Retirement savings is just a key first step in the process: IG Wealth

No one applauds retirement savings of any sort more than Save with SPP, but new research from IG Wealth suggests most of us don’t think about the many other steps in the retirement process.

The research is covered in a recent article in Wealth Professional.

The article points out that two-thirds of Canadians over 18 have registered retirement savings plans (RRSPs), and “57 per cent plan to invest in theirs” before the 2022 deadline.

As well, the average amount in our RRSP kitties is around $13,000, the article reports. All good, right?

But, the article asks, have many of us thought about the other issues retirement presents?

“Investing for retirement is just one piece of the overall retirement readiness puzzle,” IG Wealth’s Damon Murchison tells Wealth Professional. “It’s important to be thinking about retirement planning in a more holistic manner, and as a key component of an overall financial plan.”

So what are we not sure about, retirement-wise?

First, the article reports, the survey found that only 21 per cent “understand taxation of retirement income.” Those of us who are no longer working for the old company know all about this – the easy days of having the payroll department deduct enough from your pay so that you always got a tax refund are over. It’s trickier to figure things out when you are getting income from multiple sources.

Next, we are informed, only around 21 per cent have thought about their insurance needs. Once the office is far off in your rearview mirror, you may not have any drug, dental or vision coverage. Have you factored in the cost of getting this on your own, or checked out to see what your province or territory may be able to help you with?

Only 19 per cent have thought about estate planning, only 18 per cent have thought about their budgets, the article notes.

Save with SPP has had several friends who passed away suddenly, and without making a will. Without getting into this complex topic, let’s just say a will helps ensure your stuff goes to who you want it to go to. Without one, the process is slower, costly and complex, and at best is a guess by someone else of what you ought to have wanted.

A budget is highly recommended. And it doesn’t have to be a mega-detailed spreadsheet. As a former colleague of ours once explained in a masterful one-page financial planning document, it’s just knowing how much of your money needs to go to expenses, and how much is left to spend or save. When you’re retired, your expenses will probably be less, but so will your income, so the clearer the idea you have about your total retirement income, the better off you will be.

If you’re a member of the Saskatchewan Pension Plan, one way to be certain about your SPP income is to consider transferring some or all of your savings into an SPP annuity.

An annuity delivers you the same monthly payment for the rest of your life. The Canada Pension Plan and Old Age Security also give you a predictable monthly income. That income certainty will make budgeting and tax planning a whole lot less painful.

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There’s no place like home for retirement, Canucks say

The pandemic seems to have changed a few people’s minds about their retirement plans.

According to a recent article in Investment Executive magazine, the former dream of retiring to warmer climes may now have been replaced with the idea of a made-in-Canada retirement.

The article, citing recent research done for IG, found that “half of respondents said being closer to family and remaining in Canada is now a priority.”

The survey found most of us – two-thirds – also would prefer to live out our lives in our own homes rather than in “a retirement facility,” the article notes.

“It’s understandable that the events of the past year have caused many Canadians to pause and re-think what their futures will look like, including their plans for retirement,” states IG’s Damon Murchison in the article.

Other financial concerns Canadians raised in the piece including emergency funds, healthcare coverage, and the amount of savings they’ll need in retirement.

So, if having more money is the answer to most of these concerns, how do we get there?

A recent article from Kiplinger, while intended for a U.S. audience, offers up some good advice on what not to do when you’re saving for post-work life.

The article suggests that many of us, particularly when young, take too many risks with our investments, “because time is on your side.”

Once you have reached middle age, your investment strategy should change from accumulation to “preservation and distribution,” the article advises. “This is generally where your financial strategy should become more conservative,” Kiplinger advises.

The article mentions the “Rule of 100,” namely, that your current age should be the percentage of your overall investments that should not be at risk. “Whatever you do, don’t consider a Las Vegas `all-in’ scenario as you edge closer to retirement,” the article warns.

Other tips include tailoring your investments to your personal needs, being aware of the impact of fees, and not listening to the neighbours when it comes to financial advice.

“The neighbours’ advice may be well-intentioned, but it’s likely misguided or possibly self-serving. Swap barbecue tips and stories about your kids—but never talk money,” the article concludes.

Saving for retirement, like many other things we don’t always want to do, is good for you. While times are tough, they will get better as the pandemic gets under control and fades from significance. But there are some good lessons the pandemic can teach us about having an emergency fund ready, ensuring our retirement savings continue (if possible) so we don’t have to work even longer, and seeing the true value of in-person time with our family and loved ones again. All good.

If you’re not really sure about investing, but do want to save for retirement, have a look at the Saskatchewan Pension Plan. You can leave the heavy lifting of investment decisions to SPP. Despite the Tech Wreck, the financial crisis of 2008-9, and the craziness of the pandemic and its impact on financial markets, the SPP has averaged an impressive eight per cent rate of return since its inception 35 years ago. That’s quite a track record of delivering retirement security!

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