Scott Terrio knows all about the issues facing senior retirees.  Terrio, who is Manager, Consumer Insolvency at Hoyes, Michalos Licensed Insolvency Trustees, recalls doing “a lot of speaking engagements for senior groups” about money and debt. He said “retired people, who have lived a long time, ask a lot of questions (about finances), and they are certainly not a retiring bunch.”

Save with SPP spoke recently with Terrio by phone.

He says that debt is a problem for retirement, “both at the front end and the back end.” Debt can certainly encroach upon the money people want to set aside for their retirement, he explains, but it is even a bigger problem for those who are actually retired.

“Life is expensive,” says Terrio. As interest rates declined, and people’s equity grew, retirees – most living on a fixed income — began taking on debt for the first time. Seniors, he explains, began tapping into their equity for “various things,” such as helping the kids and grandkids get ahead and buy homes. These days, many have tapped into credit to pay for day to day living, he says.

Today’s retired seniors began making use of their equity, but at the same time, began to live longer. “People are living much longer than ever before. Retirement can last for 30 years or more.”  That can be costly, Terrio says. “The cost of (long term care) will kill you financially,” he says. “Care is very expensive – thousands a month – and that adds up if you live into your 90s.”

Retirees typically get into trouble gradually, he says. A lot of newly retired seniors don’t realize that they will usually owe income tax unless they have their pensions and government benefits adjusted to withhold more tax. “They are used to being on payroll, where someone takes the tax off for you. That doesn’t happen when you’re retired, and you can find yourself in a hole.”

Owing the Canada Revenue Agency for unpaid taxes isn’t usually a huge debt, but if you don’t have money to pay it, it can be “the straw that breaks the camel’s back,” he explains.

It’s having to pay for things like taxes that starts seniors looking at credit, and debt, he notes.

Once you use up your credit card room, “the banks love giving lines of credit and higher credit card limits to seniors, who tend to have equity, and since nine of 10 of them tend to pay it back.”

That’s why the expected jump in interest rates is also concerning, Terrio says.

“When interest rates go up, they have a direct effect on lines of credit,” he says. “Even an increase of $100 a month in interest payments is bad news for a senior. Now they have to pay that every month. And since the real rate of inflation is probably six, seven or even eight per cent, everything you’re buying is now more expensive and you have less money to spend. That’s the main issue.”

Debt is not something people get into on purpose. “In any age category, very few get into debt intentionally. It’s a gradual creep, usually driven by events such as loss of a job, sickness, divorce. You can maybe absorb one of these things at a time, but two – no way.”

As well, older Canadians want to help their children and grandchildren save for education and housing. “We are seeing the greatest intergenerational wealth transfer of all time,” Terrio says. And that can use up savings and leave people with debt as their only option.

The problem with debt is that it no longer is seen as a bad thing, Terrio says.

Maybe, he says, older folks once saw debt as shameful, but it is “not a shame thing” for many Gen X, Gen Y or millennials. “The younger people get accustomed to it, they less they are bothered by it.”

The problem, he concludes, is that debt “is seen as cash flow as opposed to debt.” People need to remember that credit card and line of credit money “isn’t your money… it’s the bank’s money.”

We thank Scott Terrio, who many years ago worked in Swift Current for a major farm equipment company, for taking the time to speak with us. Did you know that the money in your Saskatchewan Pension Plan account is locked in until you reach retirement age, and is also creditor-proof? If you run into financial troubles on your way to retirement, your SPP nest egg will be unaffected. It’s another great feature of the SPP.

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Students should take advantage of retirement saving and its tax advantages: The Varsity

We all look back fondly at our days as students, whether in regular or post-secondary school. At no time does this writer ever remember any friend or classmate talking seriously about the need to save for retirement. There were many other things to worry about, including passing courses and looking for a job.

But an article in the University of Toronto’s The Varsity newspaper says even students should be thinking about life after the jobs they are about to find.

“As a student, investing in a (registered) retirement savings plan early can prove to have long-term benefits like tax-deductible contributions,” the article begins. “This means that the amount you put into your RRSP for the year is deducted from your taxable yearly income. Further, investments are tax-deferred, which means that taxes on the growth of your investments are not paid until you withdraw the funds from your RRSP account,” the article explains.

The article makes the point that while the tax-free savings account (TFSA) allows money to grow without taxation, contributions made to it are not tax-deductible like RRSP contributions. As well – and a key point if you are thinking of the money being like a piggy bank for the future – is that withdrawing money from an RRSP is more difficult. The RRSP piggy bank is much harder to raid than a TFSA, the article explains.

