How are things working out with the new First Home Savings Accounts?

For decades, the federal Home Buyers Program offered first-time home buyers a way to fund their down payment – money could be taken out of a registered retirement savings plan to put on the house, with the home buyer given a period of time to repay him or herself.

A more recent program, the First Home Savings Account (FHSA), was launched in recent years by the feds. Let’s have a look at how this program, in which contributions to the plan are tax-deductible but withdrawals are not, works.

Writing in The Globe and Mail, finance columnist Rob Carrick notes that 740,000 people opened a FHSA last year.

“FHSAs are a small-scale but promising example of government policy aimed at helping middle class young people get into the housing market. You can put up to $8,000 in these accounts each year to a maximum of $40,000. Contributions generate a tax refund, and both contributions and investment gains benefit from tax-free compounding and withdrawals. FHSAs are available to people aged 18 and up who did not own a home in the part of the calendar year before an account is opened or the previous four years,” he notes.

While the $40,000 cap, he writes, “is out of synch with the average resale housing price of a bit more than $700,000 in April,” the FHSAs “are nevertheless helping people with middling incomes build down payments for home purchases well into the future.”

Citing federal government statistics, Carrick notes that 44 per cent of FHSA account holders had a taxable income of $53,359 or less. A further 36 per cent of account holders had income in the $53,360 to $106,717 range, he adds.

Launched just last year, the value of all FHSAs topped $2.8 billion, with the average account value listed at $3,900, Carrick writes.

“We are still many years from first-time buyers being able to say their FHSA was a difference-maker in getting into the housing market, but we’re off to a decent start. In 2023, a little over 34,000 FHSA holders made a withdrawal from their accounts More importantly, FHSAs are catching on with exactly the people who will need all the help they can get to buy homes,” concludes Carrick.

An article in Advisor.ca took a look at why some people made withdrawals soon after opening the accounts.

Jacqueline Power of Mackenzie Investments tells Advisor that “it doesn’t surprise me in the least” that some FHSA account holders would “choose to make qualifying withdrawals soon after opening and contributing to the plan.”

“We’re all looking for [tax] deductions these days, any way that we can get one,” Power states in the Advisor article. Qualifying withdrawals from an FHSA allow “an individual to have that deduction and make that tax-free withdrawal.”  

“Launched on April 1 of last year, the FHSA is a registered plan that allows first-time homebuyers to save for a down payment on a tax-free basis. Contributions to an FHSA are tax-deductible, while withdrawals to purchase a first home — including from investment income — are tax-free,” the article notes.

It sounds like a pretty nice program for younger people to consider when saving for a new home.

This author was able to use the Home Buyers Program, where money is transferred out of an RRSP, and then used for the down payment, back in 2008. We are just now repaying the last $1,300 or so, even though the mortgage was paid off in 2021. The one interesting aspect of our use of the HBP was that we chose to “repay” ourselves via contributions to the Saskatchewan Pension Plan! We are now gearing up to start receiving a lifetime annuity from SPP this fall, when we will reach age 65.

It’s another example of how SPP can work for you! Check out Canada’s made-in-Saskatchewan retirement savings solution today!

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The trickiest retirement problem – living off a lump sum

When we work, we get paid on some sort of regular basis – we’ve been paid monthly (with an advance on the 15^th), we’ve been paid every two weeks, we’ve been paid twice a month, and we’ve been paid every week.

But in retirement, you might find that instead of regular payments, you are living off a lump sum of money – a chunk that is at its biggest near the beginning of your retirement, and that declines as you get older. What’s tricky is figuring out how much to withdraw each year.

A recent Financial Post article looks at this tricky “drawdown” or “decumulation” phase, where retirement savings are turned into income.

Author Fraser Stark, who is president of the Longevity Pension Fund at Purpose Investments,  notes that a number of “rules” have sprung up about how much you should withdraw each year, such as the “the four per cent rule, the 3.3 per cent rule, (and) the 2.26 per cent rule.” He adds that “whatever your number, these prescribed income level rules of thumb seem to point to lower – and more precise – values.”

The question for retirees to answer, he explains, is “how much can I safely withdraw from my retirement portfolio each year without the risk of running out of money?”

And while no one wants to run out of money, Stark says not taking out enough money each year is also a risk. It means you may not be living as well as you could be, he explains.

