More than half of us fear our retirement plans are in trouble: Scotiabank survey

A new survey from Scotiabank finds that 59 per cent of us are feeling “negative” about our investments, up from just 33 per cent in a similar survey carried out last fall.

Highlights from the Scotiabank Global Asset Management Investor Sentiment Survey were reported upon in a recent Windsor Star article.

“Investors’ top five perceived risks to their portfolios over the next couple of years were an economic recession (61 per cent), rising inflation (58 per cent), stock-market volatility (46 per cent), rising interest rates (40 per cent) and global geopolitical risk (37 per cent),” reports the Star.

The article says the lack of a written financial plan may also be a source of “angst.”

“These results indicate that investors have current concerns about meeting their retirement goals, however, regular meetings with financial advisers and having a written financial plan diminish those concerns,” Neal Kerr, head of Scotia Global Asset Management, states in the article.

The article then creates a link between having a financial plan, and being confident about retirement.

A different survey from the Bank of Montreal found that “52 per cent of women are confident about retiring at their target age compared to 68 per cent of men,” the Star reports.

That same survey found that 73 per cent of women surveyed don’t have a financial plan, compared to 64 per cent of men, the newspaper reports.

As well, the Star report notes, 87 per cent of women surveyed “reported having a fear of unknown expenses,” and 63 per cent “had anxiety about keeping up with their monthly bills.”

“Financial planning and financial literacy are imperative when navigating finances to ensure customers are making real financial progress,” states BMO’s Gayle Ramsay in the article. “With most women reporting they have no financial plan in place, they can start to alleviate their anxiety and take control of their finances by evaluating their budgets, adjusting spending habits accordingly and committing to a savings and retirement plan,” she tells the Star.

So let’s tally up what we’ve learned here. Canadians worry about how their investments are going in this volatile era, but as well, they haven’t planned out what life in retirement will be like so they are worried about that as well. In short, they don’t know how much they’ll have to spend in retirement, and aren’t sure how much it will cost.

The advice we received from an actuary friend as we rolled into retirement was not to fixate on the difference between our gross work pay and gross pension amount, but to do a net-to-net comparison. This was good advice; our income dropped by more than half but our tax bill was far lower. Other deductions we faced while working disappeared in retirement, such as pension contributions, EI, and so on, and our commuting bill for trains and parking fell to zero.

The article is correct in underlining the importance of a financial plan. That plan should take into account what all your sources of income will provide you in retirement, including government benefits, workplace pensions and personal savings.

That’s one side of the balance sheet. You should then take an honest look at the costs you will be facing in your life after work. If your income is more than enough to cover your costs, hooray! If not, you may need to tweak a few things to get yourself there, such as going to one car, or working part-time in retirement, or even downsizing to a smaller home or community.

It’s still all about living within your means.

According to Statistics Canada, 6.6 million Canadians have are covered by registered pension plans as of January 2021. That sounds good until you realize that the country’s population is approaching 40 million.

So the majority of us don’t have a pension at work. Fortunately, there’s a solution for any Canadian with available registered retirement savings plan (RRSP) room — the Saskatchewan Pension Plan. SPP is a one-stop shop for investing and growing your savings, and helping you convert it to income when you retire. Find out how SPP has been delivering retirement security for more than 35 years, and check them out today!

Breaking news — contributing to your SPP account is easier than ever. You can now contribute any amount per year up to your available RRSP room. And if you are transferring funds into SPP from an RRSP, there is no longer an annual limit — you can contribute any amount! The retirement future with SPP is now limitless.

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Morgan Housel’s The Psychology of Money makes an interesting, anecdote-filled case that financial success is more about patience, and even luck, than the “technical side of money.”

It’s not, he writes, that the technical how-to advice and education about money is “bad or wrong,” but that “knowing what to do tells you nothing about what happens in your head when you try to do it.”

As an example, he notes that a big factor in success with stocks is when you were born — something we all have no control over. “If you were born in 1970, the S&P 500 increased almost 10-fold, adjusted for inflation, during your teens and 20s. That’s an amazing return. If you were born in 1950, the market went literally nowhere in your teens and 20s, adjusted for inflation.” So people in those two groups will have a different personal history with stock investing, and different levels of willingness to enter the market, he explains.