“The idea of saving for retirement while having to pay outstanding debts like credit card statements or mortgages can be overwhelming,” The Varsity notes. “Everyone has a different financial scenario and students must evaluate what works best for them, even if it means only putting small amounts of money aside in their RRSP every month,” the newspaper adds.

The article also looked at the idea of starting retirement savings early.

Citing a recent study, The Varsity reports that folks in the Gen Z cohort start saving at 19; millennials at age 25 and Gen Xers at 30.

And some great news from The Varsity article is that younger people are getting the message about the importance of getting a head start on retirement savings.

“It appears that starting to save at a younger age has been a message that has trickled down across generations, since the oldest members of Gen Z are only 24 years old. Gen X and baby boomers have been found to contribute an average of 14 to 15 per cent of their income into their retirement fund, while Gen Z and millennials invest, on average, 16 per cent of their income in their retirement savings,” The Varsity reports.

Other points made in the article include the idea that as living costs continue to rise, many households “will need to continue working past the age of 65 in order to afford retirement.” Citing recent research from the Healthcare of Ontario Pension Plan, the Varsity notes that 67 per cent of Canadians “think that Canada will be facing a retirement crisis;” that same study found that 77 per cent of workers liked the idea of their employers offering retirement savings plans.

The Varsity article concludes by saying that if you are young, you should be asking and talking about getting an early start on retirement saving.

If your employer does offer a retirement program, be sure to join it and contribute as much as you can. If you don’t, you need a do-it-yourself retirement plan. The Saskatchewan Pension Plan provides exactly what you need to get rolling. You can contribute up to $6,600 per year to SPP, and like an RRSP, SPP contributions are tax-deductible. Check out SPP, celebrating 35 years of operations, today!

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Pandemic is causing 8 million Canucks to rethink retirement

There’s no question that 2020 has been a year like no other. Its effects on the economy and our finances have been profound.

A new study by Edward Jones and research company Age Wave, reported on by Global News, shows what impacts the pandemic has had on retirement savings in particular.

The report says a whopping eight million Canadians “are rethinking their retirement timing” due to the pandemic. While one of every 10 Canucks still plans to retire early, “one third believe they will retire later,” citing financial concerns, the Global article notes.

“If many working adults were not adequately prepared for retirement, COVID-19 has thrown them even farther off course,” the article notes.

The study found that two million Canadians “have stopped making regular savings to their retirement savings.” Before the pandemic, the research shows, 54 per cent of adults were confident about retirement. Now, that confidence indicator is down to 39 per cent, Global reports.

“Those who think they’ll have to postpone retirement cited needing more income, shrunken savings, investment losses and increased uncertainty about how much they’ll need in retirement,” the article says. “The few who are considering anticipating retirement amid the pandemic, on the other hand, said they `realized that they were looking forward to retirement, or they want to spend time doing other things that are more important to them than work,’” the article states.

The article quotes financial author Alexandra Macqueen as noting that those with workplace pension plans, notably defined benefit plans, aren’t as impacted by the pandemic and can still choose to retire early.

(Save with SPP interviewed Alexandra Macqueen recently, here’s a link to the interview)

“What I’m … thinking more and more is that the difference between people with pensions and without is getting so much more stark,” she says in the Global article.

The article notes that older Canadians (boomers and the cohort that is older than them, the “Silent Generation”) are generally doing fairly well during the pandemic, while younger generations (millennials, Gen Z, and Gen X) are struggling.

The older are helping the younger financially, the article concludes, while the younger generations are making sure their elders are staying health, a “silver lining” of intergenerational cooperation amidst the pandemic.

The article underlies the disparity between those who have a workplace pension and those who don’t. When you’re in a plan at work, pension contributions are deducted from your pay – the savings is automatic, a “set it and forget it” way to pay yourself first.

The pandemic will eventually end, but if you lack a workplace pension plan, you still can set up an automatic retirement saving system of your own.

The Saskatchewan Pension Plan lets you automate your retirement savings through pre-authorized transfers from your bank account. You can start small – an affordable contribution – and ramp it up when you’re making more in the future. If there’s a trick to retirement saving, it’s to start doing it and then keep on with it. Starting and stopping won’t get you there. Pay your future self first. The money you set aside today may be missed in the short term, but in the long run you’ll have more security for the future, post-work years.

Join the Wealthcare Revolution – follow SPP on Facebook!

A recent headline shouted out the fact that an eye-popping 40 per cent of Canadians “think they’ll be in debt forever.”

