Canadians budgeting better, many will work past 65, research says

2020 has been a really strange time, one where we’ve lost a lot of people we care about, and have been generally beaten up financially, all thanks to the pandemic.

But a new study from the Chartered Professional Accountants of Canada (CPA), referenced by Business Insider, suggests that we Canucks are bearing up fairly well under the strain.

The study, according to a CPA news release, “shows great variations in how Canadians are coping and even succeeding during this unprecedented time.”

We seem to feel we are handling our finances well, the study reveals. Seventy-eight per cent of us believe we can “stick to a budget” and 81 per cent think we “can successfully manage our debts,” the study finds.

CPA Canada’s Doretta Thompson credits increased financial literacy for these strong numbers.

 “Providing financial literacy information is essential in these unsettled times as it can assist individuals and families in making smart decisions to successfully manage their financial wellbeing,” she says in the release.

The research shows nearly half of those surveyed – 49 per cent – have “modified their savings strategy,” with 63 per cent having savings accounts, 60 per cent with Tax-Free Savings Accounts, and 53 per cent contributing to either a Registered Retirement Savings Plan or a registered pension plan at work, the release says.

That focus on savings is important, the study notes. One in four of pre-retirement age respondents says they plan to retire in the next 25 years. Forty per cent of the pre-retirees plan to work past age 65, the release adds, and 43 per cent say they will do so because “they cannot afford to retire.”

An impressive 60 per cent of those surveyed have put aside funds for retirement in the last five years, the study found.

The pandemic has made most of us feel a bit of a pinch. The CPA survey found that 61 per cent of respondents “cut back on day-to-day spending,” and 49 per cent have developed household budgets, which 86 per cent say they are following.

“It’s encouraging to see many Canadians taking action to stay afloat during the fiscal turmoil of today but also looking to the future,” Thompson states in the media release. “Our country’s challenge is to ensure every Canadian has the knowledge and means to be financially secure.”

Personal finances, and the related issues of personal debt (or wealth) are things we Canadians don’t always like to talk about. An old saying in pension circles is that if you ask 100 people to describe a perfect wedding, you will get 100 different answers. The same is true if you ask them about a perfect retirement and how to save for it.

What the CPA is saying is that the more we know about saving, and the savings vehicles available, the more likely it is we will use them. And the more we understand debt, and how to manage it, the less debt we will all carry. It’s solid advice – educating yourself is a gift that keeps on giving.

Whether you are just starting to save for retirement, are midway to retirement, or are at its front door, the Saskatchewan Pension Plan has tools to help you. SPP invests your savings, either via contributions or transfers from other plans, and then at retirement time, can convert those savings into long-term security in the form of a monthly pension amount – for life! Why not check them out today.

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A look at the best of the Internet, from an SPP point of view

Boomer pension crisis is “here, and it’s real,” says survey
Saving for retirement is a lot like eating your beets. You know they are good for you, all the literature talks up their benefits, and many say you’ll be sorry later in life if you don’t eat them now. But they are not everyone’s cup of tea, and many of us choose to ignore and avoid them.

Unfortunately, retirement is a bigger problem than not eating a beet.

A recent Canadian Payroll Association survey found that 69 per cent of working people surveyed in British Columbia save less than 10 per cent of their earnings, “well below recommended savings levels.” The CPA survey is covered by this ABC Channel 7 news article.

The article goes on to say that 40 per cent of Canadians surveyed are “overwhelmed by debt,” an increase from 35 per cent last year. Debt, the article says, is clearly a factor restricting the average person’s ability to save for retirement.

Research from Royal Bank of Canada that found that 60 per cent of Canadians were concerned “about outliving their savings,” and only 45 per cent of them are confident they’ll have the same standard of living when they retire. This research was covered in an article in Benefits Canada.

So, eat your beets – contribute to a Saskatchewan Pension Plan account and if you are already doing that, consider increasing your contributions each year. You’ll be glad you did down the line.

Many savers using the wrong long-term approach
Let’s face it – whether it’s hanging a new door on the shed, patching a hole in the drywall or growing our own vegetables, many of us prefer to do things ourselves rather than depending on others.

However, when it comes to retirement savings, there are “DIY” mistakes that people tend to make, warns The Motley Fool.

First, the article notes, people tend to avoid riskier investments, like stocks. But over the long term, bonds and fixed income assets “are unlikely to provide a sizeable nest egg in older age,” the article says. The stock market is a good long-term investment, the article notes.

