Writer offers six tips on how to achieve financial independence

Financial independence, writes CTV’s Christopher Liew, “is when an individual has accumulated enough wealth or has a passive income stream capable of covering all of their living expenses for the rest of their natural life without needing a paycheque or salary.”

While the idea of never having to work for a living again sort of sounds like full retirement, Liew’s article suggests that this financial independence can be attained through “hard work, planning, and consistent action.”

First, he writes, you need to increase your savings rate.

“Your savings rate is the percentage of your total after-tax income that you save,” he explains. By doing a thorough audit of what you are actually spending your money on, you may be able to find areas where you can cut back, he continues. “By saving more money, you’ll be increasing your savings rate.”

Next, Liew recommends that we start investing early. “Investing your money is one of the most common ways to achieve financial independence,” he explains, adding that “the earlier you start, the better, due to the magic of compounding returns.”

Make sure, the article continues, that you are taking full advantage of your Tax Free Savings Account (TFSA). “TFSA accounts are best used as investment accounts, and none of the earnings within the account are taxable,” he notes. You should also “maximize the value” of your registered retirement savings plan (RRSP) and/or registered education savings plan (RESP).

Another tip is to look for other sources of income, to boost your overall earnings and free up more money for savings, the article notes. These “extra” streams of income can include dividends from investments, freelancing, rental income, starting a business, negotiating a raise, or finding a higher-paying job.

Another great bit of advice in Liew’s article is to “live below your means.”

“If you spend all the money you make, it will be difficult to achieve financial independence. Living below your means can be one way to spend less. For example, if you get a promotion at work and your salary increases, try to keep your spending at the same level instead of immediately increasing your living costs. The value of delayed gratification will mean reaching your financial independence goals earlier,” he writes.

Finally, you’ll have an easier time of achieving financial independence if you have a “like-minded spouse,” Liew writes. If both of you are on the same page, your drive towards financial independence will be doubled, he concludes.

These are all great tips. When we were working full time we did “live below your means” by simply paying the bills based on the prior year’s salary and earnings, and banking the difference. This indeed boosted our pre-retirement savings.

One of the nice features of the Saskatchewan Pension Plan is its flexibility on contributions. You decide how much you want to contribute (currently, up to $7,000 annually) and SPP contributions can be done through pre-authorized debits, can be paid like bills online, and can even be paid using credit cards (including, as we found out, pre-paid gift credit cards). Check out SPP today!

We’d like to extend our happy retirement wishes to Bonnie Meier, Director of Client Service, who steps down at the end of 2022. We all thank her for her many years of dedicated service to SPP, and wish her all the best in the life after work that awaits her!

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Not everyone is comfortable talking about money with family members – spouses, kids, and so on.

In fact, Kelley Keehn, writing for FP Canada notes that she has always found it interesting that “people naturally retreat when the topic of finances comes up.”

“While it’s perhaps not the most engaging dinner table discussion or a conversation-starter on a date, money is an important subject to be comfortable talking about,” she writes. “No matter our age, salary, social or relationship status, money is an essential part of our lives,” Keehn continues.

She cites a recent national survey by FP Canada, The Discomfort Index, as finding that the topics that make Canadians squirm the most are politics (26 per cent), relationships/sex (24 per cent) and then money – tied with religion – in third place at 23 per cent. By comparison, notes Keehn, only 12 per cent of respondents found talking about their health to be a “taboo” subject.

Strangely, notes Keehn, at a time when women’s earnings now account for 47 per cent of family income, women are “more likely to avoid the topic of money than men,” by a margin of 27 per cent to 18 per cent.

While most Canadians confide in their partners about money, there’s a whopping 40 per cent who won’t, Keehn reports. Only three per cent would talk about money with strangers, two per cent with “hairstylists and estheticians,” and one per cent won’t talk about it to anyone, Keehn adds.

Save with SPP did an interview with Kelley Keehn last year.

So, what can be done to get people talking?

Writing for the Sun Life blog, Sylvie Tremblay suggests that one barrier to money talk might be our level of financial knowledge. “All too often, resistance to talking about money in a real, substantive way stems from a lack of confidence,” she writes. Consulting a financial advisor – a view shared by Keehn – is a great way to educate yourself about the topic.

Another money talk ice-breaker could be picking a financial goal you both are interested and excited about – a major vacation, putting together a down payment, or setting up a registered education savings plan (RESP) for the kids.

Other ideas from Tremblay include making an annual “money talk” appointment with your partner, setting rules about “who is handling what” when it comes to money and bills, and finally, to get started on talking right away.

An article from the Desjardins Financial Security network gives some great ideas about talking money with your adult kids.

The article points out, citing research results reported upon by the New York Times, that 83 per cent of respondents (folks making more than $100,000 per year) said they would NOT disclose their income to their adult kids. Only 17 per cent said they would, the article notes, with the main reason given for a “no” being the belief that the parents’ finances are “none of their (the kids’) business.”

However, the article says, that’s not really the case.  First off, your money may be theirs one day – and data suggests that one-third of inheritors “squander their inheritance shortly after receiving it.” Talking about money with them now, and discussing how to make it last, the article suggests, is helpful.