“The premise of these rules is that the opposite — not running out — constitutes success. This is where the logic behind these rules begins to fray,” he writes.

“Honing in on the `correct’ value misses the point: the entire premise of holding a basket of assets and drawing from it blindly is a suboptimal approach that often leads to inefficient outcomes for retired investors,” he explains.

The granddaddy of all withdrawal rules, the four per cent rule, was posited by Bill Bengen in 1994, writes Stark. “His analysis determined that an investor who started spending four per cent of their original portfolio value… would have not fully depleted their balanced portfolio over any 30-year period,” he explains.

The idea, Stark continues, is four per cent (on average) is a rate of withdrawal that is less than long-term rates of growth. For example, the Saskatchewan Pension Plan has averaged a rate of return of eight per cent since its inception in the late 1980s.

However, the four per cent rule assumes that the retiree is going to be able to live with a “fixed spending level” throughout his or her retirement. “It is truly set it and forget it, which is not how people behave,” he explains.

As well, he writes, people are now living longer. Mortality tables suggest that a 65-year-old woman today has a “great than 34 per cent chance of living for 35 years,” or until age 100. So you are withdrawing funds for many more years than people did in the past, Stark explains.

What, then, do you do to avoid running out of money – especially if you find yourself blowing out 100 candles on your birthday cake? The answer, says Stark, is an annuity.

“A more effective approach is to annuitize a portion of your assets at retirement, thereby creating a stream of sustainable income and withdrawing from the rest of your portfolio according to your percentage rule of choice,” he writes. You can never run out of money in an annuity, as you’ll receive it for as long as you live, he explains.

He also suggests starting Canada Pension Plan and Old Age Security later – these payments are inflation-protected and also are paid for life.

“Much has changed over those three decades. In the face of rising living costs, greater macro uncertainty and continued innovation in financial product design, an optimal outcome for many investors can be achieved by more thoughtfully constructing an initial portfolio to meet their desired outcomes, and by dynamically responding to market and life conditions as the retirement phase unfolds. We deserve no less,” he concludes.

The option of a lifetime annuity payment is available to members of the SPP. When it’s time to collect your pension, you can choose to receive some or all of your account balance as an annuity, meaning you’ll get a monthly payment for the rest of your life. If you want more flexibility around the amount you want to receive, take a look at SPP’s Variable Benefit.

SPP’s varied retirement options, coupled with its professionally managed, low-cost investment strategy, make it a reliable partner for your retirement saving and income plans.

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Annuities prevent you from outliving your investments: Jonathan Kestle CFP, CLU, H.B.Com

The higher interest rates of the mid-2020s are making people revisit an old retirement planning friend, the annuity.

An annuity is a financial product that you can buy which then pays you a specified amount each month for the rest of your life. While you no longer have control over the money you used to pay for the annuity, your monthly income payments from it are guaranteed to last your lifetime.

Save with SPP reached out to Jonathan Kestle of Ian C. Moyer Insurance Agency to find out more about annuities.

Q. We’ve not seen anyone comment on how choosing an annuity takes away the headache of having to make withdrawals from a registered retirement income fund (RRIF) or similar vehicle (a minimum amount that must come out, taxation, perhaps increased income and further taxation, etc.) Does having an annuity for some or all of one’s retirement income simplify their taxes?

A. An annuity will not necessarily simplify taxes unless it is a “non-registered” annuity, meaning the funds used to purchase the annuity are regular taxable savings and not from registered savings (Registered Retirement Savings Plans (RRSPs), a Locked-In Retirement Account (LIRA), etc.)

What an annuity does simplify, is the task of making a savings account last. Annuities eliminate the risk of outliving your investment and pay a pretty good payout rate in comparison to what would be prudent with a normal investment account.

Q. Similarly, when you choose an annuity you can pick one that can provide a spouse with a pension, or beneficiaries with a lump sum amount. If you have a lump sum, isn’t it possible that you’ll spend it all before you die and leave little or nothing to beneficiaries?

A. Not really, an annuity typically makes it harder to leave funds to beneficiaries. The guarantee periods are often limited to 10 or 15 years, at which point no money will pay to a beneficiary upon the death of the owner.

I would look at it this way… if you aim for a retirement income of $60,000, you could use an annuity to supplement your social benefits (such as CPP and OAS) to reach that amount. This way, you secure a steady income and preserve other investments, which can then be left to your beneficiaries.

