer-sponsored registered pension plan
• 19 per cent say they’ll rely on government-assisted retirement plans

Those planning to rely on government programs need to know that benefits from the Canada Pension Plan (CPP) and Old Age Security (OAS) are quite modest. According to Canada Life, the average CPP benefit as of October 2022 was just $717.15 per month. The maximum amount you could receive that month was $1306.57, the article adds. The OAS payment as of April 2023 was $691 monthly, according to the federal government’s website. If you don’t have a workplace pension program, and you haven’t yet started saving on your own, the Saskatchewan Pension Plan may offer just what you’re looking for. It’s open to any Canadian with RRSP room. You can contribute any amount up to the limit of your RRSP room, and can transfer in any amount from an existing RRSP. The possibilities are limitless! Check out SPP today!

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When you think of retirement from a woman’s point of view, you see an array of challenges.

Writing in the National Post Christine Ibbotson observes that women “tend to live longer than men, and many divorced women or widows are simply choosing to remain single in retirement.”

This creates a “unique challenge” for them, she continues. “Many retired women receive much less than their male counterparts. Often, women have not worked the same amount of years as men, or have earned less income during their working careers, and therefore do not receive the same pension benefits.”

As well, Ibbotson continues, women may tend to be more “risk averse” with investing. Recent research from BMO found that “men were more likely to hold stocks and mutual funds in their investments whereas women were more likely to hold guaranteed investment certificates (GICs).”

An infographic from Eckler Partners provides more details on these factors.

In 2017, a woman could expect to live to age 83 on average — for men, the number is 79, the article notes. Sixty-two per cent of women were likely to take a break from work to care for their kids, compared to only 22 per cent of men, the Eckler research continues.

Scariest of all — 51 per cent of Canadian woman “haven’t even started to save for retirement or know how much they plan to save,” the article notes. A whopping 92 per cent of women surveyed say they have “minimal or no knowledge of investment.”

So, to sum it up, women — who live the longest — earn, on average, just 69 cents for every dollar men earn in Canada, Eckler reports. That means they have less money to save for a retirement that is almost bound to last longer than a man’s.

An article from the Wealthtender blog expands on the idea about women earning less than men, and its impact on retirement saving.

The article cites Merrill Lynch research in the U.S. as noting that “when a woman reaches retirement age, she may have earned a cumulative $1.05 million less than a man who has stayed continuously in the workforce.”

This necessarily means there is substantially less money to save for retirement by women, the article adds.

An article from Kiplinger suggests that women take a good look at annuities when they retire.

Noting that women earn less, and thus get lower government retirement benefits, the article underlines the idea that “women live longer, so their savings have to last longer.”

While the article is written for a U.S. audience, it makes the point that through an annuity, savings can be turned into “a guaranteed stream of lifetime income, paid monthly, no matter how long that is… in other words, a woman can use it to create a private pension.”

The article quotes University of Pennsylvania economist David Babbel as recommending that lifetime annuities should “comprise 40 to 80 per cent of their retirement assets.”

What can women do to close the retirement savings gap — apart from considering annuities?

Ibbotson recommends they “start by educating” themselves… “when we know more, we make better decisions and feel more empowered to improve our situation.”

“Start to know what your financial picture looks like. Buy a notebook and create a budget — your new financial plan,” she writes. Financial advisers and accountants are recommended, she writes, and your retirement savings portfolio needs to be designed “to grow with products that that offset inflation and taxes.”

The Wealthtender article adds a couple of other good points.

Focus on increasing financial literacy, the article suggests, by reading financial blogs, listening to related podcasts, and watching online videos on the topic of personal finance.

As well, the article concludes, women should focus on the future.

“Acknowledge early on that you may spend a big part of your life on your own, so always make saving one of your biggest priorities. Even if it’s just saving an extra $50 extra per month or increasing… your contribution by one to two per cent, the money can really add up over time.”