If you support charities, this is a nice idea to discuss with the kids – perhaps you can help grow their giving values too, the article adds. A money discussion plays a huge part in boosting the financial literacy of your children, the Desjardins article states.

“Parents with a certain degree of wealth have an opportunity to gradually expose their adult children to complex financial concepts such as investments, business ownership or overall financial planning,” the article adds.

Finally, the article suggests, it’s never a bad idea to involve a financial advisor in matters relating to inheritances or “in-life” transfers of wealth to kids, to game plan for any tax issues in advance.

The bottom line here seems to be quite simple – if you aren’t talking money with your spouse, it’s probably time to start. If everyone knows where the money is going and why, you avoid surprises, which people really only like on birthdays and other key holidays. If you are on the same page with spending, you can get on the same page with saving.

Thinking about saving for retirement, for couples and also for individuals, is a key financial consideration. If you have a retirement plan at work, be sure to join it and learn about what features it offers, particularly when it comes to benefits for your survivors. This is a good idea for both partners.

If you are saving on your own, take a look at the Saskatchewan Pension Plan, marking its 35^th year of operations in 2021. The SPP offers you a “do it yourself” pension plan that not only invests your savings, but provides the possibility of a lifetime pension with benefits for your surviving spouse. Check them out today.

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Year end – time to make sure you’re taking full advantage of employer retirement programs

The end of the year is always a highlight – the festive season, the New Year, family and friends; it’s an endless list.

But, according to a report from the Toronto Star, there’s another little item that should be on your growing year-end list – retirement, and particularly, any program you’re in at work.

“Many medium-to-large-sized employers offer some form of savings program for their staff; some with a matching component, such as the employer matches 50 per cent of the contribution that the employee makes up to a certain maximum value, while other programs are simply to facilitate savings exclusively from the employee. The draw for employees is that the funds are typically deducted right off one’s paycheque, and of course, the free money if a match is offered,” the Star notes.

You could be leaving that free money on the table if you haven’t signed up, the article warns.

Be sure, the article advises, to find out which employer-sponsored program you’ve signed up for.

“Have you enrolled in a defined benefit or defined contribution pension? Do you contribute to an RRSP or TFSA? Are you funding an RESP for your children? Is your company offering non-registered plans? Which accounts offer a company match, as these should be your priority to fund,” the Star notes.

You may have options to choose from if you are in a company retirement program – often mutual funds, ETFs, or target-date funds (or a combination of each).

Know what you’re paying into, the Star suggests. “Grab a list of what your fund options are and compare historical rate of return, risk level, the composition of the fund and read up on the fund’s objectives. In most cases, your company will be covering a large portion of the fees associated with these investments,” the article notes.

Finally, the article notes, be sure that if there is a company matching option, that you are signed up for it. The Star recommends that you “find out how to get the maximum matching dollars. For example, sometimes they scale the match up (or down) depending on how much you contribute. Simply take advantage of all the free money that’s available to you. It’s the easiest ‘return’ on your investment you’ll ever make,” the article advises.

Those without retirement programs at work must do the job on their own, the article concludes. If you are in this situation, “it’s then up to you to save independently.”

An option for that self-managed saving is the Saskatchewan Pension Plan . With SPP, your contributions are invested professionally and at a low fee. As of the end of September, 2019, the SPP’s balanced fund is up more than 10 per cent. In addition to growing your savings, SPP is equipped to offer you a multitude of ways to turn savings into lifetime income via annuities – SPP’s Retirement Guide provides full details.

There’s still time to sign up and join SPP prior to the RRSP deadline in 2020, so check them out today and make them part of your year-end to-do list.

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

A look at the best of the Internet, from an SPP point of view

The unempty nest: a new problem for retirement savers

We’ve heard all about the main obstacles to retirement saving – paying off debt, the lack of workplace pensions, and competing savings needs, like ponying up for a down payment.

A recent article in The Guardian from Charlottetown, PEI, points out another problem that can crop up, which we’ll call the unempty nest, or caring financially for kids age 30 and beyond.

The article notes the somewhat shocking statistic that “more than half of Atlantic Canadian parents are still supporting their adult children between the ages of 30 and 35,” and how that helping hand is “putting a damper on their retirement plans.” The article cites numbers from a recent survey by RBC.

A whopping 58 per cent of Atlantic Canadian parents are in this situation, the article reports; for the nation as a whole the figure is a lower but still noteworthy 48 per cent. The article states that while 88 per cent of parents “were happy to be able to help support their adult children,” more than a third of them – 36 per cent – “were worried about the impact on their retirement savings.”

How much support are we talking about? The article says that the average Canadian pays “$5,623 annually to support adult children age 18-35 and $3,729 annually for… adult children age 30-35.”

Sixty-nine per cent of parents are helping adult children with education costs, 65 per cent help with living expenses (rent, cable and mortgages) and 58 per cent help with cell phone costs, the article notes.

There is no question that younger people are facing higher education, housing, cable and phone costs than their parents ever did, so these statistics aren’t all that shocking. It’s clear that today’s wages don’t align with living costs like they did decades ago. So what can one do?