Q. Interest rates have been persistently higher – are we seeing more annuities being chosen?

A. Yes. Now is a great time to consider an annuity. I checked today, and payout rates are up about 19% from 2021.

Q. Any other observations on the topic?

A. The payout ratio of an annuity is often overlooked. The “payout ratio” of an annuity is simply the amount of annual income received divided by the lump sum used to purchase the annuity. The concept is that those who unfortunately pass away early have their contributions support those who live longer. This mechanism is known as “mortality credits.”

Mortality credits are a unique feature of annuities. Essentially, the contributions from those who pass away earlier than expected are pooled and used to provide higher payouts to those who live longer. Because of this, annuities can safely sustain a higher withdrawal rate than a traditional investment portfolio. Achieving the same withdrawal rate from a traditional savings account would be too risky for many investors. This system allows annuities to offer more stable and predictable income throughout retirement, providing peace of mind for retirees.

We thank Jonathan Kestle for taking the time to answer our questions. Here’s a link to an earlier interview SPP did with him on annuities.

The Saskatchewan Pension Plan offers its retiring members a variety of annuity options. There’s the Life Only Annuity, which pays you and you alone a monthly income for life. There’s also the Refund Life Annuity, which can provide a lump sum benefit for your beneficiaries, and the Joint and Last Survivor Annuity, where your surviving spouse can continue to receive annuity payments after your death. Full details can be found here: retirement_guide.pdf.

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South of the border, one in four Americans don’t plan to ever retire

Lacking any retirement savings, a new poll finds that one in four Americans say they “expect to never retire,” reports the Associated Press via MSN.

The survey was carried out by the AARP, and also concluded that 70 per cent of those surveyed – U.S. adults aged 50 and older – “are concerned about prices rising faster than their income,” the AP reports.

“About one in four have no retirement savings, “ the article continues, adding that the AARP research “shows how a graying America is worrying more and more about how to make ends meet even as economists and policymakers say the U.S. economy has all but achieved a soft landing after two years of record inflation.”

Those responding to the survey cited “everyday expenses and housing costs, including rent and mortgage payments,” as the biggest reasons why “people are unable to save for retirement,” the story notes.

Credit card debt was also cited as a barrier to saving, the report adds.

“The AARP’s study, based on interviews completed with more than 8,000 people in coordination with the NORC Center for Public Affairs Research, finds that one-third of older adults with credit card debt carry a balance of more than $10,000 and 12 per cent have a balance of $20,000 or more. Additionally, 37 per cent are worried about meeting basic living costs such as food and housing,” notes the AP story.

“Far too many people lack access to retirement savings options and this, coupled with higher prices, is making it increasingly hard for people to choose when to retire,” states Indira Venkateswaran, AARP’s senior vice president of research, in the AP article. “Everyday expenses continue to be the top barrier to saving more for retirement, and some older Americans say that they never expect to retire,” she tells the AP.

The article notes that the number of folks choosing to “never retire” has risen over the past three years of surveys, from 23 per cent in January of 2022 and from 24 per cent in July of that same year.

“We are seeing an expansion of older workers staying in the workforce,” states David John, senior strategic policy advisor at the AARP Public Policy Institute, in the AP article. He tells the AP that older workers “don’t have sufficient retirement savings. It’s a problem and is likely to continue as we go forward.”

The article says there are other factors at play for older Americans, such as concerns about the long-term financial health of the U.S. Social Security system and rising costs of Medicare.

It’s definitely an eye-opener to see how many folks plan to keep working indefinitely. We know of a few fellow seniors who are taking this approach as well, and plan to work beyond age 65 and into their 70s.

The article talks about a lack of access to workplace savings programs. This is one of the reasons why the Saskatchewan Pension Plan was founded in the 1980s – to provide people who don’t have a retirement program through work to be able to set up their own, through SPP. SPP does all the hard work for you – your contributions are invested in a pooled, professionally managed and low-cost fund. At retirement, you can choose such options as income for life via an SPP annuity, or the more flexible Variable Benefit. If you don’t have a savings program through work, SPP may be the answer for you!

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For many of us, inflation is an unwelcome guest from a long time ago who has made a sudden reappearance. For the younger among us, it’s a weird new thing.