The article by Anne Gaviola, posted on the Vice website, cites data from Manulife. The article goes on to note that the average Canuck has $71,979 in debt – up from $57,000 five years ago. These figures, the article says, come via Equifax.

It wasn’t always like this, was it? Why are all willing to live with debt levels that are approaching record highs?

Save with SPP had a look around for answers – why are we so comfy carrying heavy debt loads?

According to the Advisor, it may simply be that paying the way with debt has become so common that no one gets worked up about it anymore.

“Living with debt has become a way of life for both Generation X… and baby boomers as the stigma of owing money is gradually disappearing,” the publication reports, citing Allianz Life research originally published by Generations Apart.

The research found that “nearly half (48 per cent) of both generations agree that credit cards now function as a survival tool and 43 per cent agree that ‘lots of smart, hardworking people who are careful with spending also have a lot of credit card debt,’” the article reports. Having debt is making people plan to work indefinitely – the article notes that 27 per cent of Gen Xers, and 11 per cent of boomers “say they are either unsure about when they plan to retire or don’t plan to retire at all.”

Why the comfort with debt? The Gen Xers got credit cards earlier than their boomer parents, and half of Gen Xers (and nearly a third of boomers) never plan to pay anything more than the minimum payments on them, the article notes.

“Over the last three decades, there has been a collective shift in how people view debt – it’s now perceived as a normal part of one’s financial experience and that has fundamentally altered the way people spend and save,” states Allianz executive Katie Libbe in the article. “If Gen Xers continue to delay saving for retirement until they are completely out of debt, their nest egg is clearly going to suffer. For Gen Xers who are behind on saving, better debt management, with a focus on credit card spending, should be the first issue they address to get back on track,” she states.

To recap, it almost sounds like there’s a couple of generations out there who have never worried about debt.

What should people do to get out of debt?

According to the folks at Manulife, there’s a five-step process that will get you debt-free.

Manulife cites the fact that Canadians owe about $1.65 for every dollar they make. That suggests they aren’t ready to “make a budget and stick with it,” and always spending more than they earn, the article says.

In addition to getting real about budgeting, the other tips are paying off credit cards by targeting those with the highest interest rate first, considering debt consolidation, earning extra money, and negotiating with creditors.

Tips that Save with SPP can personally vouch for in managing debt include giving your credit cards to a loved one, and instructing that person not to hand them over even if you beg; paying more than the minimum on your credit cards and lines of credit; and trying to live on less than 100 per cent of what you earn, so that you are paying the rest to yourself.

While a country can perpetually run deficits and spend more than it earns – and most do – the math doesn’t work out as well for individuals. The piper eventually has to be paid. And if you only pay the minimums, that piper will get paid for many, many years.

Getting debt under control and paid off will help you in many ways, including saving for retirement. Perhaps as you gradually save on interest payments, you can direct the savings to a Saskatchewan Pension Plan retirement account, and watch your savings grow.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

By Sheryl Smolkin

According to a recent TD survey, more than two-thirds of Canadians between the ages of 35 and 54 say they’re not saving enough for retirement, and one in four say not being ready for retirement is keeping them up at night. As a result, the majority of Gen-X Canadians (60%) who aren’t saving enough do not expect to be able to retire on time and half as many (29%) expect to still be working in some capacity during retirement.

The top barrier preventing Gen-Xers from retiring on time is everyday financial demands like living expenses, mortgage or rent, and childcare costs (61%), followed by existing debt (42%) and major unexpected life events such as divorce or death of a spouse (19%). Given these challenges, it’s not surprising that more than half (54%) of Gen-X Canadians surveyed say they need help meeting their financial goals, with a majority feeling guilty about not saving enough for retirement and wishing they had started earlier.

If you have fallen behind in saving for retirement, here are some ways you can get on track to achieving your savings goals and become retirement-ready.

Track your spending
More than three in five (61%) Gen-Xers attribute everyday financial demands as the reason they don’t expect to retire on time. Keeping a record of your spending is a simple way to see where your money goes each month and look for ways to cut back on expenses to free up funds and help boost your savings.

Once you’ve identified some monthly savings, consider arranging for those funds to be transferred automatically into Saskatchewan Pension Plan, a Retirement Savings Plan (RSP) or Tax-Free Savings Account (TFSA). As you identify even more savings over time, you can increase the amount transferred automatically each month. Remember to also factor in any additional money you receive throughout the year such as annual raises or bonuses.