It’s the same story for inflation, he notes. Those born in the 1960s remember it, those born in the 1990s are experiencing it for the first time.

Next, he notes that those with lower incomes have more faith and hope in lottery winnings than those with higher incomes.

“The lowest-income households in the U.S. on average spend $412 a year on lotto tickets, four times the amount of those in the highest income groups,” he notes. Does that factor correlate with another stat, that 40 per cent of Americans say “they couldn’t come up with $400 in an emergency.” They are, he writes, “blowing their safety nets on something with a one-in-millions chance of hitting it big.”

Looking at retirement, he writes that since the 1980s, “the idea that everyone deserves, and should have, a dignified retirement took hold. And the way to get that dignified retirement has been an expectation that everyone will save and invest their own money.” But, he continues, it is not happening. “It should surprise no one that many of us are bad at saving and investing for retirement.”

In a chapter titled Luck & Risk, Housel notes that Nobel Prize-winning economist Robert Shiller was once asked what he would like to know about investing “that we can’t know.”

“The exact role of luck in successful outcomes,” replied Shiller.

On risk, Housel stresses the concept of having “enough,” and not necessarily needing more.

“There is no reason to risk what you have and need for what you don’t have and don’t need,” he explains. Watch out if “the taste of having more — more money, more power, more prestige — increases ambition faster than satisfaction,” he warns.

A long-term approach to investing can work well, he writes. He notes that famed investor Warren Buffett “began serious investing when he was 10 years old,” and by 30, had a net worth of one million. That has grown to $84.5 billion at the time the book was written, Housel notes.

But if Buffett had been “a more normal person, spending his teens and 20s exploring the world and finding his passion,” and had $25,000 as his net worth at age 30, he would have — everything else being the same — just $11.9 million today.

“His skill is investing, but his secret is time,” explains Housel.

Getting money is one thing, he writes, but keeping it is another.

Buffett, writes Housel, avoided debt, panic selling “during the 14 recessions he’s lived through,” kept his reputation intact and “didn’t burn himself out or quit or retire.”

“He survived. Survival gave him longevity. And longevity — investing consistently from age 10 to at least age 89 — is what made compounding work wonders,” Housel writes.

So, he explains, while planning is important, “the most important part of every plan is to plan on the plan not going according to the plan.”

Rather than focusing on getting big returns, think about survival, and being “financially unbreakable… if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.”

Unlike flying an airplane, you don’t have to be right all the time in investing. “If you’re a good investor most years will be just OK, and plenty will be bad,” he explains.

Being a saver is critical, he adds.

“Building wealth has little to do with your income or investment returns, and lots to do with your savings rate,” he writes. “Personal savings and frugality — finance’s conservation and efficiency — are parts of the money equation that are more in your control and have a 100 per cent chance of being as effective in the future as they are today.”

He spends time on the of “leaving room for error” with investments. “The person with enough room for error in part of their strategy (cash) has an edge over the person who gets wiped out, game over, insert more tokens, when they’re wrong.”

Some concluding thoughts from Housel are that “saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future.”

Manage money in a way that lets you sleep at night, increase your investing time horizon, and “become OK with a lot of things going wrong. You could be wrong half the time and still make a fortune.”

It’s hard to do justice to such a thought-provoking book in a short interview, so consider adding The Psychology of Money to your personal finance library.

The idea of starting retirement savings early is a good one, and as the author notes, not everyone has access to a workplace pension or retirement program. If you’re in that boat, take a look at the Saskatchewan Pension Plan (SPP). Under SPP’s new rules, you can contribute any amount to the plan each year, up to your available registered retirement savings plan (RRSP) limit! And if you are transferring money into SPP from an RRSP, there is no longer an annual limit — you can transfer any amount into your SPP nest egg. Contributing to SPP is now limitless!

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Experts call for higher RRSP limits, and a later date for RRIFs

Writing in the Regina Leader-Post, a trio of financial experts is calling on Ottawa to make it easier for Canadians to save more for retirement — and then, on the back end, starting turning savings into income at a later date.