How do we cope with a reality that has prices for things like groceries soaring? Save with SPP took a look around for some top tips on slaying the beast of inflation.

The folks at Ratehub.ca describe “two common categories of inflation” as being “cost-push inflation” and “demand-pull” inflation.

Cost-push inflation, the blog reports, “happens when production costs rise (wages, raw materials, transportation, etc.) but demand doesn’t.” The higher cost of producing items inflates their cost, the blog explains.

Demand-pull inflation, Ratehub explains, “is the result of higher consumer demand for certain goods.” Popular items become harder to find, supplies shrink, and companies “start charging more.”

Terrific. But what can we do about it?

Among the tips offered up by Ratehub are:

• Putting off big expenses – if you can, Ratehub suggests, put off costly home renos or big-ticket purchases like new cars.
• Save on groceries – buy in bulk, the blog suggests; take advantage of grocery store points programs, and plan more vegetarian meals given the high price of meat
• Pay off debt – “Brainstorm some ways in which you can free up money… by cutting back, then use the extra cash you saved to begin paying off your debt.”

Global News suggests a few more ideas:

• Spend less on dining out, entertainment – A recent poll, the broadcaster reports, found that 54 per cent of those polled (in 2022) were “dining out less.” As well, Global notes, 46 per cent said they were “cutting back on entertainment spending.”
• “Spring clean” your budget – Myron Genyk of Evermore Capital tells Global News that people should be “taking a look at credit card statements (for) recurring charges that might not be worth the monthly fee, such as a streaming subscription that is not being watched.” Cutting these “passive” charges may be easier than “overhauling one’s lifestyle” to make spending cuts, she tells Global.
• Consider the impact of higher interest rates on savings, expenses – Interest rates, reports Global, haven’t been this high for a generation. For savers, now may be a good time to consider a Guaranteed Investment Certificate (GIC), but the article warns that even GICs may not keep pace with inflation if it continues to increase. For those with mortgages, Genyk suggests they consider a longer amortization period. “While they might end up owing more on their mortgage by extending the life of the loan, it might be worth it to offset the temporary inflationary pressures on their monthly budget,” the article suggests.

Forbes Advisor has some additional thoughts on the subject.

• Speed up debt repayment – With interest rates on debt rising, a bad thing is getting worse, Forbes reports. The article quotes Doug Hoyes of Hoyes Michalos as saying “if you are spending more money on food, rent, and gas for your car, that leaves less money to service your debt.” His first tip for surviving inflation is “to tack consumer debt as quickly as possible to avoid the snowball effect of debt overwhelming your finances.”
• Use cash-back credit cards – Vanessa Bowen of Mint Worthy tells Forbes that using a cash-back credit card “on essential expenses like gas and groceries can be a simple way to put money back in your pocket.”
• Avoid volatile investments – When investing, watch out for companies carrying a lot of debt. Nesbitt Burns’ John Sacke tells Forbes “you want to buy stocks in companies that are likely—and I use that word ‘likely’ very carefully—to perform better than other companies in a rising rate environment.”

The folks at Sun Life Financial finish us off with some classic inflation-beating advice.

• Cook at home – “Cooking at home is cost effective,” especially when compared to the cost of dining out or ordering in, the article advises. Think of the $6 latte you like – on a daily basis, it is costing you $2,190 per year! Much cheaper, the article notes, to make your own coffee at home.
• Buy used, or borrow – “Consider buying second-hand items – you can sometimes find great deals at a fraction of the original price. Books, toys, sports equipment, furniture, clothing and accessories … you can find it all on platforms like Facebook Marketplace and Kijiji,” the article suggests. You may also be able to borrow or rent things like speciality tools for a home improvement job, rather than laying out money to own them, the article suggests.
• Travel during off-peak times – The article suggests being “smart” about travel, and to “take advantage of the off-season. You’ll likely have a cheaper and more relaxed holiday.”

Some of our friends have started doing challenges related to health and weight loss; maybe some of these ideas would make good challenges – going a week, or a month, without dining out or ordering in would save a pile of cash, for example. Creativity is always good when it comes to saving money, we wish you the best of luck in your own challenges.