You need bigger long-term returns to outpace inflation, The Motley Fool advises.

Finally, it is important to avoid “short-term” investment thinking; retirement investing is for the long term, the article concludes.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

A survey released last month in support of Financial Literacy Month (#FLM2017) by the Canadian Payroll Association reveals that Canadian workers would be very pleased if their employers decided to offer or enhance financial education programs this holiday season.

In fact employees have a strong appetite for employer-provided financial education programs, with an astonishing 82% indicating they would be interested if employers offered financial information at work. But, busy workers have timing expectation — 54% would prefer that employers offered lunch and learns but only 8% would be interested if information was offered after work hours.

Currently, 38% of Canadians rely on financial advisors and banks for financial and retirement planning advice. A further 27% of people surveyed lean on friends, family and the internet for this important information.

Employees’ appetite for financial education at work is not surprising, considering results of the CPA’s National Payroll Week Employee Survey revealing that nearly half (47%) of working Canadians are living pay cheque to pay cheque. Survey results also illustrate that many Canadians are challenged by debt, are worried about their local economy and are not saving enough for retirement.

In addition, the more recent November 2017 survey results show that working Canadians are experiencing a high level of financial stress, and that too few are keeping a close eye on their finances. Half of employees feel that financial stress is impacting their work performance. What’s more, just 52% say they budget frequently; with an astounding 31% of this group saying that they keep their budget in their head. Of those who do budget, 52% say they usually or always stick to their budget.

“We know that many working Canadians are struggling to make ends meet financially and they need help,” says Janice MacLellan, Vice President of Operations at the CPA. “While many Canadians are well-intentioned, our survey results show that they are not making enough progress towards financial health, and ultimately, this is impacting their work and their lives.”

The CPA continues to champion its key message “Pay Yourself First” to prepare for a healthy financial future. Currently 61% of Canadian employers offer a “Pay Yourself First” option through payroll which enables employees to set up automatic payroll deductions to direct a portion of their net pay into a separate retirement or savings account. Of those employers that do not currently offer this option, an additional one-third are considering making it available.

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Members of the Saskatchewan Pension Plan can pay themselves first by having contributions withdrawn directly from their bank account using the PAC system on the 1st or 15th of the month. Other methods of contribution to SPP include: using a contribution form to contribute at your financial institution; using your VISA or MasterCard; through online banking; or by mail to the Plan office in Kindersley.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Recently Kyle Prevost (Young and Thrifty) hosted the online Canadian Financial Summit which included video presentations and interviews with 25 Canadian personal finance experts. While the presentations were free from September 13-16, you can still buy a pass to view these presentations.

Blogs by many of these people are regularly featured in SPP’s Best from the Blogosphere, but there were some interesting people on the agenda who are new to me. Today I introduce you to some of their recent work.

Alyssa Fischer is the writer behind one of Canada’s top up and coming blogs MixedUpMoney.com. In How My Accountability Buddy Became My Secret Financial Weapon she writes that grocery shopping with her husband is important because they help each other stick to their budget. She says, “If I let myself spend money in a frivolous fashion each time I needed a pick me up, I would be right back where I was 3 years ago. In debt, maxed out, and over my limit.”

Martin Dasko on Studenomics graduated from college debt-free and the purpose of his blog is to help readers get to financial freedom by age 30 (no debt, money saved, and the ability to do whatever they want). In Why You Should Save $10k in The Next Six Months (and how to start) he explains that personal finance is often about habits and choices. “You may decide to find new ways to make more money or spend less.  Having money in the bank will make your life better because you will have options and you can plan your next move,” Dasko notes.

Chris Enns is an opera-singing-financial-planning-farmboy and the man behind Ragstoreasonable.com. He wonders whether he can be an artist and be profitable. He also questions the following core beliefs  so many carry in the creative industry.

• That breaking even is enough.
• That paying the bills is enough.
• That building a profitable creative business is next to impossible.

He recognizes that wanting just “enough” to live his life is holding him back in a huge way. Instead he says shifting his thinking to “making a profit” is more likely to pave the way to building his savings and planning for the future.

Janine Rogan is the talented writer and CPA behind JanineRogan.com.  Rogan suggests that if your bank balance is too high you are more likely to spend too much. For example, even though you have $15,000 sitting in your chequing account, some (or all) of that money may be spoken for.