The opinion piece in the Leader-Post was authored by William Robson and Alexandre Laurin of the C.D. Howe Institute, and Don Drummond, a respected economist who now teaches at the School of Policy Studies at Queen’s University in Kingston, Ont.

Their article makes the point that our current registered retirement savings plan (RRSP) limits need to be changed.

“The current limit on saving in defined-contribution pension plans and RRSPs — 18 per cent of a person’s earned income — dates from 1992,” their article notes. While that 18 per cent figure may have been appropriate 30 years ago, “now, with people living longer and with yields on safe investments having fallen, it is badly out of line with reality,” the authors contend.

They recommend gradually raising the limit to 30 per cent of earned income through a four-year series of three per cent increases, the Leader-Post article notes.

While an RRSP is for saving, its close cousin, the registered retirement income fund (RRIF) is the registered vehicle designed for drawing down savings as retirement income. The trio of experts have some thoughts about RRIF rules as well.

The current RRIF rules compel us to “stop contributing to, and start drawing down, tax deferred savings in the year (Canadians) turn 71,” the authors note. This rule was also established in the early 1990s, they note.

“As returns on safe assets fell and longevity increased, these minimum withdrawals exposed ever more Canadians to a risk of outliving their savings,” the authors explain. They are calling for a reduction of the minimum withdrawal amount by “one percentage point, beginning with the 2023 taxation years, and further reduce them in future years until the risk of the average retiree depleting tax-deferred savings is negligible.”

OK, so we would raise RRSP contribution limits, and lower RRIF withdrawal amounts. What else do the three experts recommend?

They’d like to see it made possible for Tax Free Savings Account (TFSA) holders to buy annuities within their TFSAs.

“When an RRSP-holder buys an annuity with savings in an RRSP, the investment-income portion of the annuity continues to benefit from the tax-deferred accumulation that applied to the RRSP. But TFSA-holders cannot buy annuities inside their TFSAs, which means they end up paying tax on money that is intended to be tax-free. This difference disadvantages people who would be better off saving in TFSAs and discourages a much-needed expansion of the market for annuities in Canada,” they write.

Save with SPP has had the opportunity to hear all three of these gentlemen speak out on retirement-related issues over the years. They’ve put some thought into providing possible approaches to encouraging people to save more, making the savings last, and to make the TFSA into a better long-term income provider. Under new rules, you can now make an annual contribution to SPP up to the amount of your available RRSP room! And if you are transferring funds into SPP from an RRSP, there is no longer a limit on how much you can transfer! Check out SPP today — your retirement future with the plan is now limitless!

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The Association for Canadian Pension Management (ACPM) has rolled out a new online course on retirement that will help you up your game when it comes to mastering the topics of retirement saving, and turning those savings into income.

The course consists of six sections, with questions at the end to test your new knowledge. The first section, The Importance of Saving, talks about the importance of making savings part of your financial plan. “Many imagine retirement savings can wait for later,” the course explains, adding that it is far harder to play catch up than to start saving, even a little bit, while you are younger.

Small savings, we learn, can add up due to the “compounding effect” of time — even $50 a month in retirement savings can grow to more than $16,000 in 20 years.

The second section, Individual Registered Savings Plans, looks at registered retirement savings plans (RRSPs), Tax-Free Savings Accounts (TFSAs), the Home Buyers Program and Lifelong Learning Program (these allow you to “borrow” from an RRSP to pay for buying a home or furthering your education) and the new Tax-Free First Home Savings Account.

Ideas expounded on here include how much you should be expecting to live on when you retire — a rule of thumb given here is 70 per cent of your gross, pre-retirement employment income. The course notes that money from an RRSP should be considered to be “deferred income,” since you are able to put it away and grow it tax-free until the time you take it out as future income, when it is taxed.

The Government Retirement Income section walks you through the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement. The important points raise about CPP is that the benefit it provides it quite modest, with the average monthly after-tax payment ranging in the $700 range. And while OAS is a universal benefit, it can be subject to a partial or even full “clawback” if you earn more than a certain level of overall retirement income.