If you have a pension plan at work, be sure to join up, and participate to the max. Many plans will allow you to do “buybacks,” and make contributions after you are back at work for periods when you were away. This can really help fatten up your future pension cheque.

If you don’t have a pension plan at work, a great program to know about is the Saskatchewan Pension Plan. It’s open to any Canadian with registered retirement savings plan (RRSP) room. Your contributions are invested in a pooled fund, featuring low-cost expert management. When it’s time to retire, SPP will help you turn your savings into retirement income, including the possibility of a lifetime annuity.

And now, there are no limits from SPP on how much you can contribute each year, or transfer in from an RRSP. You can contribute any amount (up to your available RRSP room) and transfer in any amount from your RRSP. The possibilities are limitless!

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More Canadians need access to better pensions: Ambachtsheer

Writing in The Globe and Mail, noted pension expert Keith Ambachtsheer says our ever-growing senior population would be better served if they — and the rest of us — had access to better workplace pensions.

He notes that Canada’s retirement system is ranked 11^th out of 44 countries via the Mercer CFA Institute Global Pension Index. What’s needed to boost that ranking, Ambachtsheer contends, is to make the type of pension plans that public sector workers have widely available to the rest of the population.

“Canada,” he writes, already has “one of the best occupational pension systems in the world for its public-sector workers. Globally admired as `the Canadian pension-fund model,’ it efficiently converts regular contributions into lifetime retirement income streams for its public-sector members. At the same time, investment organizations using the model are at the leading edge of converting retirement savings into sustainable, wealth-producing capital. This system needs to be expanded to everyone else.”

The number of senior citizens, he observes, is on the rise. Citing Peter Drucker’s 1976 book The Unseen Revolution, Ambachtsheer notes that the author foresaw “the young, outsized baby boomer generation of the 1970s eventually becoming an outsized generation of retirees, and advocated creating pension organizations with two key features: legitimacy and effectiveness.”

Ambachtsheer lists governance as an important attribute of the most effective pension plans. “Pension arrangements must be structured to always act in the best interests of the plan risk-bearers,” he explains.

The plans should ideally “have an accumulation pool that focuses on investment return generation, and a separate decumulation pool that provides lifetime income.” You contribute to the investment pool during your working life and receive benefits from the decumulation side when you retire, he explains.

The Canadian model pension plans also feature cost-effective management and “value-adding investment programs that turn retirement savings into wealth-producing capital,” writes Ambachtsheer. Another feature is the ability to provide lifetime pensions to plan members, he adds.

So how do we go from what we have now — a situation where there are many workers without any sort of retirement program at work — to one where most of us are in a Canadian model plan? Ambachtsheer sees three ways to achieve this change.

First, “existing Canadian pension-fund model organizations” could “offer their pension management infrastructure to private sector employers,” he notes. This is already being done by a few larger pension funds, such as Ontario’s Colleges of Applied Arts & Technology Pension Plan (CAAT).

Save with SPP interviewed CAAT’s Derek Dobson on this topic a few years ago.

Another approach would be to have “a government entity decide to create a Canadian pension-fund model organization for private-sector workers and retirees,” an idea that has worked in some U.S. states and in Great Britain, he writes.

Finally, he suggests that the private sector create “one or more new Canadian model offerings,” making better pension plans available to the private sector. He writes that Common Wealth and Purpose Investments offer programs that provide end-to-end coverage, including lifetime pensions.

Our own Saskatchewan Pension Plan, which is open to any Canadian with available registered retirement savings plan (RRSP) room, already has some of the Canadian model features — investments are pooled, professionally managed and governed at a low cost. SPP offers, through its annuity features, a lifetime pension for its members. If you don’t have a pension plan at work, you can join SPP as an individual — or, if you are an employer, you can look into offering it as a pension for your employees. Check out SPP today!