When you are able to generate some extra savings, don’t forget about the future. If you are saving on your own for retirement, a wonderful and willing partner is out there for you – the Saskatchewan Pension Plan. SPP members have their savings pooled in a low-fee, professionally managed fund. Those savings grow over time, and when it’s time to collect, SPP members have choices, such as a lifetime monthly annuity payment or the flexibility of our Variable Benefit. Check out SPP today!

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Why tax planning is a different game once you’re retired

Tax planning is something that’s pretty easy to handle when you’re working – especially if you have just one employer making deductions from your pay.

But once you’ve retired, The Globe and Mail reports, it’s a whole new ball game.

“For many working Canadians, filing taxes is relatively straightforward: You get a T4 slip from your employer, maybe make a deduction for contributing to your registered retirement savings plan (RRSP), and perhaps claim the odd credit, depending on the current tax rules,” the Globe article begins.

“However, your tax picture can get more complex in retirement, given the new and varied income sources. These often include workplace pensions, RRSPs, registered retirement income funds (RRIFs), locked-in retirement income funds (LRIFs), Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, non-registered investment accounts, and maybe some extra cash from part-time or occasional work,” the article continues.

So, instead of your money coming from one source, you may be getting a stream of income from a variety of sources, the article notes.

“The more buckets you have, the more flexible you are in controlling your income levels … The key is figuring out which buckets to take money from and when,” Brianne Gardner, financial advisor and co-founder of Velocity Investment Partners at Raymond James Ltd. in Vancouver, tells the Globe.

She says Canadians “need to be more strategic in the decumulation stage of life to minimize their taxes not just from year to year but for the longer term, while also factoring in tax changes,” and to pay attention to tax policy changes, such as the recent federal government change to the capital gains inclusion rate.

You should start thinking about it five years ahead of actually retiring, she states in the article.

Owen Winkelmolen of PlanEasy.ca in London, Ont., sees three different stages for retirement tax planning – pre-65, 65 to 70, and 72 and older, the article notes.

In the pre-65 phase, retirees are usually receiving workplace pensions, money from RRSPs, or money from non-registered accounts, the Globe notes.

If you are drawing down money from registered and non-registered sources, there are different tax consequences. Registered money is taxed at a higher rate, but having less of it when you start getting Old Age Security (OAS) may give you a bigger OAS payment, the article explains. There’s also a pension income tax credit you may qualify for.

As well, many Canadians start getting CPP at age 60.

In the 65-70 phase, you start getting the federal age amount tax credit and can benefit from income splitting, the article notes.

It’s also possible to delay your CPP until you are older, to the maximum of age 70. The same is true of OAS, and if you start either later, you get a significantly larger monthly amount, the article explains.

Once you are 72 there is less wiggle room, the article notes.

“Not only are they already receiving CPP and OAS benefits, but the mandatory RRIF withdrawals increase each year. It can be a problem for retirees with large RRIFs who haven’t pre-planned withdrawals before this phase,” the article warns.

“Some retirees can get stuck with a lot of taxable income, a lot of tax owing and sometimes even OAS clawback if these accounts are quite sizable,” Winkelmolen tells the Globe. “You can get to the point at which you have a lot of income that you have little control over.”

In our opinion, if you haven’t called up a financial adviser or accountant in your working life, retirement might be a good time to turn to their expertise to help navigate this, especially the early phases of retirement.

If you’re a member of the Saskatchewan Pension Plan, or are considering becoming one, a great feature to be aware of is the plan’s portability. Since you can join as an individual, a change in jobs doesn’t impact your SPP membership – you can continue contributing as you move from one workplace to another.

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Holly Trantham’s Beyond Getting By sets out the possibility of developing financial habits and actions that map to your lifestyle goals.

She explains how living well and building wealth have a complex relationship. By having a job “that requires me to examine the systems we live in…. I’m constantly thinking about what actually makes us happy and, by extension, what actually makes me happy. Because the truth is… we’ve all been sold lies about wealth, work and security that are actively making our lives worse.”

As an example, she talks about “shame-based budgeting” advice from other experts that leave the reader “smacked in the face with guilt” about such things as dining out, taking trips, and so on. Instead, your spending habits shouldn’t “come from a place of internalized shame. Budgeting this way makes you believe that you must be broke or poor because you’re lazy, incompetent, or otherwise undeserving of money… (which) makes you feel bad about every single `unnecessary’ expense.”

