Save with SPP recently reached out to Andrea Andersen, Principal, Western Canada Leader and Financial Advisor at Edward Jones for the company’s thoughts on a recent survey on retirement carried out by the firm Age Wave. Here are her answers to our questions.

We were interested that “purpose” is seen as one of the four pillars along with health, family and finances. This suggests that maybe the research shows people are looking for more meaning in their retirement than perhaps in the past. Is that your impression too and can you expand on why purpose has become (apparently) more important?

Absolutely – one of the biggest insights from our study was that the majority of retirees say that all four pillars—health, family, purpose and finances—are interdependent and essential to optimal well-being in retirement. We were also surprised to see just how crucial purpose is to retirees, as 92 per cent surveyed said that having purpose is key to a successful retirement. 

One reason for the prioritization of purpose is that scientific research has shown that having a sense of purpose can actually reduce the risk of cognitive decline, cardiovascular disease and depression, and is essential to a long, healthy and potentially cost-saving retirement. Another reason we found was that having purpose helps retirees feel both useful and youthful. Nearly all (93 per cent) retirees say it’s important to feel useful in retirement, and 87 per cent also say that being useful helps them to feel youthful.

Retirement is a time of enormous freedom, but that same freedom from work and family responsibilities can also create a missing link when it comes to how to live a life filled with purpose. During the pandemic, we’ve seen many retirees have taken on new roles and responsibilities, such as providing childcare to grandchildren, shopping for higher risk neighbours, and providing emotional comfort to family and friends. These stepped-up roles have given retirees a greater sense of purpose and connection.

The idea that COVID is causing some people to postpone retirement is interesting, but we were also interested to learn that 20 million Americans and two million Canadians stopped making retirement contributions during the pandemic. What caused this – lack of employment and tight finances? Pessimism about the timing of their retirement? We’d be interested in your views on why people paused retirement savings.

Our study showed that the pandemic’s effect on finances has not been equally distributed by age, wealth, gender, or retirement status. The greatest negative impact has been felt by Gen Z and Millennials and the least by Silent Gen, who have the safety nets of pensions, Social Security, and other means to provide financial security.

One of the biggest financial challenges we saw impacting Americans and Canadians alike during the pandemic is what’s been dubbed the “she-cession,” or the deepening of the economic gender gap. Women were more likely to lose their job or exit the workforce due to the challenges of COVID-19. They have also been far more likely to take on the lion’s share of time spent caring for family members, including home-schooling children and providing eldercare to parents. One of the outcomes of this is that only 41 per cent of women planning to retire said they were saving each month for retirement, compared to 58 per sent of men.

Pressing short-term financial needs have also taken precedence over longer-term goals. Combined with the existing gender pay gap, the headwinds facing women saving for retirement present a serious challenge. It’s crucial for women – and anyone facing retirement savings shortfalls – to work with a trusted financial advisor to determine a holistic financial plan to prepare for short and long-term financial goals.

The healthspan vs lifespan findings were equally fascinating, we had not heard it expressed that way before. The idea that a significant chunk of retirement may be in poor health doesn’t seem to get discussed often. Do you have any additional thoughts on that topic – should people, for instance, think about planning for a period of poor health where their care costs will be higher?

We know that money is an essential ingredient in retirement planning, but it’s not the only one. On average, the World Health Organization reports that the gap between life expectancy and healthy life expectancy, defined by the years lived in full health and free from disability, is 10.9 years for Canadians. That discrepancy tends to fly under the radar when pre-retirees are counting down the days until they can pursue their retirement dreams.

Saving for long-term care is a priority for many of my clients, who have seen older relatives suffer from medical issues – from suffering from a broken hip to cognitive decline caused by Alzheimer’s disease. These situations can leave retirees needing assistance from short-term hospital stays to full time care through hospice. For those concerned about the rising costs of long-term care and the potential financial impact it may have on them and their families, it might be worth considering long-term care insurance.

An advisor can help you identify which long-term care costs might be covered by your existing insurance and where additional coverage is needed. It’s important to weigh the benefits of insurance with its costs versus the risk of not having it and needing it. There’s always the possibility that you’ll pay for coverage you’ll never use, but I recommend it for clients who may not have the coverage to pay for these potential needs.

Finally, what surprised you most about the findings of this research?

I think the most surprising finding from the study was that 77 per cent of those planning to retire wish there were more resources available to help them plan for an ideal retirement beyond just their finances. This is hugely important as the vast majority of retirees surveyed say that in addition to saving for retirement and managing finances in retirement, it is important to think about all the other factors that contribute to a healthy retirement.

This research reminds me to challenge clients to think about the other aspects of their retirement planning outside of the finances. I now make sure to respectfully ask clients about their non-financial retirement goals, from where they will live to which activities will give them a sense of purpose, to get the conversation flowing.

We thank Andrea Andersen for taking the time to answer our questions. If you’re interested in saving for retirement – but aren’t all that sure how to go about it – the Saskatchewan Pension Plan may be the answer you’ve been looking for. Send SPP your pension contributions, and they will be professionally invested, grown, and at retirement, paid out to you as retirement income, with the option of receiving a lifetime annuity.

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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.

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