Great news — the savings opportunities with SPP are now limitless! You can transfer any amount you want into SPP from an RRSP, and you can make contributions based on your entire available RRSP room. It’s a great way to build your SPP retirement nest egg more quickly!

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A recent poll by CIBC found that while most Canadians hope to retire by age 61, more than half (57 per cent) worry whether “they’ll actually be able to achieve that ambition.”

As well, a very high percentage — 66 per cent — of pre-retirees surveyed worry “about running out of money in retirement.”

Save with SPP reached out to CIBC to follow up on these results, and got some comments from Carissa Lucreziano, Vice-President, Financial and Investment Advice, CIBC.

Q. Quite an eye-opener to see that two-thirds of people worry they might run out of money in retirement. We wondered if you got any information on the causes of this worry – maybe more people are drawing down a lump sum of money in a registered retirement income fund (RRIF) versus receiving monthly workplace pension cheques? Or is it worry they’ll lose money in the markets? 

A. The rising cost of living is increasing faster than people expected which in turn is impacting many Canadians’ ability to save for retirement and other goals, which has them feeling less prepared for the future and worried about their retirement savings. A recent CIBC poll found that inflation is the top financial concern for 65 per cent of Canadians right now. While inflation is cyclical, many people are thinking, if inflation keeps going up at this rate, it’s going to affect my retirement plan. 

Another reason people may be worried is because they don’t know how much they will need in retirement. One third of Canadians simply hope they have enough to retire, 20 per cent have sat down to run the numbers on their own and only 14 per cent have enlisted the help of an advisor. It’s like going on a road trip without planning a route, of course you’ll be worried about getting lost. 

Given all the factors you need to consider in a retirement plan, it’s best to sit down with an experienced advisor who can map out a strategy that aligns with your goals, your current situation and how you expect your circumstances to change in the future. 

Q. We were interested in the quote in the release about the importance of having a financial plan. Wondered if you could expand (briefly) on what sorts of things should be in a plan – probably it is looking at what future retirement income will be versus expected expenses, and then including the great things listed in the release like travelling? 

A. A financial plan is your big picture, giving you a detailed look at your current financial situation to help you prioritize and manage your short- and long-term goals – like travel, renovations, and retirement. 

The key items that should be included in every financial plan are your income, expenses, net worth, investment strategy, retirement, and estate plan.  

Many advisors use a goal planning tool to build a personalized plan that addresses all your needs, while taking into consideration any “what if” scenarios to see how any major changes might affect your overall plan. What if you buy a cottage at age 55 or gift money to your children at age 75? It is important to understand the financial implications of any big moves before you make them.  

The most important thing to remember though, is that your plan should grow and change as you do. Ideally, you should be reviewing it every year or whenever there is a material change like employment, divorce, marriage or having a child. 
 

Q. It’s interesting that many people are saving for retirement more via Tax-Free Savings Accounts (TFSAs) than by traditional registered retirement savings plans (RRSPs). Wondered if you learned any of the reasons why they preferred the TFSA – tax free income when you withdraw the money? Accessible for emergency spending en route to retirement? Maybe it is not impactful on one’s Old Age Security (OAS) qualification? 

A. Right now, Canadians are prioritizing day-to-day needs over long-term planning. This means, for many, that they are saving more in their TFSA over their RRSP.   

Contributing to a TFSA is a terrific way to save for both short- and long-term goals. A TFSA gives you the flexibility to access money easily and any interest, dividends, and capital gains earned are tax-free. The funds you withdraw from your TFSA also do not count as income, so it will not affect the amount of OAS you qualify for when you are over the age of 65.  

You don’t have to choose between an RRSP or a TFSA.  However, one could give you more benefits than the other depending on your situation. An advisor can help you understand your options and how it fits into your plan.

Q. Finally, what was the one thing that surprised you the most about these results? 

What stood out to me is that most Canadians polled are relying on their best guess for how much they will need to fund their retirement. Only 14 per cent have met with an advisor to run the numbers.  