But you may feel you can splurge because you have extra cash on hand. Therefore she suggests that you should set guidelines for a maximum bank balance in your chequing account and once you hit that threshold excess cash should be moved to a savings or investment account.

Rogan says, “Shifting the expectation to living on less because you only have a set amount of cash in your bank account means that you will function in more of a frugal mind set.”

Half-banked.com is Desirae Odjick’s personal finance blog for millennials who want to manage their money and still have a life. She offers Five ways to learn about money for free (without leaving the house). They include:

• Taking out a stack of books from your local library.
• Watching money videos on YouTube.
• Reading a whole pile of financial blogs.
• Tracking your spending.
• Visiting the Canadian Financial Summit .

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

By Sheryl Smolkin

More working Canadians and Saskatchewan residents are living pay cheque to pay cheque, As a result they are saving less and falling further behind in meeting their retirement goals according to the sixth annual National Payroll Week Research Survey, conducted by the Canadian Payroll Association (CPA). 

Nationally, more than half of employees (51%) report that it would be difficult to meet their financial obligations if their pay cheque was delayed by a single week. In Saskatchewan, the percentage is even higher – 56% say they are living pay cheque to pay cheque, up from an average of 52% over the previous three years.

Another finding confirms that more than a quarter of those surveyed are living very close to the edge. A total of 26% say they probably could not pull together $2,000 over the next month if an emergency expense arose. In Saskatchewan, 28% would be hard pressed to come up with the funds.

The low savings rate has become even more prevalent this year. Half of all employees nationally (57% in Saskatchewan) are putting away just 5% or less of their pay, up from an average of 47% of employees over the past three years (41% in Saskatchewan). Financial planning experts generally recommend a retirement savings rate of 10% of net pay.

Part of the reason for low savings is that 44% of employees nationally, and 54% of employees in Saskatchewan, are spending all, or more than, their net pay. Among the top reasons for increased spending, the survey identifies: children, home renovations and education.

“Those who are trying to save but finding it hard to succeed should consider directing a portion of net pay into a separate savings account and/or a retirement savings program,” says CPA President and CEO, Patrick Culhane. “They can speak to their organization’s payroll practitioner to arrange this.” 

Retiring older and needing more retirement savings 

Fully 79% of Canadian employees and 75% of Saskatchewan employees expect to delay retirement until age 60 or older – up from 70% and 57% respectively over the past three years. The number one reason cited for retiring later in life is that employees are not able to save enough money.

Employees continue to raise the bar in terms of what they think they will need to retire comfortably:

• Fewer now feel that savings under $500,000 will be sufficient (10% in Saskatchewan, down from an average of 11% over the past three years; 18% nationally, down from an average of 21% over the past three years).
• Many think between $500,000 and $2 million will be required (71% in Saskatchewan, down 1 % from an average of 72% over the past three years; 68% nationally, up from an average of 60% over the past three years).

Yet despite upward adjustments in perceptions of what constitutes an adequate nest-egg, the vast majority of employees are nowhere near reaching their goals – 75% nationally and 74% in Saskatchewan say they have put aside less than a quarter of what they will need in retirement (up from an average of 73% and 70% respectively over the past three years). And even among employees closer to retirement (50 and older), a disturbing 47% of employees nationally (and 43% of employees provincially) are still less than a quarter of the way there, indicating a significant retirement savings gap, according to Culhane.

Debt overwhelms many

Over one-third of employees (39% nationally and 34% in Saskatchewan) say they feel overwhelmed by their level of debt (up from an average of 32% and 29% respectively over the past two years). Nationally, 1 % of respondents this year indicate they do not think they will ever be debt free, and one-third say their debt has increased from last year.

The number one step that employees believe they can take to improve their financial situation is to earn more (27%), while spending less dropped to second place from last year and decreasing debt remained flat. “Earning more is not always feasible,” says Culhane. The CPA suggests that automatic savings through payroll is the best strategy for financial well-being.

The Saskatchewan Pension Plan allows members to contribute up to $2,500/year to their SPP account using a credit card online, through online banking, automatic debit from their bank account or credit card or by sending a cheque. Up to $10,000/year can also be transferred to SPP from a personal RRSP.

Companies can also set up SPP in the workplace and employee contributions can be made by payroll deduction.