The Workplace Retirement Savings section walks you through the difference between defined benefit, target, and capital accumulation plans. Defined benefit plans provide you a lifetime benefit based on a formula that takes into account your earnings and years of membership in the plan; benefits are guaranteed. Target is similar, but lacks the guarantee. With a capital accumulation plan, what’s “defined” is usually how much money you and your employer contribute — your income will be based on how well those savings are invested. Examples of capital accumulation plans are defined contribution plans, group RRSPs, and of course the Saskatchewan Pension Plan.

The final sections talk about the critical “transition to retirement” stage, where you really need to know exactly what your retirement income will be and what expenses you will need to cover, as well as “decumulation,” which involves turning the money you have saved in a capital accumulation plan into income, either by withdrawing money periodically or converting some or all of it to an annuity, which provides a guaranteed monthly payout.

Estate planning — a complex topic that we all need to know more about — is also covered off.

ACPM has done a great job here. The ACPM Strategic Initiatives Committee (SIC), of which SPP’s Executive Director Shannan Corey is a proud member, led this project, and a broader financial literacy framework for plan sponsors is in the works. The group feel a national effort towards broader financial literacy is an important project, she notes.

Shannan says that response to the program has been good so far since the course was rolled out late last year, with close to 200 people graduating from the program.

Asked if the course might make its way into school curriculum one day, Shannan says “yes, we have talked about that and a contact of mine who teaches financial literacy for high school seniors is using the course as part of this curriculum.” It would be great, she adds, to see usership of the course expand.

“We feel it is a really great tool, but that it will take time for it to gain credibility and exposure. The financial literacy framework is going to be pretty amazing and should help get broader national exposure too — that one may have broader uptake as it is designed for plan sponsors rather than individuals,” she adds.

ACPM describes itself as “the leading advocacy organization for a balanced, effective and sustainable retirement income system in Canada,” and ACPM member organizations “manage retirement plans for millions of plan members. “

The group believes that “part of having a better retirement system is to provide education to those preparing for and contemplating retirement.”

According to ACPM, the motto for retirement savings is “the sooner the better.”

They state that their online retirement savings course is designed to be of value to all ages. “If you are in your twenties or thirties and just starting your career path, this course is for you.  If you’ve reached the point where you are building your household savings but not yet focused on retirement savings, this course is still for you. And if you’re nearing retirement but haven’t already learned how to manage and accumulate retirement savings, there are still many important lessons to be gleaned here,” states ACPM.

Finally, ACPM notes that many Canadians are not well prepared for the inevitable retirement from work that lies ahead of them.

“Nearly one in five retirees has less than $25,000 in savings and investments while more than half of Canadians do not have a financial plan for their retirement,” the group states. “It is our hope that this course will help you gain an understanding of pensions and retirement savings as you plan for your retirement.”

Many Canadians don’t have any sort of retirement program at the workplace. If you’re in this group, the responsibility for saving for your future retirement is squarely on your shoulders. Fortunately, the Saskatchewan Pension Plan offers a program for any Canadian with unused RRSP room. SPP, which operates on a not-for-profit basis, will invest your savings in a pooled retirement fund managed at a very low group rate. When it’s time to retire, your income options include choosing one of SPP’s lifetime annuity options, which will ensure you never run out of money. Check out SPP today!

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Study finds support for more in-plan DC decumulation options: PIMCO

A recent study from PIMCO Canada has found that consultants, advisors and plan sponsors serving the defined contribution (DC) sector feel plan retirees should have more “in-plan” options for the decumulation, or drawdown stage.

The study was designed to help industry supporters “understand the breadth of views and consulting services within the Canadian DC marketplace,” PIMCO’s media release notes. The study, released earlier this year, asked questions of “12 major recordkeeping, consulting and advisory firms that serve roughly 36,000 Canadian clients,” the release continues.

A whopping 92 per cent of respondents “believe retirees should be able to remain in plan with investments that suit their needs,” the release notes. All respondents believe that “recordkeepers should offer and support in-plan decumulation options.”

A bit of background here. A DC plan typically has two phases in its working lifetime. There is an “accumulation” phase, where savings are collected and then invested for the future.

When the individual decides to turn those savings into an income stream, it is called the “decumulation” or “drawdown” phase.

