Some optimism amongst older Canadians about the future

Despite frequent doom and gloom chatter regarding the ongoing waves of boomer retirements, some older Canadians say they are quite optimistic about the future.

That’s one of the findings of new research from the National Institute on Ageing. Investment Executive’s Maddie Johnson recently reported on the latest NIA findings.

The report found that 63 per cent of Canadians over 50 surveyed are “feeling positive about aging,” the article notes.

“What’s more, the oldest Canadians in the survey — those 80 and over — felt the best about growing older, expressing a more positive attitude toward most aspects of aging compared to those aged 50 to 79,” Johnson reports.

This is good news, the article continues, since it comes at a time when “Canada is facing unprecedented demographic realities with Canadians aged 65 years and older representing the fastest-growing segment of the population.”

Why are older Canadians optimistic?

Seventy per cent of respondents reported they had “strong social networks they could rely on,” the article notes. Sixty per cent said they were “socially engaged” and 72 per cent felt their financial resources were “adequate,” the article continues. Sixty-eight per cent felt they had “access to the healthcare and community support services they needed,” and 89 per cent “had confidence in their ability to age in their own homes,” Investment Executive reports.

There were a few points of concern noted in the research, the article reports.

Fifteen per cent of respondents reported being in poor health, and 26 per cent said their retirement income was “inadequate,” the article reports. As well, of the survey respondents who were still working, only 35 per cent said they were going to be able to “afford retirement when they wanted it,” and 37 per cent said they were not “in a position to financially afford to retire,” the article states.

Nineteen per cent said they were “stretched” for income and seven per cent reported “having a hard time,” the article adds. Four in ten, the article concludes, were at risk of “social isolation.”

These last points of an excellent Investment Executive piece are important. You’ll need to develop new social networks after you leave the workforce. It was for this reason that Mrs Save with SPP decided to sign us up for line dancing, and after six years, we are not only reasonably competent line dancers but have a new network of friends we hang out with.  

As for the financial side, those of us who are working and who have access to a workplace pension program are probably not going to be worried about the adequacy of their retirement income in the future. If you’re on your own as far as retirement savings goes or if your employer is looking for a pension option for you, why not partner up with the Saskatchewan Pension Plan? More than 32,000 Canadians belong to this open defined contribution plan — why save on your own when you can tap into SPP’s pension expertise and low-costed pooled investing? Check out SPP today!

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More had pension coverage in 2020, but six in 10 don’t: Statistics Canada

New research from Statistics Canada shows that 57,000 more Canadians had registered pension plans in 2020 than in 2019, reports Investment Executive.

However, the article notes, 2020 – the first year of the pandemic – saw fewer workers overall due to COVID-19. So while a greater percentage of workers had pensions, the overall worker pool actually shrunk that year, the article notes.

Let’s dig into the other findings.

“Nearly 6.6 million Canadians had a registered pension plan in 2020, up by 57,000 (0.9 per cent) from 2019,” Investment Executive reports, citing Stats Canada data.

“The increases came in Quebec (33,000), Ontario (25,200) and British Columbia (16,800), while fewer workers in Alberta (-23,400) and in Newfoundland and Labrador (-3,500) had pensions,” the article continues.

Defined benefit pensions – the type where the payout is pre-determined, and is typically a lifetime pension that may offer inflation protection – represented “the lion’s share of pensions in Canada,” the publication notes. 4.4 million Canadians were covered by this type of plan in 2020, the article adds.

Defined contribution pensions – basically capital accumulation plans, where savings are invested and whatever is in the kitty at retirement is turned into income – accounted for 18.4 per cent of all registered pension plan members. The Saskatchewan Pension (SPP) is this type of plan.

Overall, the article reports, “almost four in 10 (39.7 per cent) workers in Canada were covered by a registered pension plan in 2020, up from 37.1 per cent in 2019.”

“The increase in the coverage ratio was due to a decrease in labour force numbers, attributable to the pandemic, rather than an increase in the membership in the registered pension plans,” StatsCan stresses in the article.

Participation in workplace registered pension plans has been in decline generally this century, Investment Executive reports. “This level of coverage was last seen in 2001 (40.2 per cent), then trended downward before having a peak year in 2009 (39.4 per cent), after which point it resumed its downward trend.”

