If there’s one thing almost everyone can agree on, it was great to celebrate – in a limited, socially distanced way – the end of the brutal year 2020, when the pandemic slammed the world.

It’s been a particularly frightening year for those of us struggling to save a few bucks for our retirement.

Back in February, when the COVID-19 crisis was beginning to take effect, stock markets dropped sharply, erasing “four years of gains,” reports Maclean’s . The market’s crash was based on fear – “not knowing how severe COVID was going to be in terms of morbidity,” the magazine explains.

In addition to the shocking numbers of deaths and sickness COVID-19 delivered, it also walloped our economy. According to Wealth Professional, quoting Bank of Canada Governor Tiff Macklem, Canada’s economy “is expected to shrink by 5.5 per cent for the whole of 2020, with the initial rebound following the First Wave of the pandemic having eased.”

We all know what he’s talking about here – the First Wave led to lockdowns and business closures, and high unemployment. There was a break in the summer as much of the shuttered economy reopened, but now the Second Wave is causing lockdowns and job losses once again.

The usual safe harbour for savers when the economy (and stock markets) are volatile is in fixed income, investments that pay us interest. However, in order to reboot the economy, the Bank of Canada is planning to keep interest rates low “until 2023,” Macklem states in the Wealth Professional article.

Those “low for long” interest rates mean it is not the best time to buy bonds or guaranteed investment certificates (GICs). Some savers looked to the real estate investment trust (REIT) market to replace the income their fixed income was providing, notes The Motley Fool. While some REITs, notably industrial ones, and those involved with warehousing and data centres did well, “retail and hospitality REITs… had lost 80 per cent of their value at the market’s bottom.” The Motley Fool article wonders how investments in commercial office and retail space will fare in a world where most people are working from home.

Now that 2020 is behind us, there are signs of better days ahead.

The markets in Canada and around the world are now recovering due to late-year news that effective vaccines are nearly ready for distribution.

Dave Randall of Reuters, writing in the Chronicle-Herald, notes that November was “a record-breaking month as the prospect of a vaccine-driven economic recovery next year and further central bank stimulus measures eclipsed immediate concerns about the spiking coronavirus pandemic.”

Let’s review all this. The pandemic hit us hard, sending markets down, throwing people out of work, shrinking the economy. Central banks had to cut interest rates to reduce borrowing costs. That’s great for borrowing but less great for saving. Those looking to replace the interest they weren’t getting had to navigate a market that dropped by 40-50 per cent in the late winter and is recovering, and they had to face the reality that some sectors were doing far better than others.

2021, however, looks like a better year. Market optimism is returning, and once the vaccines start to get distributed around the country, we will (hopefully) start to see a return to more normal times, with no lockdowns and business restrictions.

The point of retirement saving is putting money away for the future, which may be quite soon or decades away. If you’re worried about saving on your own for retirement during these volatile days, you might consider teaming up with the Saskatchewan Pension Plan. With SPP, experts run the money at an extremely low cost. We all have enough to worry about these days – let SPP take the worry of pandemic-era retirement saving off of your plate!

Join the Wealthcare Revolution – follow SPP on Facebook!

60 per cent of pension plan members report barriers to retirement saving

New research from Benefits Canada magazine shows that even folks who are in retirement plans say they’re finding barriers to saving – all thanks to the impacts from the pandemic.

The magazine’s annual CAP (capital accumulation plan) Member Survey was carried during the start of the crisis, from March 30 to April 1.

A capital accumulation plan is any type of savings vehicle where members put in money – sometimes matched by the employer – over their working lives. At the end of work, the total amount saved for retirement is then either paid out to them via an annuity, drawn down from a special locked-in RRIF, or a combination of both.

The folks at Benefits Canada asked people in these types of plans how the pandemic was affecting their spending and saving habits.

The research found that Canadians “are continuing to juggle their financial priorities. More than half (54 per cent) of CAP members are prioritizing day-to-day expenses, followed by paying the mortgage or rent (47 per cent), paying off personal debt (38 per cent), enhancing personal savings (34 per cent) and saving for retirement (28 per cent),” the magazine reports.

A fairly low number of respondents – 41 per cent – “described their current financial situation as excellent or very good,” the magazine notes. A further 40 per cent said their finances were “adequate,” but 19 per cent said things were “somewhat poor or very poor.” A whopping 60 per cent said “they’re unable to save as much as they’d like for retirement due to other financial debts, such as credit cards or student loans,” Benefits Canada reports.

Debt is definitely a barrier to saving, the magazine reports. “I think the big thing we need to start to get across to workers, savers, Canadians . . . is that having too much credit card debt is the opposite side of insufficient retirement savings,” Joe Nunes, executive chairman of Actuarial Solutions Inc., states in the article. “It comes from too much spending. We have to get better at educating people that they need to keep the spending in check to get the savings in order.”

The problem, however, is that the pandemic is making Canadian household debt even worse.

“You don’t need to be a psychic to predict that over the next weeks and months, the country will see an increase in personal bankruptcies, while household debt is going to soar,” reports Maclean’s magazine. “Well before COVID-19, there was growing concern over the country’s personal finances, with debt-to-income ratios topping 176 per cent in the third quarter of 2019, which means for that every dollar of income we earn we owe $1.76.”

With so many people off work and receiving CERB benefits, which may equal only about half of what they were making at work, credit cards and lines of credit will feel the strain, the magazine predicts.

Let’s face it – at a time when just staying healthy and avoiding COVID-19 is the new national priority, followed by keeping a roof overhead and food in the fridge, retirement saving is going to get bumped to the bottom of most people’s to-do lists.

But remember that with some capital accumulation plans, like your RRSP or your Saskatchewan Pension Plan account, you can reduce your contributions and put in what you can. If you can’t chip in what you did last year, put in less. Any contribution, however small today, will benefit you in the future, thanks to the professional investment growth it will receive over the years. You can ramp things up again when better times return.

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22