An advisor can help you get a better understanding of your big picture and put an actionable plan in place, setting you up for success! It may seem overwhelming, but you can get there with the right support. Plus, you will be able to enjoy your next chapter, knowing that you are in a good place financially. Financial wellbeing is so important. 

Our thanks to Carissa Lucreziano and CIBC for taking the time to respond to us!

The Saskatchewan Pension Plan has been helping Canadians save for retirement for more than 35 years. Now, saving for retirement is simpler than ever before. There’s no longer a dollar limit on how much you can contribute to SPP during the limit — you can contribute any amount up to the total of your available RRSP room. And if you are making a transfer into SPP from another RRSP, you can transfer any or all of it — no limit applies. It’s a limitless opportunity for retirement saving! Check out SPP today!

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Canada, unlike France and the U.S., is not dealing with a pension crisis: Keller

In an opinion column for The Globe and Mail, Tony Keller explains why Canada isn’t having a crisis with its pension system like France and the United States are.

In France, he writes, there are protests in the streets and strikes over plans to raise the national retirement age to 64 from 62. In the U.S., he writes, there’s a “quiet… slow motion” crisis as Democrats and Republicans fail to agree on steps to stabilize the U.S. Social Security system.

“The Congressional Budget Office says that unless premiums are raised, the deficit is increased or taxpayers kick in cash, pension benefits will have to shrink 23 per cent by 2033,” Keller writes, noting that the Social Security system “continues to wend its gentle way toward the iceberg.”

There’s no crisis here, he says.

“Canada is not having a pension crisis. You may not have noticed. ‘`Absence of Crisis Expected to Continue Indefinitely, Experts Say’ is not a headline we tend to put on the front page,” he writes.

That’s because actions taken decades ago stabilized our system, Keller explains.

“Back in the 1990s, Canada was headed for a crisis. The Canada Pension Plan (CPP) (and the parallel Quebec Pension Plan (QPP)) had been created three decades earlier, and like most public pensions they were built on a pay-as-you-go model. CPP premiums deducted from workers’ paycheques paid retirees’ pensions, and once you retired, the next generation of workers would pay your pension. The CPP was a chain of intergenerational IOUs,” he writes.

The French and American systems also operate under the “pay-as-you-go” model. But such systems run into problems when there are fewer workers than retirees. Here in Canada, 19 per cent of us were seniors as of 2021; in France it is 21 per cent, Keller explains.

You have to change things up when demographics change, Keller contends.

“In the 1990s, then-Finance Minister Paul Martin and his provincial counterparts chose to face the arithmetic. They gradually doubled CPP premiums, to ensure that promised pensions would be paid, today and tomorrow. To make that possible, a large chunk of premiums now go into a savings account. The Canada Pension Plan Investment Board (CPPIB) manages the growing pile, which at the start of this year stood at $536-billion. Your premiums today partly fund your retirement tomorrow.”

This is a somewhat complex concept, but what it means is that we are still operating a “pay-as-you-go” system, but when we get to the point when there are not enough workers to pay for the pensions of retirees, money in the CPPIB cookie jar will be tapped into until the ratio returns to a sustainable level.

Keller’s article goes on to note that the Old Age Security (OAS) system, which is paid entirely out of tax dollars rather than employer and member contributions, has the potential for problems in the future; its costs keep rising as the senior population grows. One way to save money on OAS would be to increase the so-called “clawback” so only those seniors needing OAS the most would get it.

CPP was intended to supplement the workplace pensions Canadians were supposed to have; increasingly, workplace pensions are becoming less common. And OAS was designed for those who did not work (and contribute to CPP) during their careers. For a lot of people, CPP, OAS and even the Guaranteed Income Supplement are all they have to live on in retirement, and it’s a pretty modest living.

