End RRIF mandatory withdrawals, RRSP end dates, and create national RRSP: Pape

Well-known financial author Gordon Pape has been observing the Canadian investment and retirement savings system for many decades, and has come up with a four-point plan to make retirement more effective for Canada’s greying population.

Writing in the Globe and Mail, Pape observes that there are now seven million Canadians aged 65 and over.

“This has the makings of a massive demographic crisis,” he writes. “Where are the future workers going to come from? Who is going to support our rapidly aging population? What will happen to the tax base as people leave the work force and reduce their spending?”

He then suggests that one way to address the problem would be to encourage more Canadians to work past age 65, a plan that would “require a massive overhaul of our retirement system,” but that is “doable.”

As a starting point, he notes that the trend towards more working at home, born from our experiences with the pandemic, may be a good “carrot” for encouraging older Canadians to keep working. Working from home is preferable for most, he says.

But other carrots are needed as well, he writes.

Eliminate mandatory RRIF withdrawals: Currently, he writes, registered retirement savings plans (RRSPs) must be “wound up by Dec. 31 of the year in which you turn 71,” and are then mostly converted into registered retirement income funds (RRIFs). With RRIFs, he explains, you are required to withdraw a minimum amount annually, an amount that grows until you are 94 and must withdraw 20 per cent of the RRIF.

“RRIF withdrawals are a huge disincentive to work after age 71. Added to regular income, the extra RRIF money can quickly push you into a high tax bracket,” Pape writes.

“The solution is legislation to end mandatory withdrawals entirely. Let the individual decide when it’s time to tap into retirement savings and how much is needed. The government will still get its tax revenue. It will just be delayed a few years,” he posits.

End RRSP wind up at 71: A second “carrot,” he writes, would be to change the age that RRSPs must be closed, currently age 71. Why, asks Pape?

“RRSP contributions are tax deductible. Making RRSPs open-ended would therefore create an incentive to continue saving in later years, when people may have more disposable income (no mortgage, kids moved out). That would result in more personal savings, which should result in fewer people requiring government support in later years,” he writes.

Create a national RRSP: Pape proposes that a national RRSP – to be run by the Canada Pension Plan Investment Board – be created. “It would provide Canadians with first-rate management expertise, at minimal cost,” Pape writes.

This idea is needed, Pape says, because many people don’t know how to invest in their RRSPs and lack the advice they need to do so.

Allow CPP and OAS to be deferred longer: His final idea would be to allow people to start their Canada Pension Plan and Old Age Security later than the current latest age, 70. Again, this is to accommodate folks who want to work longer and don’t need the money as “early” as 70.

These ideas all make a lot of sense if the goal is to help people working longer. The idea of being able to withdraw RRIF funds as needed rather than based on a government mandatory withdrawal table is sensible. After all, who wants to withdraw money – effectively selling low – when markets are down? And if one is working into one’s 70s, why take away the effective tax reduction lever of RRSP contributions?

Let’s hope policy makers listen to some of Pape’s ideas. Gordon Pape spoke to Save with SPP a while ago, and he knows his stuff. He also spoke with our friend Sheryl Smolkin in an earlier Save with SPP column.

If you don’t have a workplace pension plan, investing on your own for retirement can be quite daunting, especially in times like these where interest rates are rising and markets are falling. Fortunately, there is a way to have your money professionally invested at a low cost by money managers who know their way around topsy-turvy conditions – the Saskatchewan Pension Plan. You’ll get professional investing at a low cost, and over time, your precious retirement nest egg will grow and be converted to an income stream when the bonds of work are cut off for good. Check them out today!

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The concept of retirement “has grown increasingly more sophisticated,” begin authors Alexandra Macqueen and David Field in their new book, The Boomers Retire.

“Canadians preparing for retirement,” they write, “have been able to contemplate a variety of highly personalized approaches – from early (or even very early) retirement, to phased retirement, working retirement, and more.”

This thorough book covers all matters retirement and boomer with clear, concise explanations, tables, charts, and focus.