Typically, the options for a retiring member are to convert some or all of their money to an annuity, which provides them a monthly pension for life, or to continue to invest the savings in a registered retirement income fund-type vehicle, where they are required to withdraw a set amount each year. All of these options are designed to provide a retired person with income from their savings.

So the research suggests that there’s a strong interest in having people keep their savings within their DC plans when it’s time to collect the income, versus transferring it out.

Other study findings looked at how the DC plan’s investments should be managed.

Interestingly, 91 per cent of respondents thought exposure to equity markets (like stocks) was “extremely important or very important” for DC plans to offer. That’s up 27 per cent over 2021, PIMCO’s release notes.

At the same time, 82 per cent of respondents feel inflation protection is an important investment objective, while 54 per cent felt capital preservation was also an important consideration.

Thinking about decumulation-related investing, the majority thought a “target date fund” approach, where one’s exposure to equities is reduced every year you get older, was the top approach. Annuities were favoured by 27 per cent of respondents as a good decumulation approach.

It’s clear that figuring out how to turn savings into income is a top concern among those who are running/consulting on DC plans — “100 per cent of respondents are either recommending or currently evaluating new investments designed for retired participants.”

This is all pretty technical-sounding, but is less complex than it sounds. Saving is something we understand — think of money going into an account that is then invested. The trickier part is drawing it down, because you want to get an income from the savings without running out of money. So you don’t want to take out too much at the front end of retirement in case you run out at the back end.

The simplest way to make sure your piggy bank is never completely empty is to consider annuitizing all or some of your retirement savings. This is an option offered by the Saskatchewan Pension Plan. If you choose this for some or all of your savings, you’ll get a payment on the first of the month for the rest of your life from SPP. Check out SPP’s retirement income options today! Also new — the rules for contributing to SPP have changed. You can now contribute any amount annually up to your registered retirement savings plan (RRSP) contribution limit. And, if you are transferring funds from an RRSP into SPP, there is no longer an annual limit on how much you can transfer! Your retirement future with SPP is now limitless!

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We’re living through an era where all the everyday things we spend money on cost a whole lot more than they did a year or two ago.

With that in mind, Save with SPP decided to do a little digging for some new (to us) ideas on how to keep more of your money in your purse or wallet.

The Asterisk blog offers up a few, including the idea of ditching your landline (if you haven’t already). “Paying… for a landline you barely use just doesn’t make sense,” the blog advises.

Other ideas include getting rid of traditional cable and making do with programming from an antenna on the roof, and/or the free streaming apps offered by major TV networks.

The blog also suggests you review your credit card statements each month to look for any subscriptions you can live without.

At the Millennial Money blog, we are urged to “stop paying for music” via streaming services. This is a good one. Here at home, we “ripped” all of our old CDs, stored them in the cloud, and used the Cloud Beats app to listen to them when in the car. You already paid for the CDs, so why not listen to them?

Another good idea from Millennial Money is to make use of your local public library.

“There’s really no reason to buy books or media on Amazon when you can just as easily visit your local library for a virtually unlimited selection of items,” the blog advises.

“The thing to remember about libraries is that you pay for them with your tax dollars. So, if you don’t frequent your local library, you’re literally flushing money down the drain,” the blog adds.

Our late father would like another of the cost-saving suggestions — “turn off the lights.” The blog notes that “people often lose a lot of money because they leave lights on around the house.” Check to see if this is true at your house!

The (Mostly) Simple Life blog offers up a few more.

A good one is to borrow, rather than buy or rent. “I’m sure that I could find a family member or friend to borrow from instead of purchasing something that’s just going to sit around most of the time,” the blog advises. “We’ve borrowed tools, suitcases, and extra bedding for guests instead of buying something we might only need once,” the blog adds.

Another nice idea is to shop with cash, rather than with debit or credit cards.

“If you have a hard time sticking to your budget, don’t bring more cash than you are supposed to spend,” the blog notes. “If you only have $50 to spend on groceries, bring $50 of cash into the store.” Boomers will recall that in the days before widespread credit card use, cash with truly the Monarch of Money — the main, and most common way to pay.