If you don’t have a workplace pension, there’s a great made-in-Saskatchewan solution out there for you — the Saskatchewan Pension Plan. SPP is a voluntary defined contribution pension plan that any Canadian with registered retirement savings plan (RRSP) room can join. Employers can also offer it as a workplace benefit. Contributions made to SPP are professionally invested in a pooled fund at a low fee. SPP grows the savings until retirement time, when options for turning savings into income include a stable of annuities. Check out SPP today!

And there’s more good news! Now, you can contribute any amount to SPP each year up to your RRSP limit. And if you are transferring money into SPP from your RRSP, there’s no longer an annual limit! Saving with SPP for retirement is now limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!

Boomers will recall what happened where our parents retired. It was literally, in most cases, getting the gold watch at 65 and leaving the workforce entirely for a leisurely life of golf, visiting relatives, the bridge club, and so on.

Turn the clock forward from the 1980s to the present, and it’s a very different story.

According to Statistics Canada, the percentage of Canadians of senior age is growing. In 2020, the agency reports, “18 per cent of the Canadian population were aged 65 and older,” a percentage expected to grow to 24 per cent by the end of the 2030s.

Our older folks “are living longer and healthier than previous generations,” and that’s one reason why more of them than ever are working or volunteering, the article notes. Stats Canada reports that 13.8 per cent of Canadian seniors were working or volunteering in 2020, up from just six per cent 20 years earlier.

Is it just health and vitality that’s keeping older folks working?

A recent H&R Block Canada survey found that 50 per cent of those surveyed planned “to have a side gig when they retire.”

That may be driven by the reality that they can’t afford to fully retire at 65, notes the media release setting out the survey results. “Fifty-two per cent don’t feel they have enough money left at the end of the month to save for their retirement,” the release notes. And only 46 per cent “feel good about their retirement strategy,” the release notes.

“Not so long ago, the traditional vision of retirement was that at around 65 years old, Canadians ‘hung up their hats’ and celebrated the end of full-time employment. Enjoying the steady income of their company/government pension, they were ready to embrace new life ventures in pursuit of the things they never previously had time for,” states Peter Bruno, President of H&R Block Canada, in the release. “What we’re seeing now is that the vision for retirement has evolved dramatically – fuelled by shifts in tax-friendly savings plan options, evolving workforce realities, the gig economy, and the prevailing economic environment.”  

An article in Business Insider suggests the rising cost of living is also a factor.

“Seniors are re-entering the workforce in growing numbers,” the article reports, citing a report from USA Today. “As inflation squeezes them out of retirement, many are taking jobs as cashiers, retail associates, and hosts at local restaurants, among other service industry jobs,” Business Insider reports.

Steve Weeks, 69, says he went back to work at a Florida restaurant because “the extra money is helpful.” The article goes on to say that older workers are seen by many as being “more dependable, displaying higher levels of punctuality, lower absenteeism, and less inclination towards job-hopping.”

There can be other, non-monetary benefits derived from working into your senior years, reports Harvard Health Publishing.

“There’s increasing evidence that the payoff of working past age 65 may go beyond income. Some studies have linked working past retirement with better health and longevity,” the article notes.

“A 2016 study of about 3,000 people, published in the Journal of Epidemiology and Community Health, suggested that working even one more year beyond retirement age was associated with a nine per cent to 11 per cent lower risk of dying during the 18-year study period, regardless of health,” the article continues.

Another study found that “people who worked past age 65 were about three times more likely to report being in good health and about half as likely to have serious health problems, such as cancer or heart disease,” the article notes. Research has also established a link between working past retirement age and “a reduced risk of dementia and heart attack.”

Most of the folks we know still working at part-time or volunteer jobs cite the benefit of being part of a time, and having a purpose and sense of belonging. You do miss social interaction with workplace friends after you hang up the ID badge.

If you’re a member of the Saskatchewan Pension Plan (SPP), and plan to work beyond age 65, be aware that the plan allows you to start turning savings into income as late as late as age 71. So if you work after turning 65, you can still contribute to your SPP pension nest egg for another six years. It’s another helpful feature of SPP, which has helped deliver retirement security since 1986.