Early, we learn about three “realities” in today’s retirement world – the amount of time we are retired is “increasingly longer,” that retirement is much more diffuse than the old “retire at 65” days of the past, and that funding retirements that may last longer than one’s working years is “increasingly complex.”

Workplace pensions aren’t as common as they were in the past, especially in the private sector, so many of us have to rely on government benefits, the authors explain. But Canada Pension Plan and Quebec Pension Plan maximum benefits are just over $1,200 a month, and worse, the “average benefit amount for new recipients is $710.41 per month, or about 60 per cent of the maximum.”

Old Age Security provides another $7,384.44 annually, but is subject to clawbacks, the authors observe. Lower-income retirees may qualify for the Guaranteed Income Supplement, we are told.

Those without a workplace pension plan (typically either defined benefit or defined contribution) will have to save on their own.

In explaining the difference between two common do-it-yourself retirement savings vehicles, the Tax Free Savings Account (TFSA) and the registered retirement savings vehicle (RRSP), the authors call the TFSA “a nearly perfect retirement savings and retirement income tool” since growth within it is free of tax, as are withdrawals. They recommend a strategy, upon withdrawing funds from an RRSP or registered retirement income fund (RRIF) of “withdrawing more than needed… and instead of spending that extra income, move it over to the TFSA.”

Our late father-in-law employed this strategy when decumulating from his RRIF, chortling with pleasure about the fact that he received “tax-free income” from his TFSA.

The book answers key timing questions, such as when to open a RRIF. Planners, the authors write, used to advise waiting “until the last possible moment” to move funds from an RRSP to a RRIF, at age 71. “The problem with this approach,” they tell us, “is that it sometimes results in low taxable income between retirement and age 71.” If you are in that situation, be aware that you don’t have to wait until 71, and can RRIF your RRSP earlier, they note.

A section on annuities – a plan feature for SPP members – indicates that they address the concern of running out of money in retirement, as annuities are generally paid for life. The trade-off, of course, is that you don’t have access to the funds used to provide the annuity.

Other retirement options, like continuing to work, taking a reverse mortgage, and starting your own business, are addressed. There’s a nice section on investing that looks at the pros (security) and cons (low interest rates) of bonds, how to treat dividend income, index exchange-traded funds, and more.

An overall message for this book, which is intended for both planners and individuals, is a focus on having an individualized strategy, rather than relying on various “rules of thumb.”

“Aiming for a smooth, even withdrawal over a retiree’s lifetime will often be the optimal approach,” the authors say. That’s complicated if, as our friend Sheryl Smolkin told us recently, your retirement income “river” comprises many different registered and non-registered streams. The authors say that a withdrawal rate of four per cent from your various retirement income sources is generally a good target.

Tax tips include remembering to claim medical expenses – many of us forget this category and miss out on tax savings – claiming the disability amount if you qualify, and taking advantage of income splitting. There’s a chapter on being a snowbird (there can be some unexpected downsides with it) and going the rental route in your latter years, when “the future is now.”

This clear, detailed, and very helpful book is a must for your retirement library.

If you’re a member of the Saskatchewan Pension Plan, you’ll have the option at retirement to choose from a variety of great annuity products. Some offer survivor benefits, including the Joint & Survivor option where your surviving spouse will continue to receive some (or all) of your pension after you are gone. It’s a solid part of the SPP’s mandate of delivering retirement security, which it has done for more than 35 years.

Join the Wealthcare Revolution – follow SPP on Facebook!

We got a chance to catch up recently with Sheryl Smolkin, the original Save with SPP writer who has had a long career as a pension lawyer, a magazine editor, and a freelance writer/blogger.

Speaking over the phone from her Toronto home, Sheryl explains that because she worked at a variety of jobs over her working years, her retirement income comes from a variety of different streams.

She was Canadian Director of Research and Information at a global consulting firm for 18 years. Later, she became editor of Employee Benefit News magazine for four years, and subsequently she turned her talents to freelance writing. Sheryl played a pivotal role in setting up the Saskatchewan Pension Plan’s (SPP) social media efforts, including the Save with SPP blog that she pioneered.