The My Money Coach blog has some great ideas as well.

The blog advises us to “give every dollar a job.” Huh?

This strategy involves finding “a home for every dollar in your budget so you’re not tempted to make thoughtless purchases by thinking `if I have the money sitting around, I’ll spend it,’” the blog explains.

“Start telling your money where to go once you deposit your paycheque: pay all of your bills first, then move the remainder to other accounts, such as a savings account or your retirement fund. By ensuring that every dollar has a home, you’ll be less likely to spend away your entire paycheque. To make things easier, you can set up an automatic transfer on payday to divvy up your paycheque into separate accounts, so you won’t be tempted to spend it,” the blog explains.

Other good advice from My Money Coach includes leaving credit cards at home when you go shopping, and the classics of having a budget and tracking spending.

We’ll add a couple that have worked for us over the years. Guaranteed investment certificates are basically a savings account that pays you interest, but can’t be accessed for a specified term, typically one to five years. Money that you can’t easily get at to spend tends to grow. It’s a piggy bank that can only be opened every few years.

Shopping at thrift stores is another great way to have fun hunting for treasure while saving money. It’s amazing what you can find, and you are usually paying a few bucks instead of $50 or $100. We brag to our friends at the golf course, especially after sinking a long putt, that our vintage putter cost $3 at Value Village.

The Saskatchewan Pension Plan makes it easy for you to automate the building of your retirement nest egg. SPP allows you to make pre-authorized contributions (PACs) to your account. Through PACs, you can have money directed to your SPP account every payday, so that you’re literally paying your future self first! Check out SPP today!

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98 per cent of workers say employers should offer a workplace pension

It’s unanimous! Or about as close as you can get to that.

An impressive 98 per cent of U.S. workers polled by Vestwell, Inc. say “it’s important for their employer to provide a retirement savings plan,” reports Benefits Canada.

The survey also found that “nearly half (47 per cent) of workers listed retirement as their number one savings goal,” the magazine reports, adding that paying off debt was seen as the top priority by 34 per cent of respondents.

There were some other interesting survey findings, Benefits Canada adds.

“While two-fifths (40 per cent) of employees said a higher salary would encourage them to contribute to a workplace retirement plan, others cited a higher employer-matching contribution (28 per cent), better financial education (eight per cent) and paying off personal debt (six per cent) as motivating factors. Just 12 per cent said nothing would motivate them and six per cent cited other motivations,” the magazine reports.

The vast majority of respondents (91 per cent) wanted employers to offer a program that offered “a guaranteed lifetime income stream, such as a deferred annuity.” Only 40 per cent of employers wanted their retirement programs to deliver guaranteed income.

It would seem that saving on their own is seen as difficult by American workers. Seventy-six per cent of those surveyed “reported some level of stress regarding their financial situation, including two-thirds (66 per cent) who agreed that inflation and market volatility has increased their previous levels of financial stress,” Benefits Canada reports.

Despite this, 48 per cent of employees agree they should be saving more.

Finally, 90 per cent of employees wanted their employers to deliver some sort of “retirement education,” and more than half (59 per cent) “agreed or strongly agreed that companies should have responded to the `Great Resignation’ with a more hands-on approach to providing retirement information,” the article notes.

It is very encouraging to see a survey report that retirement saving is seen as a top priority, and that employers should offer some sort of retirement savings program. This seems to us like a cry for help from workers on the whole retirement savings issue; it may be too daunting and complex for people to save on their own.

It’s also interesting that most respondents want some sort of guarantee around the income they get from their workplace retirement savings program. If your workplace retirement savings program doesn’t offer guaranteed income on retirement, but a lump sum, you can achieve a guaranteed income stream through the purchase of an annuity with some or all of the savings.

If you don’t have a workplace retirement savings program, the Saskatchewan Pension Plan may be able to provide some help. You can join SPP as an individual — the plan is open to any Canadian with registered retirement savings plan room. SPP will invest your savings at a low cost in a professionally managed, pooled fund, and at retirement your income options include choosing from a stable of lifetime annuities.

Alternatively, your employer can choose to offer SPP as a retirement benefit. If there’s interest at your organization, here’s where you can find out more details.