Another great bit of news — SPP members can now make annual contributions equal to their available registered retirement savings plan (RRSP) room! There is no longer an annual limit on how much you can contribute to SPP, and as well, there is no limit on how much you can transfer into SPP from your registered retirement savings plan (RRSP). SPP retirement saving is now limitless!

Join the Wealthcare Revolution – follow SPP on Facebook!

`”Hyperbolic discounting,” other mental factors block us from saving

Writing for MSNBC, Jasmin Suknanan asks why it’s so easy for most of us to think hard about tomorrow, but less so about the weeks and years that come after that.

“Psychology is often just as important in personal finance as the numbers — the way we save, spend and invest are all influenced by the way we think and feel, especially when it comes to preparing for future events like retirement,” she writes.

We know, she continues, that saving for retirement is important “because you’ll need a nest egg when you’re no longer working. The best way to guarantee an income when you’re in your golden years is to save and invest as much as you can now while you are still working.”

So, we all get it — why don’t we all get going on it? Suknanan points to a number of causes.

First, she writes, we tend not to make too many decisions with the distant future in mind.  “It’s easy to feel like retirement is so far into the future and that we have plenty of time before we need to start preparing for it. As a result, many would rather treat themselves to things they can enjoy right now instead of stocking away money for a future that’s decades away,” she notes. This process is called “hyperbolic discounting.”

Simply put, we’d rather spend $5 today than save $10 for next week. Living in the now.

Next, she explains, “it’s easier to do nothing than it is to make a change.”

Even when you know you have to start your retirement savings program (this article is written for a U.S. audience, but here, let’s talk about starting a registered retirement savings plan or Tax Free Savings Account), it is easy to put off actually doing anything, the article tells us.

“’I’ll do it tomorrow’ becomes `I’ll do it this weekend,’ which then becomes `I’ll do it next weekend.’ Before you know it, you’ve gone a month or more and still haven’t opened up your… account. And this doesn’t just occur when it comes to saving for retirement; we’re certainly guilty of repeating this thought process for just about any task — returning a package for a refund, cleaning our room or even cancelling subscriptions and memberships,” she writes.

She notes that opening up a retirement savings account is not some big event that takes days — it can take minutes. As an example, here’s how to sign up for the Saskatchewan Pension Plan (SPP).

The final problem — also a perception-based one — is where we “underestimate how long it will take for us to achieve our desired savings,” Suknanan writes.

“Many people put off saving for retirement until their 30s or 40s thinking that they should be able to amass as much as they’ll need for their golden years in just two decades. But once they factor in their current expenses and financial obligations, they find that it’ll actually take a lot longer than they initially believed to build a comfortable retirement fund,” she explains.

“Saving for retirement is one of the most crucial financial steps you’ll need to take. Taking steps to save today can guarantee you an income in retirement when you’re no longer working,” she concludes.

This is a great article on many levels. Given the fact that the majority of Canadians don’t have a workplace pension plan, the onus for saving for retirement tends to be solely on your own shoulders. Fortunately, the SPP can equip you with all the tools you need to get the job done. Signing up is easy, and you decide how much to contribute. You can automate your contributions via pre-authorized payments, or set up SPP as a bill via online banking. You can even contribute via credit card.

SPP takes those contributions, invests them professionally in a pooled fund at a low cost, grows your nest egg, and helps you convert it to income in those faraway days of retirement. Check out SPP today!

Have you heard the news? Contributing to SPP is now easier than ever. You can now contribute any amount per year up to your available registered retirement savings plan (RRSP) room. And if you are transferring funds in from an RRSP to SPP, there is no longer an annual limit — you can transfer any amount into your SPP nest egg. Saving with SPP is now limitless!

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We should eat healthy. We should exercise. And we should save for the future.