Her recommended three-point plan is simple yet effective:

• Pay your bills on time.
• Don’t go into debt funding your lifestyle.
• Invest in your long-term financial goals.

Each chapter in this thoughtful book provides a workbook section where you can chart out your own ideas and beliefs and test them against Trantham’s key messages.

In a chapter exploring happiness, Trantham makes the point that rich people aren’t always happy. They spend more time alone than do those with lower income, as well as “26 minutes less per day with family,” the book notes. “Rich people also tend to surround themselves with other rich people,” and become “less interested in engaging with a lower-class person than with an upper-class counterpart” This, she argues, will tend to “corrode your capacity for empathy – a key ingredient to building and maintaining relationships.”

Wealth (without happiness) becomes an addiction, she concludes, like a gambling or shopping addiction.

Instead, she says, we all need to ask ourselves this – “are your current money habits aligned with your personal values and interests?”

As an example, she talks about how she does not have a “car dependent” lifestyle, and can walk most places and use public transportation, but still was a heavy user of ride-sharing services until she thought about it more carefully. “Defaulting to taking a car whenever I was mildly inconvenienced (via Uber or Lyft) was deteriorating my relationship to my community and causing me to live a less active lifestyle along the way.”

And, she notes, this is just one example – think of all the different lifestyle/money categories this sort of analysis can be applied to!

In a chapter that looks at investing, she boils things down to several “most important” considerations:

• Get started as early as you can so your money has ample time to grow.
• Make sure you’re actually investing the money you contribute to (for Canadians, a registered retirement savings plan, pension plan, or Tax Free Savings Account), as the accounts are not themselves investments, they just hold investments.
• Continue contributing to your retirement regularly throughout your earning years.

“Retirement isn’t necessarily an age, it’s an amount of money. Financial independence means having enough money in the bank to stop working if you want to,” she explains. While stock markets have historically given returns in the 10 per cent range, “nothing is guaranteed… therefore, increasing the amount you’re able to invest over time is critical.”

This is especially important advice for women, she notes.

“According to the Women’s Institute for a Secure Retirement,`while the poverty rate for all women age 65 and older is 10.6 per cent (or just over one in 10), the poverty rate for single women living alone is almost twice as high at 19 per cent,’” she writes.

There’s a lot of ground covered in this great book.

On shopping, the author reminds us that “retailers do not have sales in order to save you money. They have them so they can earn more, because the more items they sell, even at a discount, the more revenue they’re going to generate overall. A $100 pair of jeans at 40 per cent off isn’t saving you $40, you’re still spending $60 you may not have necessarily spent.”

She takes a look at the idea of “manifesting,” the belief that if you “just visualize and vocalize your goals enough, they will come true.” A more realistic way to think about things is what she calls “facilitation,” a “much more pragmatic and intentional way to put the ideas behind manifestation into practice. It involves the process of visualizing not just the outcome you want, but the process it’s going to take to get there.”

Near the end of the book, Trantham makes the point that we tend to stick with what we are doing – the status quo – instead of making positive changes.

“No matter what the question is, the answer is often to choose the less convenient option,” she writes. “It is easier, in the short term, to stick to the status quo in your home life. But will that allow you to feel seen, respected, and like you’re contributing to an equitable home life in the long run?”

“Will it have been worth it (not speaking up) if things don’t change? Isn’t that a scarier thought that the possibility that they could?”

A very interesting and informative read – highly recommended!

If you’re saving on your own for retirement, the Saskatchewan Pension Plan may be just the ally you’ve been seeking. Amounts you contribute to the plan are invested in a pooled, low-cost and professionally managed fund. When it’s time to retire, your SPP options include the possibility of a lifetime monthly annuity payment or the flexible Variable Benefit.

Check out SPP today!

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Traditional retirement “an outdated concept,” younger Canadians say

Working away until age 65, getting the gold watch and the retirement party, and then travelling and having fun – a Boomer view of life after work – is seen as an “outdated concept” by younger people, reports The Daily Hive.

“A Leger survey commissioned by Canadian investment service Wealthsimple found that nearly three-quarters (74 per cent) of Canadians between the ages of 25 and 44 feel the conventional approach to retirement — to stop working at 65 years old to then enjoy travelling, leisure and time with family and friends — is an outdated concept,” the publication reports.