Tackle your debt while also saving
Four in ten (42%) Gen-Xers attribute existing debt as a top reason that prevents them from retiring on time. While everyone’s financial picture is different, there are a few key steps you can take immediately to help pay down debt while building up savings:

• As you start tracking your spending and becoming more in control of your finances, take a look at where your money is going and determine where you can free up cash flow to go towards paying down debt.
• Seek out groups and communities – either online or in your neighbourhood – where you can sell stuff you no longer use or need, and use those funds to pay down your debt. One person’s junk is another person’s treasure.
• Look for tips and tools online, like this Debt Repayment Calculator, to help you become organized by determining how much you owe and prioritizing what to tackle first. You can stay on top of your debt more easily when you have a repayment plan.

According to the survey, of Gen-Xers who are already saving for the future, the majority (64%) rely on RSPs to help fund their retirement. If you have RSP savings room, this video will show you how easy it is to join the Saskatchewan Pension Plan. SPP is an easy, flexible, cost-effective way that any Canadian over age 18 can save $2,500/year. You can also transfer an additional $10,000 a year into your SPP account from another RSP.

By Sheryl Smolkin

Hi. Today I’m interviewing Catherine Allen, co-author of The Retirement Boom for Save with SPP.com. She is Chairman and CEO of the Santa Fe Group, a financial services and technology executive, corporate board director, and expert in cyber security and risk management. Catherine lives in Santa Fe, New Mexico.

Q. Catherine, The Retirement Boom is a book by baby boomers for baby boomers about the transition into a new phase of life. Why did you and your co-authors decide to write the book?
A. Well, all of us are boomers ourselves at various ages within the category. We all have experienced or continue to experience reinvention. We all have a desire to stay involved and to be relevant. In fact, we do retreats and many of our attendees age 55-60 told us, “I really don’t want to retire. I’m not ready to retire. I want to do much more.” That’s what led us to do the research and the book.

Q. Who should read your book and what can they expect to learn from it?
A. First are the boomers, especially those 55 plus, who are concerned about and have a fear that they’ll never be able to retire or that they will run out of money before they pass away. For them it’s both financial and lifestyle planning. Twenty-seven percent of Gen Xers are also very concerned that they too many not be able to retire. Lastly there are many 70 year olds that have retired and told us, “I’m bored. I want to do something different. I want to reinvent myself. I may have 30 more years to live.” By reading the book, financial advisors and corporate HR people can also learn a great deal about the needs of their clients and workforce.

Q. How do you think retirement today for baby boomers is different than it was for their parents 30 or 40 years ago?
A.I see differences in four areas: financial, health, emotional, and government policies.

Thirty or forty years ago many more people had pensions which today are pretty much gone. Most people thought they might live to 70 or maybe 72 or 75. Today because of health care and being fit it’s very likely the boomers will live until 100. That means there are expenditures like travel or entertainment or other things that they want to do that they need to allow for.

Also, when people retired 30 or 40 years ago they did the 3 G’s as I call them. Gardening, grandchildren, and golf. Today people want to stay active, they want to get involved, they want to give back, they want to be a part of the ongoing environment.

Finally, government policies are not keeping up. Government policies have to positively support the aging population instead of being against things like social security or medicare or pensions or even not understanding the impact of aging. Those are all big differences I see from just 30 or 40 years ago.

Q. People spend their whole life with an identity that’s tied to their work. How can they overcome the fear associated with this loss of this identity to better embrace and enjoy their retirement?
A. That’s my favorite subject and it’s about reinvention. You don’t have to keep that same identity. This is a time when you can follow your passions as a way to reinvent your identity. We encourage people to keep their bio and resume and certifications up to speed because you never know when you might want to go back into the work force, especially if it’s a field that you love.

We encourage everybody to have a business card that has their website or their email and telephone number on it so that they feel like they have an identity and that’s who they are. Then lastly, we talk about people having a portfolio career and that means perhaps a third of what they’re doing is earning income by consulting or writing books and so forth. A third of their time is giving back through non-profits. A third of their time is just having fun enjoying and learning about life.

Q. Many people do continue working beyond the normal retirement date. Do you think that most people that are doing this are doing it for love or for money?
A. Well, that’s … It’s hard to tell. I would say 50/50. First of all, they are continuing to work as a form of insurance to keep funding their lifestyle and their retirement because many people believe they will live to 100. Secondly, many people want to remain again, relevant. They want to make a difference, they’re engaged.

The boomers — many of whom are part of the 60s generation — feel like now they finally have time to give back. It might be teaching, it might be mentoring, it might be being active in non-profits either by giving or volunteering or being on boards. Recent research published in the Journal of Epidemiology and Community Health say that the longer people work beyond 65 the less likely they’re to die at that age compared to others who do not work.