When she left consulting, she received a defined benefit pension and retiree health insurance, she explains. As a result, she and her husband have retirement income from an employment pension, government benefits, and other registered and un-registered savings, including SPP. They have been “drawing down” income from various streams since their mid-50s.

Sheryl says she regularly transferred $10,000 annually from her RRSP to SPP over the years. When she reached 71, she looked at her SPP options and decided on the prescribed registered retirement income fund (PRRIF) to draw down her savings. With that option, she will cash out the Canada Revenue Agency (CRA) required minimum amount from her account each year.

So, she says, while some folks (including this writer) might think that 71 is a sort of magic age when all retirement savings gets converted to retirement income, that’s probably not the case for many people.

“My recommendation is always this,” she explains. “Everybody worries about having enough money in retirement; but the real worry is, are you going to have enough time” to spend it. “Enjoy spending the money – there are very few people who actually run out of money.”

She’s been busy since she wrapped up her writing work for SPP back in 2018. In the pre-COVID era, she took courses at Ryerson University, took care of her aging mom who passed away in 2019, visited the kids and her granddaughter in Ottawa, and went to every sort of live theatre, music performance or other show on offer. “We were having a lot of fun before COVID,” she says, and that will resume now that the pandemic appears to be winding down.

Her husband, a “serial hobbyist,” has not slowed down on his woodworking during the pandemic. She has taken advantage of the quiet period to catch up on her reading.

Sheryl does not hanker for a return to the workforce. When she left her consulting position in 2005, she notes, “I was NOT ready for retirement, but by 2018, it was time.”

She says however, that occasionally she does “miss the satisfaction of producing a piece of work, and seeing it online or in print – creating.” With her job at the magazine, there were a lot of conferences and travel, which she liked – but recalls that at one conference, she also agreed to produce a daily newspaper which was particularly hectic.

Fun is a central theme in talking to Sheryl. She says it is very important to have fun in your retired life. “Everyone has something they want to do, but the beauty of it (retirement) is that you don’t HAVE to do anything, if you don’t want to,” she says.

These days, she is anticipating getting involved “in the rhythm of the year” again through visits with friends and family. She looks forward to resuming “long distance travel” again once things are safe. Until then, “I’m excited to be able to go back to Stratford, back to the Shaw Festival, and other Canadian destinations.”

Sheryl says retirement really consists of three phases – the early stage, the mid-stage, and the later stage.

“Don’t be afraid to spend money in the earlier, more active stage of retirement,” she advised. “There will be less travel and shopping as you get older.”

She is glad that the SPP has provided one of her retirement income streams. “I think it’s a very good program,” she says. “For us, SPP is part of a bigger overall plan, which has both registered and unregistered components.”

So retirement income is a river fed by multiple income streams – we thank Sheryl for that lovely, and very evocative image. She says hi to everyone at SPP in Kindersley, and we all thank her very much for her time and wish her continued happiness in her life after work.

Need to add a good stream to your future retirement river? Consider joining the SPP. It can augment the income you’ll receive from workplace and government plans, and the best part is that you can now contribute up to $6,600 a year – and can transfer in up to $10,000 a year from other RRSPs. Be sure to check out SPP today!

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After nearly seven years of writing insightful and highly informative blogs for the SPP, Sheryl Smolkin has decided to retire. We certainly wish her all the best – good health, long life, and many adventures on the road ahead.

Our new blogger is Martin Biefer. Martin has been writing for 35 years, most recently with the Healthcare of Ontario Pension Plan, but before that with community newspapers in Ontario and Alberta, and for the old Southam company, in their business magazine division.

Martin retired from working full time a few years ago and returned to his hometown of Ottawa, where he lives with his wife, his large and crazy Sheltie, and his cat. He’s trying to break 100 now and then at the golf course, occasionally doubling out at the Legion darts on Wednesdays, and taking line dancing lessons at the nearby Richmond Arena.