Instead, The Daily Hive reports, younger Canadians surveyed revealed “an ambition among millennials and Gen Z Canadians for `a modern form of retirement’ that lets them pursue personal and professional passions throughout their adult lives.”

Say that again?

“Essentially, the path to retirement is no longer linear, but a mix of work, travel, volunteering and entrepreneurial pursuits,” the publication explains.

“It’s a new perspective on the future driven by younger generations. They are looking for flexibility, personalization and control over their future, rather than feeling controlled by conventional wisdom,” states Wealthsimple CEO Mike Katchen in the article.

The other interesting thing in this new “non-linear” approach is that it calls for early retirement, too.

“The survey also found that early retirement (before the age of 55) has emerged as the go-to plan among 25 to 44-year-olds so they can start their own business, work at not-for-profits, or pursue a passion project — basically, not live to work for someone else,” The Daily Hive article notes.

While factors like “soaring inflation” and the high cost of home ownership are cited as obstacles in the article, more than half of those surveyed plan “self-directed investment options to support their long-term financial goals.”

And, the article concludes, more than half of the 1,500 younger Canadians surveyed “feel that investing has given them more flexibility and choice.”

It’s not surprising to see the traditional path to retirement being questioned by the younger folks. As Boomers, we watched our parents work away at long-term jobs with good pensions, all the while paying down the mortgage on their more affordable homes, and then retiring at 65.

Not as easy for those of us of Boomer age to retire debt and mortgage-free – so you see more Boomers hanging onto their jobs longer, hoping to make the math work for living on less. Many choose part-time or contract work in retirement.

If the survey results hold true, the younger folks plan to save and invest at a greater rate than their parents, and then move out of traditional work earlier – sounds like a good plan to us!

If you’ve got money squirrelled away in a bunch of different registered retirement savings plans (RRSPs), the Saskatchewan Pension Plan may offer you a way to consolidate your nest egg. With SPP, you can transfer in any RRSP amount from other accounts. Once your funds are in SPP, which is a provincially run, not-for-profit retirement program, they will be professionally managed at a low fee, and your choices at retirement will include a lifetime monthly annuity payment or the flexible Variable Benefit.

Check out SPP today!

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Ah, spring. Time to drag the golf clubs back up to the garage, to pump up the bike tires, and start getting the garden going. And, for many of us, time to get a nice tax refund cheque (or, more likely, a refund deposit).

Save with SPP wondered what people do with the refunds. Let’s take a look around and find out!

According to Fiona Campbell, writing for Forbes Advisor, tax refunds “are a sweet perk of filing your income tax return – and the good news is that most Canadians get one.” In fact, she notes, 58 per cent of filers got a refund in 2021, and the refund averaged just over $2,000.

This year, the average refund is more like $2,100 and change, she continues.

Campbell’s ideas on how to spend the refund don’t include “concert tickets, vacations, or designer clothes,” but are intended to “put you ahead financially in the long run and give you peace of mind instead.”

First (no surprise) is paying down debt. “If you carry a credit card balance, or only make the minimum payments, you’ll end up paying interest each month—and with APRs averaging 21 per cent, that can add up quickly,” she warns. The average Canadian owes more than $4,000 in credit card debt, she adds. If you don’t have credit card debt, you may have other loans or credit lines that can use a hand, she continues.

Next comes the mortgage. Campbell suggests making a prepayment on your mortgage, either as a lump sum or as an extra amount each payment. “If you don’t have other outstanding debt with higher interest rates, prepaying your mortgage can be a smart way to use your tax refund as it goes directly to the principal portion of your loan,” she notes.

Other ideas from Forbes Advisor include topping up your registered retirement savings plan (RRSP) or Tax Free Savings Account (TFSA), starting or adding to your emergency fund, or saving for a child’s education via a registered education savings plan (RESP).

The folks at the Nerd Wallet blog have a few more ideas.

“A tax return can be a great way to fund home repairs and upgrades. Maybe you have a big project to tackle, such as redoing a bathroom or renovating your kitchen. Spending your money on home upgrades is an investment that could shrink your home insurance bill and add value to your property in a way that pays off handsomely when it comes time to sell,” the blog advises.

Another idea, the blog continues, is to “invest in yourself.”