There are a couple of takeaways from this article. First, it suggests that over six in 10 workers in Canada weren’t covered by a registered pension plan in 2020. That’s going to be a problem as more folks without pension coverage at work converge on their retirement years.

On the positive side, these days in the sorta-kinda post-COVID world, employers are finding it harder to attract and retain employees. Many are improving the benefits they offer their teams, including adding or upgrading pension programs. Let’s hope this more positive trend continues.

If you don’t have any kind of pension arrangement at work, fear not. There’s a great do-it-yourself option out there through the Saskatchewan Pension Plan. Any Canadian with registered retirement savings plan (RRSP) room can sign up for SPP, and you can then contribute up to $7,000 annually to the plan. If you have an RRSP, you can move those funds to your SPP account – transfers of up to $10,000 a year are permitted. Your savings are professionally invested at a low cost in a pooled pension fund, and when it’s time to stop the whole work thing, you can arrange to receive some or all of your savings as a lifetime monthly pension via SPP’s annuity program.

Be sure to take a look at what SPP has to offer!

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Canadians sock away $50.1 billion in RRSP savings

It appears the venerable registered retirement savings plan (RRSP) is alive and well, reports Investment Executive – and pandemic-related extra cash may be the reason why.

Citing Statistics Canada data, the magazine reports that “the number of Canadians that socked money away in their RRSPs increased in 2020, and their contributions rose too.”

In 2020, Canadians collectively contributed $50.1 billion in their RRSPs, the article notes. That’s an increase of 13.1 per cent over 2019, the article continues, and the number of contributors rose as well by 4.9 per cent.

Investment Executive reports that “the median RRSP contribution in 2020 came in at $3,600, which is the highest on record.”

Why did more people put more money away?

Well, the article states, “savings rose as public health restrictions limited consumer spending.” With little to spend money on other that food and fuel, the average Canadian was able to stash away “$5,800 in extra savings in 2020 on average.”

So, that extra pile of money found its way into people’s retirement savings kitties.

“With the added savings on hand, more Canadians put money into RRSPs. The proportion of taxpayers that made RRSP contributions in 2020 increased for the first time in 13 years, StatsCan said, noting that the share of taxpayers making contributions has been declining since the Tax Free Savings Account (TFSA) was launched as a retirement savings alternative,” the article reports.

While things are not as locked down (thank heavens) today as they were a couple of years ago, the retirement savings bug is still with us, reports Baystreet.ca.

More than $10 billion found its way into Canadian mutual funds this February, the site reports.

“That brought the total amount of mutual fund assets under management in Canada to $2 trillion as of March 1,” Baystreet notes. “In all, Canadians put $111.5 billion into mutual funds in 2021. That’s nearly four times the $29 billion in mutual fund sales in 2020, which was in line with average annual sales going back to 2000.”

So, let’s put those two thoughts together – Canadians are putting more money away in their RRSPs, including managed mutual funds. The trend seems to be that more money is going this way each year.

The Saskatchewan Pension Plan allows you to contribute up to $7,000 annually towards your retirement nest egg. And you are allowed to transfer in up to $10,000 annually from other registered savings vehicles. SPP is a voluntary defined contribution plan – it has some of the characteristics of an RRSP and some of a managed mutual fund. Where SPP differs from a typical retail mutual fund is in the fees charged. SPP provides you with professional investment management, but SPP’s fee is typically less than one per cent – less than half of what most managed retail mutual funds charge. SPP has a stellar investing record, and – again, unlike a RRSP – SPP gives you the option of converting your accounting into a lifetime SPP annuity, among other retirement income options. Check out this made-in-Saskatchewan success story today!

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TFSAs – a handy tool for retirement savers and those drawing down their nest eggs

Writing in Investment Executive, Jeff Buckstein takes a look at how the Tax Free Savings Account (TFSA) can play a key role not only in saving for retirement, but in the trickier “drawdown” stage.

For starters, he writes, “many people quickly identify the registered retirement savings plan (RRSP) as a key component of successful retirement planning,” overlooking the “complementary role” the TFSA can play “in planning for and enjoying retirement.”

One interesting TFSA characteristic is that money saved within them does not – like in an RRSP – have to come from earned income. Examples of income that doesn’t qualify for an RRSP contribution would be dividends from a private corporation or business, or “a windfall, such as an inheritance,” Buckstein writes.