Our parents drilled these ideas into our heads, yet — apart from a massive burst of saving when pandemic restrictions prevented us from spending — we are no longer, as Canadians, a nation of savers.

The highly-regarded Retire Happy blog, authored by Jim Yih, offers up some thoughts on the subject.

First, he posits, “the statistics are alarming when it comes to debt, savings and fiscal responsibility. One of the reasons for this is the lack of formal financial education.”

Next, writes Yih, is the problem of a culture of overspending.

“We live in a society that loves to spend. It starts with a government that believes spending drives the economy and for the past few decades, governments have encouraged spending even if it means spending money we do not have,” he explains. “We live in a world of delayed consequence over delayed gratification and unfortunately we are facing those consequences today.”

A third reason is that our levels of debt make saving next to impossible, Yih states.

We owe, he notes, more than $1.5 trillion in household debt, and the ratio of debt to disposable income was 155 per cent at the time he wrote his blog post (higher now). How, he asks, “can you save money when Canadians have this much debt?”

OK — we don’t know how to be responsible with money, we love to spend, and we clearly love to max out credit cards, lines of credit, and other sources of spendable debt. What else is holding us back from saving?

The Kinda Frugal blog explores a few other factors.

Citing figures from Bankrate, the blog reports that “56 per cent of American adults don’t have enough savings to cover a $1,000 expense.”

The blog contends that not having a budget is a key reason for a lack of saving. Without a budget, people end up “living beyond your means” and “deep in debt,” and can be “wiped out by an unexpected expense.”

Instead, the blog suggests, we should try to live “below our means,” and spend less than we earn.

“Creating a budget is an excellent first step toward curbing overspending. Sticking to it is the part that will free up extra cash to put toward your savings,” the blog advises.

Another concept the blog explores is the ideas of separating your needs from your wants. “A need is something you can’t live without,” the blog explains. “Food, shelter, clothing, and medicines are necessities and examples of needs.” Wants, on the other hand, aren’t needed for living — examples include “expensive jewellery, high-end cars and luxury vacations.”

Writing for The Balance, Matt Reiner suggests a few other contributing factors in the “not-saving” file.

As mentioned by other bloggers, not having any savings when an emergency arises — like a major auto repair bill — can wipe you out. Reiner notes that it is important to have an emergency fund in place equal to about three to six months’ worth of income.

“If that sounds intimidating, start with socking away enough for one month. From there, you can continue building your emergency savings with regular monthly contributions,” Reiner suggests.

Reiner also advises those of us with retirement savings arrangements at work to take full advantage of them. Here in Canada, this would mean joining any company pension plan or retirement savings arrangement and taking part to the maximum. A lot of times, he writes, employers match all or some of the amount contributed. “A company match is essentially free money, and it’s best not to leave it on the table, especially if you’re behind on retirement saving,” Reiner explains.

He concludes with one piece of advice. “Regardless of where you decide to start, the important thing is to start. Even putting a little in savings out of each paycheque can add up over the long term,” writes Reiner.

Our late Uncle Joe religiously endorsed the so-called 10 per cent rule. When you get paid, put 10 per cent of the total away, and live on the rest. “You’ll never run into troubles if you can do this,” he told us.

Another idea that really works is to automate your savings, even if you are starting small. Choose an amount you’d like to save, and have it diverted automatically from your bank account to savings. It’s a “set it and forget it” approach, and you’ll be surprised how well it works.

It’s an approach that works well with the Saskatchewan Pension Plan (SPP). SPP members can make pre-authorized contributions to their accounts. You can pick dates that align with your payday, and boom — you are building your future retirement income without even noticing. Check out SPP today!

And there’s some great news for SPP members — the rules on making contributions have changed, and for the better. You can now make an annual contribution to SPP that is equal to your available registered retirement savings plan (RRSP) room! And if you are transferring money into SPP from an RRSP, there is no longer an annual limit on how much you can transfer in! It’s a change that makes contributing to SPP limitless!

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