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Those of us still slogging away at our jobs — maybe working from home, or perhaps beginning our return to the shop — like to dream of a future beyond work, where we’re retired and able to do whatever we want.

But if “doing what we want” is zoning out, drinking coffee, and watching movies from the couch, there could be problems lurking ahead. Save with SPP took a look around to find out what people are saying about the dangers of inactivity in retirement.

According to information from the World Health Organization, cited by the Step2Health blog, physical inactivity is pretty widespread. “Sixty to 85 per cent of people globally lead a sedentary lifestyle,” the blog reports.

“Studies show that sedentary behavior, particularly in the elderly, is detrimental to their health. Medical experts believe that older people sitting too much or spending extended periods in bed are more prone to the risks of chronic health problems such as heart diseases, diabetes, obesity, and even cancer,” the blog notes.

In the U.S., the Center for a Secure Retirement also concludes that “long periods of inactivity are bad for our health.”

“Retirees are particularly vulnerable to sedentary behavior. Retirement is associated with a 10 per cent decrease in moderate to vigorous physical activity and a 13 to 29 per cent increase in TV watching, according to a 2018 study from the National Institute of Health,” the Center notes.

The Center recommends that seniors “take a five minute walk every two hours,” or “stand and march in place during commercials while watching TV.” Another bit of advice is to “walk around, pacing, while you are on the phone” and to “do pushups against the wall while waiting for the oven to heat up or the microwave to finish cooking.”

The BBC also takes the view that an inactive retirement can have negative impacts on both your physical and mental health.

“Research from the Institute of Economic Affairs suggests that while retirement may initially benefit health — by reducing stress and creating time for other activities — adverse effects increase the longer retirement goes on,” reports the BBC.

“It found retirement increases the chances of suffering from clinical depression by around 40 per cent and of having at least one diagnosed physical illness by 60 per cent,” the article continues.

It’s inactivity that can be a chief cause of these problems, the BBC report explains.

“It may be there is no imperative to get up and out of the house, as there was when there was a daily journey to work,” the article notes. “Or it may be that a health problem has meant someone cannot – or does not want to – get out and about.”

An antidote, the network adds, is physical activity.

“Age UK runs a programme called Fit as a Fiddle, which encourages older people to keep physically active — as well as to eat healthily and look after their mental health,” reports the broadcaster. “Simply walking can offer great benefits, including boosting your mood, as can gentle exercise classes.”

Let’s recap. If you decide to spend your retirement sitting around at home, your physical health can decline, and the isolation may impact your mental health. Even light activity can help prevent these problems.

So it’s probably an important part of your retirement plan to think of what you’ll do to keep active after you log out for the last time. Consider taking a dance class, or painting lessons, or volunteering, just to get you out of the house and moving around. Your future you will be glad you thought about this.

And your future you will be pleased if you’ve chosen the Saskatchewan Pension Plan to help you save up for life after work. SPP has been helping Canadians save for retirement for more than 35 years. Let SPP do the heavy lifting of investing your nest egg — via a pooled fund and low management costs — so that you’ll enjoy a nice, extra income stream when you hang up your name tag for the last time.

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RRSPs are still the best way to save for retirement: Golombek

At a time when many observers are saying the venerable registered retirement savings plan (RRSP) has been surpassed by other, newer savings products, noted financial writer Jamie Golombek begs to differ.

Writing in the Strathroy Age Dispatch, Golombek notes that some retirement commentators are asking if the RRSP “still has merit.”

“Let me try to un-muddy the waters by suggesting that RRSPs are likely the best way for many Canadians to save for retirement. After all, an RRSP, just like a tax-free savings account (TFSA), allows us to earn effectively tax-free investment income. And that’s not a typo: tax free, not merely tax deferred,” he writes.

So how is an RRSP tax-free? Golombek explains.

“If you go back to basics, and really think about what’s happening with an RRSP contribution, you will soon realize the investment return on your net RRSP contribution is mathematically equivalent to the tax-free return you could achieve with a TFSA, ignoring, for now, changes in tax rates. And, provided the time horizon is long enough, RRSPs can beat non-registered investing even if your marginal tax rate is higher in the year of withdrawal than it was when you contributed,” he writes.