If you are a regular RRSP contributor who maxes out each year, any extra cash can be saved in a TFSA (up to the annual TFSA limit), he writes. As well, if you are in a company pension plan where your contributions produce a pension adjustment – which reduces how much you can contribute to an RRSP – the TFSA is a safe savings alternative, the article notes.

Quoting Tina Di Vito of Toronto-based MNP LLP, the article notes that “lower income clients who anticipate relying on Old Age Security (OAS) or the Guaranteed Income Supplement (GIS) may be better off investing in a TFSA.”

That’s because withdrawals from a TFSA are not considered taxable income, like withdrawals from an RRSP, a registered retirement income fund (RRIF) or an annuity purchased with registered funds are. So TFSA income doesn’t impact one’s ability to qualify for OAS or GIS.

So what’s a good idea, investment-wise, for a TFSA?

The article quotes Doug Carroll of Aviso Wealth Inc. in Toronto as saying that since TFSA investments are going in to the account tax free and coming out tax free, “you probably lean a little more toward equities in there than you would in your RRSP.”

A more complex idea explored in the article is – for those with substantial TFSA savings as well as an RRSP – to draw down the TFSA income first, and try to delay touching the registered money until you have to at age 71. This strategy can reduce your taxable income over the longer term, the article explains.

Our late father-in-law used to use his TFSA as part of his RRIF withdrawal program. He’d withdraw funds as required from his RRIF, pay tax on them, and then put the after-tax income back into his TFSA to invest. This generated a regular and growing supply of tax-free income, he used to tell us with a broad grin.

Many of us semi-retired boomers didn’t get in on the TFSA, launched in 2009, until the latter years of our careers. If you are younger, and decades away from retirement, think of all the tax-free growth and income your savings could produce in the run up to your Golden Years.

If you don’t have a retirement savings program at work – or want to supplement the one you have – a great place to look is the Saskatchewan Pension Plan. This made-in-Saskatchewan success story has been helping Canadians save for more than 35 years. Check them out today.

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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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An old idea makes a comeback – annuities

An investment idea for retirees that you don’t hear about as often as you used to seems to be making a comeback.

A recent article in Investment Executive suggests that today’s volatile markets and uncertain economy may be perfect conditions for some of us to consider buying annuities.

An annuity is a product you purchase with all or part of your retirement savings. Once purchased, the annuity pays you a monthly amount for the rest of your life – a guaranteed amount that doesn’t change, even if markets decline. They were much more common decades ago when interest rates were high.

“Annuities are one of the best ways to plan for retirement if you are worried about volatility in the market, feel you will run out of money before you die and do not want to manage the investments,” states Markham, Ont. financial planner Ahilan Balachandran in the Investment Executive article.

He does point out that the current low-interest rate environment is not generally favourable for annuity purchases, since you basically “lock in” at a low interest rate. Annuities provide higher payouts when interest rates are higher, he explains in the article.

But it’s not all about interest rates, points out another financial expert.

“After 35 years of being in the business of selling annuities, I conclude that rates are not the primary consideration for a person to purchase an annuity,” states White Rock, B.C. annuity broker John Beaton in the article. “People are not as worried about interest rates as they are about establishing a lifetime stream of income.”

He tells Investment Executive that annuities offer “peace of mind” for retirees.

“Some people understand that a time will come when they will suffer from diminished capacity to handle their affairs. Not having to worry about how things will be paid is more important,” Beaton tells the magazine.

And Burlington, Ont. investment advisor Jim Ruta says while interest rates may be low, there are other reasons to think of an annuity.

Now that markets are so uncertain, he states in the article, “you can guarantee yourself a multiple of what interest rates are with an annuity.”

This is a somewhat complex topic. We tend to confuse retirement savings with wealth generation – for many of us, our retirement savings are the biggest chunk of cash we have. It’s never easy to think about trading some or all of that nest egg for the security of a monthly, set income.

But an annuity is a way to “pensionize” some of your savings. You saved all this money to provide future income, an annuity allows you to get a monthly pension – for life – from your savings. If you invest your retirement savings and draw it down each year, there’s a risk you can outlive that lump sum amount. That risk disappears if you have purchased an annuity.

The Saskatchewan Pension Plan (SPP) offers you a wide variety of annuity choices when the time comes to convert savings to an income stream. The SPP pensions page has details on SPP’s annuity options.

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