“While tackling debt, saving for the future and improving your home are all worthwhile uses for your tax-season windfall, don’t forget that you are also a smart investment. Maybe you’d like to start a side hustle, treat yourself to a monthly massage, or complete a professional certification. Though they might not earn compound interest, these types of investments can yield a sense of wellbeing and set you up for future success in a way that’s truly priceless,” the blog suggests.

Global News covers many of the same ideas, concluding that it really boils down to either paying down debt or adding to savings (or both).

The broadcaster suggests targeting credit card debt first.

“Credit card debt, which typically carries high interest rates at upwards of 20 per cent, can be particularly damaging to Canadians’ finances and “snowball” out of control, states financial author Sandy Yong in the article.

However, Yong says, even though saving and paying off debt are seen as the most sensible things to do with a refund, having a little fun is never out of the question. There’s no reason, she tells Global, to “feel bad about spending it on something for yourself.”

If you’re planning to use some or all of your tax return on your retirement savings, why not consider the Saskatchewan Pension Plan. SPP works just like an RRSP – the contributions you make are tax-deductible, which may help you get a refund down the road. And, way further down that road, the contributions you make to SPP – having been professionally invested, at a low fee, in a pooled fund – will grow into a future income stream for the retired you. A gift that keeps giving, as they say.

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Why are Canadians retiring later?

A recent article in Kamloops Now reports that Canadians are retiring later and later.

As recently as 2000, the article notes, Canadians – on average – retired at age 60. “By 2020, that had crept up to 63.25,” Kamloops Now notes.

Why the change in retirement timing?

“Retirement is tricky,” the article begins.

“Not only do you have to have enough money to not work, but you have to decide if retirement is actually for you,” it continues. “Maybe, if you don’t have a job, you’ll be bored, unfulfilled and aimless,” the article adds.

The figures cited by Kamloops Now come from www.agecalculator.com, “which crunched numbers provided by the Paris-based Organization for Economic Co-operation and Development, the international agency that shapes policies for prosperity, equality and opportunity for all.”

The trend towards later retirement, the article notes, can be seen in a number of countries. In Bulgaria, the average age for retirement jumped from age 56 in 2000 to 63 in 2020, the publication reports.

“Thirty-eight of the 51 countries included in the study saw average retirement age climb, while in 13 countries, people have been retiring earlier,” the article points out.

The biggest drop for countries where folks are leaving the workforce earlier was in Colombia, where in 2000, the average retirement age was 69.7, Kamloops Now reports. As of 2020, they are retiring on average at age 63.5.

“A scan down the list shows 2020’s youngest average retirement age is in South Africa, where people are calling it quits at 58.2, while the oldest average is in Indonesia where you have to stick it out to 68.95,” the publication notes.

A release from agecalculator.com is cited in the article, and provides a bit more insight on the “whys” of this later retirement trend in most industrialized countries.

“Some of these include the extension of people’s life expectancy, which has increased thanks to medical advancements, economic pressures that translate into people not being able to retire comfortably because of the rising cost of living, and shifting demographics, such as declining birthrates and aging populations,” the release states.

Kamloops Now provides some additional thoughts on what’s behind later retirement.

“Remember the Freedom 55 campaign by London Life Insurance Company launched in 1984 that ran for 25 years encouraging people to plan and save for early retirement? To many that’s an unattainable goal,” the article notes.

“Plus, people started to realize if they were to live for 30 years after retirement, they could very well run out of cash. The cost of living, led by soaring house prices, is high and many haven’t saved enough to retire early,” Kamloops Now continues.

“Even if you do have enough money, you should enter retirement cautiously at any age,” the article concludes, noting “people need purpose and if you suddenly stop working you might be bored or start to feel pointless. After all, there’s only so much travel, golf and pickleball that you can do.”

It’s a very valid point that the author makes, here. There’s the money side of retirement – do you have enough to cover the bills you’ll face when you stop working – as well as the lifestyle side. Do you have a plan for what to do with all that extra time?

If you’re saving for retirement, perhaps on your own or through a workplace plan, you’re covering off the money side nicely. If not – or if you want to save even more for retirement – take a look at the Saskatchewan Pension Plan. SPP is ideally suited for individuals or groups. Contributions are invested in a low-cost, professionally managed pooled fund. When it’s time to hang up the ID badge and log out for the last time, SPP offers you options such as a lifetime monthly annuity payment, or our flexible Variable Benefit.

Check out SPP today!

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