Saving for retirement “is only part of the puzzle,” reveals Edward Jones research

Today’s retirees aren’t having an easy time of it like their predecessors, but are dealing with “curveballs, cannon balls and windfalls,” reports a new study carried out by Edward Jones.

The study’s results are covered in a recent article in Wealth Professional.

On the plus side, the findings from the firm’s latest Age Wave study suggest that Canadian retirees are focused on “health, family, purpose and finance,” the article notes.

And, says Edward Jones’ David Gunn, millennials are taking note of how retirees are dealing with post-work life.

“Eighty-five per cent of millennials agree that applying what retirees are learning right now would be helpful to them. So, millennials seem to recognize that retirees are going through a lot right now with respect to retirement plans and they want to learn from them. That’s a really good finding,” he tells Wealth Professional.

However, the study did note that while having goals in retirement is a positive, having a budget is also of critical importance.

“Saving for retirement is only part of the puzzle. The biggest challenge is figuring out a retirement budget,” the article explains.

On the activity/lifestyle front, those surveyed suggested that pre-retirees “test-drive their retirement activities before retiring.”

The survey also suggested that retirees “consider working in retirement,” even if they don’t need the money, the article notes. “It can improve their quality of life… by helping them keep an active mind and maintaining a strong sense of purpose,” the article reports.

The research found that the most successful retirees seem to embrace flexibility in their golden years, the article adds.

“Ninety-two per cent of retirees said that preparation, flexibility, and willingness to adapt were keys to success in retirement,” Gunn tells Wealth Professional. “So, they’re making course corrections in all four pillars of health, family, purpose, and finance.”

Their focus, the article continues, is on “healthier diets, doing regular exercise, and finding mental stimulation. They’re spending more quality time with family and less in unhealthy relationships.”

This is all very insightful.

On the idea of “test-driving” retirement activities, we might add a suggestion — why not test-drive your retirement budget? Before you retire, spend a month or two living on what you think your retirement income is going to be. That way, when you leave the workforce, you won’t be surprised, but prepared.

Friends of ours did this when buying their first home. They were worried what it would be like paying a mortgage, and thus, having less to live on. So, for six months before they started their mortgage, they banked the difference and tried living on the lesser amount. The plan worked perfectly — they had a stress-free transition to home ownership.

More is always good when it comes to retirement income. If you don’t have a pension program at work, and are saving on your own for retirement, why not consider partnering with the Saskatchewan Pension Plan? This do-it-yourself pension plan will invest your retirement savings in a low-cost, pooled fund, grow them, and when the time comes, help you turn those saved dollars into retirement income! Check out SPP today!

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At a time when some have “mountain” of savings, few focus on RRSPs: study

One of the oddest side effects of the pandemic has been the fact that for those fortunate enough to be able to keep working throughout it, savings are starting to pile up.

According to the Financial Post, the overall Canadian saving rate has reached “historic highs.” So, the article says, “you might think it would be a bumper year” for Registered Retirement Savings Plans (RRSPs).

Apparently not. Citing research from Edward Jones, a brokerage firm, the article reports that “52 per cent of Canadians say they do not plan to contribute to their RRSPs,” with 44 per cent saying it’s the pandemic that is preventing them from doing so.

As well, the Edward Jones research found that of the 31 per cent who said they would invest in their RRSPs, less than a third – again, 31 per cent – said they would invest the maximum.

Now, normally you’d look at all this and say, yeah, no one has the money for RRSPs this year – pandemic, hours cut, stores closed, travel and restos no longer possible, etc.

But the article notes that Canada’s overall savings rate “is at the second highest (level) since the early 1990s as locked-down residents with little to spend their money on, squirrel it away.” By the third quarter of 2020, the Post reports, our savings rate had soared to 14.9 per cent, compared with just three per cent in 2019.

So those with savings are packing it away at a clip not seen since the early 1990s. Save with SPP remembers those years fondly, as interest rates that were in the high teens in the late 1980s were still hitting the mid-teens by the early 1990s, making those old Canada Savings Bonds a great investment.

But there’s no such investment attraction today, and the Post feels that those who are hanging onto their dollars are doing so because of “economic uncertainty.”

“What the research shows is that Canadians have had to make financial compromises like deferring retirement contributions for other more immediate priorities and are storing away cash they can easily access in response to economic uncertainty,” states David Gunn, president of Edward Jones Canada, in the Post article.

This, the article informs us, makes sense given similar results from earlier Edward Jones research, as well as a Morneau Shepell poll that found 27 per cent of Canadians “say their financial situation is worse than those (15 per cent of those polled) who say it is better.” Looking around the country, Morneau Shepell found the most financial pessimism in Alberta, with Saskatchewan residents being the most optimistic about their finances.

While it is completely understandable that those without extra cash would have to cut back on retirement saving, it’s less clear for those who are sitting on money as to why RRSPs aren’t in favour. After all, you get a tax deduction for the RRSP contributions you make. More importantly, it’s not like retirement savings are some sort of bill you have to pay – it’s an investment in your future. You’ll eventually get all the money back and then some, thanks to investment.

If you are lucky enough to be sitting on some extra cash this year, consider the possibilities and look to the Saskatchewan Pension Plan as a destination for those dollars. Founded 35 years ago, the SPP has posted an impressive eight per cent rate of return over that period, demonstrating a history of savvy investing. Your contributions, just like an RRSP, are tax-deductible, and the money saved and invested will come back to you in the form of lifetime income down the road. Don’t deny your future self retirement security – check out the SPP today.

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