Whether or not we actually listen, we are all told – practically from the first time we bring home a paycheque – that it is important to start saving for retirement early, as in, day one.

But as is the case with many good ideas, other priorities often crop up in life that divert us from a path of saving. By the time we get around to it, we worry that it’s too late.

However, says retired actuary and retirement expert Malcolm Hamilton, starting to save later in life is probably not starting too late. In fact, he tells the Hamilton Spectator, starting late can work out just fine.

Of the many expenses in life, Hamilton tells the Spectator, saving for retirement “is the deferrable one. You can’t say, ‘I’m going to have my children in my 60s when I can afford them.’ And it doesn’t make sense to raise your children and then, after they leave home, buy a nice big house.”

The idea of getting through “the financial crunch” years first, of “huge mortgage and child-rearing costs,” means that retirement saving will have to be done late, “in a concentrated period,” the article notes.

You’ll have to sock away a significant chunk of your salary if you are starting the savings game late, the article warns. Those who start early will get there by saving “10 to 15 per cent of their salary” each year; those starting late will “need to put aside much more per year,” because they have a “much shorter period in which to save,” the article notes.

Those starting late, the article concludes, should be able to save most of what they were paying on their mortgage and their children towards their retirement.

The Good Financial Cents blog agrees that “if you find yourself approaching retirement age and have not yet looked at your retirement needs or started saving for later in life, it’s not too late.”

Those who delay savings, however, may have to “work well into their late 60s and maybe 70s to make up for the shortfall,” meaning that any dream of early retirement is off the table, the blog advises. The blog says late savers need to immediately reign in spending, max out their retirement savings “with no exceptions,” and explore ways to make more money, downsize, or sell off unneeded “large ticket” items.

At the Clark blog, writer Clark Howard comments that in The Wealthy Barber, the seminal financial book by Canadian author David Chilton, the advice was to save 10 cents of every dollar you make.

But if you start later, the savings amount grows, writes Howard, citing information from the Baltimore Sun.

“If you start saving at 35, you need to save 20 cents out of every dollar to have a comfortable retirement at a reasonably young age,” the blog notes. At 45, that savings rate jumps to 30 cents per dollar, and at 55, 43 cents per dollar, the blog notes.

Clark Howard concludes his post with this sage thought – “saving money is a choice. There’s no requirement that you do it. If saving is not something that’s important to you, it simply means you’ll probably have to work longer. There are no right and wrong answers here, so don’t feel guilty if you’re not saving. What’s right for me may not be right for you.”

Whether you are starting early or late, the Saskatchewan Pension Plan may be a logical destination for those retirement savings dollars. The SPP allows you to sock away up to $6,300 a year in contributions, as long as you have available RRSP contribution room – and you can also transfer in up to $10,000 a year from other savings sources, such as an RRSP. Your savings will grow, and when it is time to retire, you can collect them in the form of a lifetime pension. Check out this low-fee, not-for-profit savings alternative today!

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

Are Canadians saving enough for retirement? It depends who you ask.

A BMO survey conducted in early 2014 revealed that only 43% of Canadians planned to make RRSP contributions by the March 1st deadline, down from 50% the previous year. An October 2014 study from the Conference Board of Canada reports that almost four in 10 Canadians are not saving and nearly 20% of respondents said they will never retire.

Yet a 2015 study of 12,000 Canadian households conducted by consulting firm McKinsey & Co. says that four out of every five of the nation’s households are on track to maintain their standard of living in retirement. The research reveals that most of the unprepared households belong to one of two groups of middle to high-income households:

• Those who do not contribute enough to their defined contribution (DC) pension plans or group, and
• Those who do not have access to an employer-sponsored plan and have below average personal savings.

The McKinsey study suggests that since the retirement savings challenge is quite narrow, the best way to address it should be an approach targeted to these groups that is balanced and maintains the fairness of the system for all Canadian households.

And now, Malcolm Hamilton, a Senior Fellow at the C.D. Howe Institute and a former Partner with Mercer has weighed in on the issue with his commentary Do Canadians Save Too Little?

Hamilton agrees with the McKinsey research that Canadians are reasonably well-prepared for retirement. Most save more than the five percent household savings rate. Most can retire comfortably on less than the traditional 70% retirement target. Furthermore, the size of the group that appears to be “at risk” cannot be accurately determined nor can the attributes of its members be usefully described.

He notes that a couple can live comfortably after retirement despite a reduction in income of more than 30% for several reasons:

• They no longer need to save for retirement.
• They no longer contribute to CPP and EI.
• One of their largest pre-retirement expenses – supporting children – ends.
• During their working lives the couple acquires non-financial assets like the family home, cars, furniture, art and jewelry. Some can be turned into a stream of income. Some cannot. But they do not need to budget to re-acquire these items during retirement.
• Finally, any tolerable reduction in post-retirement income is amplified by a disproportionate reduction in income tax due to the progressive nature of our tax system and special tax breaks reserved for seniors.

As studies of our retirement system become more sophisticated, Hamilton thinks we should focus more on solutions for individuals who are not saving enough as opposed to a blanket approach that will impact everyone

So how can we fill the “gaps” identified by these studies?

Hamilton is not a big fan of an enhanced Canada or Quebec Pension plan. He agrees that CPP/QPP are effective ways to increase the post-retirement incomes, and to reduce the pre-retirement incomes, of all working Canadians.

However, he says they are ineffective ways to increase the post-retirement incomes of hard-to-identify minorities who are thought to be saving too little. “Their strength is their reach – they can efficiently move everyone to a common goal,” Hamilton says. “But what if there is no common goal? What if there are only individual goals dictated by personal circumstances and priorities?”

The report concludes that because gross replacement targets are unreliable measures of retirement income adequacy due to the diversity of our population, programs like the CPP/QPP can go only so far in addressing our retirement needs. They can establish a lowest common denominator – a replacement target that all Canadians should strive to equal or exceed.

“Beyond that, we need better-targeted programs – programs that are better able to recognize and address our individual needs,” Hamilton says.