He gives the example of Sarah, who has a marginal tax rate of 30 per cent and puts $1,000 into an RRSP.

“Applying (an) … annual rate of return of five per cent over the next 20 years, with no annual taxation, Sarah will be able to accumulate an RRSP worth $2,653. But, alas, not all the RRSP funds are hers to spend. The piper must be paid. When Sarah withdraws the $2,653 from her RRSP, and assuming her marginal tax rate is still 30 per cent, she will pay $796 in tax, netting her $1,857 after tax from her RRSP. This is equivalent to a five-per-cent annual after-tax rate of return on her $700 net initial investment ($1,000 contribution less $300 in deferred taxes on that initial investment),” he writes.

“In other words, Sarah’s after-tax rate of return of five per cent is exactly equal to her pre-tax rate of return, meaning she essentially has paid no tax whatsoever on the growth of her initial $700 net RRSP investment for 20 years. The RRSP allowed her to save for retirement on an effectively tax-free basis,” he explains.

If your marginal tax rate when you retire is lower than it was when you put the money in, you get an additional tax advantage, Golombek concludes. Did you know that the Saskatchewan Pension Plan operates very much like an RRSP? The contributions you make are tax-deductible, so you may get a nice little tax refund as a pat on the back for making regular SPP contributions. Check out SPP today!

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“The best investment you can make is an investment in yourself.”

This quote, from famed financier Warren Buffett, begins Larry Bates’ book Beat The Bank, a nicely written, witty and fun “how-to” on how to build wealth without handing over a massive chunk of your savings to your local financial institution.

He introduces the concept of Simply Successful Investing by encouraging us all to “learn investment basics,” to “think long-term” when investing, and to “minimize” investment costs.

He rolls out the example of two couples, the Meeks and the Ables, who both manage to save $300,000 by age 65 in their Tax-Free Savings Accounts (TFSAs). At that point, the Meeks have saved $470,000 — a $170,000 gain on their investment. But the Ables, at the same point, have $856,000.

The difference, the book explains, is that while the Meeks followed the bank’s advice and invested their money in equity and bond mutual funds — carrying an average annual fee of two per cent — the Ables invested in index ETFs that charge only 0.25 per cent in fees.

“The Meeks paid total mutual fund fees of $217,600 — an astonishing 73 per cent of the original $300,000 they invested — while the Ables paid total ETF fees of just $63,900, about 21 per cent of their original investment,” author Bates explains. As well, because the Ables have so much more savings by age 65, they will receive more than twice the annual retirement income that the Meeks will.

In another chapter, Bates explains the three “wealth builders” that are out there for investors — amount saved, time (how long one has been saving) and “the magic of compounding.” The more you are able to save, and the earlier you get started, to more your savings growth will be compounded over time, he explains.

To illustrate the idea of compounding, a chart shows how $10,000 invested in Royal Bank stock would grow to $60,822 after 15 years, thanks to growth in the stock price over time. And if dividends are reinvested, the figure goes even higher, Bates writes.

Had you invested $10,000 in TD Bank stock in April, 1978, you would have $4.2 million 40 years later. “The only two investment values that really matter are the amount you pay on purchase, and the amount you receive on sale,” he writes. “The thousands of data points in between ultimately mean nothing… learning to ignore all these thousands of data points is key to Simply Successful Investing.”

Watch out, warns Bates, for “wealth killers,” which include fees (both visible and invisible), taxes, and inflation.

He offers a fee impact calculator (the T-REX calculator) at www.larrybates.ca.

Latter chapters provide detail on investing via discount brokerages or through “robo-investing,” both of which offer lower fees than traditional full service brokerages. Closing advice includes the idea of “automating” your investing/savings by making regular, automatic deposits.

This is a great, clearly written and very digestible walkthrough of what can seem like a very complex topic.

The Saskatchewan Pension Plan operates on a not-for-profit basis. That allows them to keep investment management costs low, typically under one per cent. No fees are charged directly to members. If you are looking for a low-fee, pooled retirement savings vehicle with a sparkling track record since its inception 36 years ago, look no farther than SPP!

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