And what’s interesting is the numbers go up. At age 72 you’re 56% less likely to die than a 72 year old who is not working. I think that kind of research is going to encourage people to work longer after the age of 65.

Q. What do you mean by retirement robbers and how can retirees avoid them?
A. First of all, the biggest retirement robber might be yourself. They are people that keep you from doing what you want to do. You may have set up goals for retirement so you have time to follow your passions. Now guilt keeps you from enjoying what you said you wanted to do in retirement.

Also there are relatives. You’re retired, so guess what? You’re the one that can do the errands, you might be the caretaker or the “go to” person. We encourage people to try to think of retirement just like thinking about a career. What it is that you want to do, and how do you want to allocate your time? Try to stick to your plan so you are not sabotaging yourself.

Q: You and your co-authors interviewed over 300 people as part of your research for this book. Can you share 1 or 2 of your favorite anecdotes with us?
Well, I’ll start with my dad. He was a small town community banker. He always said he wanted to die with his boots on. That was his way of saying he wanted to be working when he passed away and he did. He was always a role model for me.

We’ve also heard from several women who were stay-at- home wives raising their kids who have gone back to work. Now their husbands have retired and they say things like, “I married you for life but not for lunch.” In other words, just because you’re retired doesn’t mean that it’s up to me to fill all of your time.

Another example is I was on a corporate board with a gentleman who was 92 years old and probably the smartest one of all of us. He wouldn’t say anything until he was ready to say the exactly right thing. There are lots of examples of people well into their 70s, 80s, and even 90s who are still actively involved and engaged in the world.

Q. What are some of the ways retirees can simplify their lives so that they can pursue their passions?
A. Well, start with your own home. Downsize or clean up. There’s a relationship between having less clutter in your mind and less clutter in your home. Try yoga or meditation or journalling. One of my favorites is detaching from technology for a while, whether it’s for a weekend or for a day or even for an entire vacation.

Lastly is relationships. I think as you get older you really want to think about who are the people that are most important to you and surround yourself with those you trust. Plan most of your time to be around these people. I call it sorting friends just like you sort your closet.

 

 

 

 

 

 

 

The Retirement Boom: An All Inclusive Guide to Money, Life, and Health in Your Next Chapter can be purchased in paperback or for Kindle on Amazon.com.

*This is an edited transcript of a podcast interview recorded in May 2016.

By Sheryl Smolkin

This is the last Best from the Blogosphere for 2015 and I’m taking a break, so the next one will be published on January 25, 2016. We wish all savewithspp.com readers a healthy, prosperous New Year.

As we look back on 2015 and ahead to 2016, there is much to think about. We have a new Federal government, the loonie is at an all-time low and Canadians have extended extraordinary hospitality to Syrians and other refugees from war-torn lands.

Here are some interesting stories we are following:

In TFSA vs. RRSP: How are Canadians saving? I interviewed Krystal Yee (Gen X), Tom Drake (Gen Y) and Bonnie Flatt (Boomer) to find out how Canadians are taking advantage of the tax-sheltered savings vehicles available to them.

In What Sean Cooper Really Achieved By Paying Off His Mortgage In 3 Years Robb Engen from Boomer and Echo tells us that Sean Cooper didn’t just pay off his $255,000 mortgage in three years; he taught us all a lesson in personal branding. Mr. Cooper, a pension analyst by day, mild-mannered blogger by night, took an almost Machiavellian-like approach by achieving fame through mortgage freedom at age 30.

Jim Yee offers some Year End Finance Strategies that will take advantage of ongoing changes to our tax rules. For example, in 2016, the new Liberal government will be lowering the tax rate on the middle income bracket from 22% to 20.5% so those individuals making more than $45,283/year but less than $90,563/year, deferring income to next year might save some tax dollars.

On the Financial Independence Hub, Doug Dahmer writes about the timing of CPP benefits. He says the CPP benefit for a couple can be in excess of $700,000 over their lifetime and the study demonstrates that the difference between starting your benefit at the least beneficial date and starting at the best date can be more than $300,000.

And finally, Rob Carrick at the Globe and Mail offers some thoughts on how to prepare for a frugal retirement. Frugality is assumed to be a virtue in the world of personal finance writing, but on the outside, frugality is sometimes a synonym for cheap. He refers to a blogger on Frugalwoods who argues that making the choice to be frugal is about asserting your independent thinking about money.

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 with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.