The cost of higher education for your children can be addressed by signing up for a RESP when they are very young. According to the Canada Education Savings Program’s 2017 Statistical Review, the average tuition cost in Canada was $6,373, and there may be additional costs for “administration fees, books, tools and accommodation and living expenses.”

The publication shows how various programs can help people save up to $21,000 per child if they start at the child’s birth. Many people are taking advantage of this program, the publication notes – there was $55.9 billion in RESP assets in 2017, compared to just $23.4 billion 10 years earlier, benefitting more than 622,000 students.

Save with SPP can attest to the benefit of a RESP; the great thing about it is that your successfully educated child graduates with less student debt thanks to the RESP saving.

So what’s the takeaway? Even if you can only put a little money away for the kid’s education and your own retirement, that action will be far more beneficial than doing nothing at all. Slow and steady wins the race, and as far as retirement savings are concerned, the Saskatchewan Pension Plan  lets you contribute as little or as much (up to $6,200 a year) as you want.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

What I find most interesting about budgets are the provisions that are often buried in the fine print and don’t make the front page of the newspaper. You will find links below to some widely-reported features of the 2018 Federal Budget and others you may not yet be aware of.

The graphic above illustrates how the new EI parental-sharing benefit will operate. The Investment Executive reports that in an initiative that was widely-anticipated in the lead-up to the February 27th budget, the Liberal government introduced a new Employment Insurance (EI) parental sharing benefit that will provide extended EI parental benefits when both parents agree to share parental leave. The proposed “use-it-or-lose-it” benefit will increase the duration of EI parental leave by up to five weeks for parents who share a standard 12-month parental leave, or up to eight weeks for parents who share an extended 18-month leave. This incentive is expected to be available starting June 2019.

And while details are sketchy, MPs may finally be entitled to long over-due maternity and parental leave. According to the Budget Papers (p.52):

“The Government is supportive of, and will work with Parliament on, the recommendations put forward in the report of the Standing Committee on Procedure and House Affairs entitled Support for Members of Parliament with Young Children. This includes…improving work-life balance, providing access to child care and designated spaces for the use of Members with infants and children, and a change to the Standing Orders of the House of Commons to allow an infant being cared for by a Member of Parliament to be present on the floor of the House of Commons. The Government will also bring forward amendments to the Parliament of Canada Act to make it possible for Parliamentarians to take maternity and parental leave.”

The government has backtracked on key tax measures for small businesses. Mark Burgess at advisor.ca explains how the federal government will tie the passive income threshold to the small business deduction. He notes that the plan put forward in Tuesday’s federal budget takes a different approach to the one the government proposed last summer that received considerable blowback from business owners.

If a corporation earns more than $50,000 of passive investment income in a year, the amount of income eligible for the small business tax rate is reduced and more of the company’s active income is taxed at the general corporate rate. The $50,000 threshold originally announced in changes the government made to its proposals while under pressure from business groups in October is equivalent to $1 million in passive investment assets at a 5% return.

Julie Cazzen at Maclean’s lists 15 ways Budget 2018 will affect your wallet.  Here are a few of the interesting budget provisions she highlights:

• The Canadian Child Benefit will be indexed to inflation starting July 2018.
• You will be able to open an RESP and claim the $500 Canada Learning Bond grant at the same time that you apply for a birth certificate for your child. This will automatically enroll children born into low-income families for the grant.
• Canada Student Grants and Loans has expanded eligibility for part time students, as well as full and part time students with children, and introduced a three-year pilot project that will provide adults returning to school on a full-time basis after several years in the workforce with an additional $1,600 in grant money starting Aug 1, 2018.
• A new Apprenticeship Incentive Grant for Women will give women in male-dominated trades fields $3,000 per year of training (or up to $6,000 over two years). Almost all Red Seal trades are eligible.
• The CPP death benefit is now $2,500 for all eligible contributors (whereas before it was pro-rated.)

Rob Carrick in the Globe and Mail discusses seven changes that could affect your finances. For example, following up on public consultations in 2016, the federal government is poised to announce improvements to Canada Deposit Insurance Corp. The consultations looked at adding registered disability savings plans (RDSPs) and registered education savings plans (RESPs) to the list of registered accounts that are covered and adding foreign currency deposits to covered products.

This would benefit snowbirds keeping large deposits in U.S.-dollar accounts. Other reforms could add coverage for guaranteed investment certificates of longer than five-year terms. Increasing the current $100,000 coverage limit for eligible deposits does not appear to be in the government’s plans.

Some other lesser known and unexpected Budget proposals reported by the Financial Post are:

• The government will create an advisory council to begin “a national dialogue” on a national pharmacare program.
• The government is moving to provide more support for Canadians suffering from mental health issues – including veterans – by helping them with the cost of psychiatric service dogs. Specifically, starting this year, the Medical Expense Tax Credit will be expanded to cover costs associated with the animals.

The federal government also announced in the budget that it will eventually move away from its problem-plagued Phoenix pay system – which has overpaid, underpaid or completely failed to pay tens of thousands of public servants – and invest $16-million over two years to develop a new pay system.

You can see the full document tabled in the House of Commons here.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.