He and his wife are SPP members. “I was fortunate enough to have a pension from work, but I still had room for RRSP savings. The SPP is so flexible. I’m actually quite excited to see what will happen when the day comes that I turn the savings into income.”

Martin plans to write not only about saving for retirement, but ways to save generally, the ins and outs of retirement, the importance of health and fitness as we age, and much more.

“I can already see the importance of growing your network of friends once you leave the workforce,” he says. “A lot of seniors find themselves isolated, and that’s not good for their mental health. We are social animals and we need lots of interaction to stay energized.”

For Martin, there are obstacles to saving these days that weren’t there in the past. “Homes are 10 times more expensive than they were when my folks bought in the 1960s. So a mortgage is a much bigger deal than it used to be. People are carrying around much more debt than ever before, and that can prevent them from saving.”

The solution, he says, “is to start small. If you can afford only $5 a week, start with that. Put that away before you pay the bills and buy the groceries. And when you can, increase it to $7.50, then $10. You won’t even miss it, and you’ll be on the road to being a saver.”

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, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Last week Sheryl Smolkin announced her retirement and talked about how SPP has changed her life.  If you missed the blog you can read it here. Sheryl has been part of our Social Media team for the last seven years, helping us write our original policy, getting us started with Facebook posts, hosting on our YouTube channel and of course has being the voice of savewithspp.com since 2011.

Sheryl lives in the Toronto area, however she writes content that is relevant across Canada. Her writing style makes the blogs easy to read and packs a lot of information into a few hundred words. We covered many topics over the years, mixing current events with general topics that everyone in Canada should know about everything financial.

Sheryl and I have worked closely together on the blogs since the beginning; I have gained so much knowledge not only from reading her posts, but also from asking questions and getting advice for the writing I do at SPP. We both like traveling and seem to travel close to the same time which makes it fun to hit our deadlines for our weekly best of posts and our regular weekly blogs.  But we always got our “act together” so we didn’t miss a week, even if our inboxes were full of emails saying “Are the blogs ready for review I am leaving on Wednesday?”.

As I said to Sheryl, I have mixed feeling about her departure from savewithspp.com. I am happy she will be able to spend more time with her family and traveling, but I will miss hearing from her and reading her blogs.

Thank for you for being a mentor to me and putting up with me as I moved from a mid-20 something to an early 30 something. Enjoy your retirement and remember those of us who are still working.

Happy retirement Sheryl!

Stephen Neiszner

After a long career as a pension lawyer with a consulting firm, I retired for the first time 13 years ago and became Editor of Employee Benefits News Canada. I resigned from that position four years later and embarked on an encore career as a freelance personal finance writer.

In December 2010 I wrote the article Is this small pension plan Canada’s best kept secret?  about the Saskatchewan Pension Plan for Adam Mayers, formerly the personal finance editor for the Toronto Star. The Star was starting a personal finance blogging site called moneyville and he was looking for someone to write about pensions and employee benefits. I was recommended by Ellen Roseman, the Star’s consumer columnist.

The article about SPP was my first big break. I was offered the position at moneyville and for 21/2 years I wrote three Eye on Benefits blogs each week. It was frightening, exhausting and exhilarating. And when moneyville began a new life as the personal finance section of the Toronto Star, my weekly column At Work was featured for another 18 months.

But that was only the beginning.

Soon after the “best kept secret” article appeared on moneyville, SPP’s General Manager Katherine Strutt asked me to help develop a social media strategy for the pension plan. Truth be told, I was an early social media user but there were and still are huge gaps in my knowledge. So I partnered with expert Leslie Hughes from PunchMedia, We did a remote, online presentation and were subsequently invited to Kindersley, Saskatchewan, the home of SPP to present in person. All of our recommendations were accepted.

By December 2011, I was blogging twice a week for SPP about everything and anything to do with spending money, saving money, retirement, insurance, financial literacy and personal finance. Since then I have authored over 500 articles for savewithspp.com. Along the way I also wrote hundreds of other articles for Employee Benefit News (U.S.), Sun Life, Tangerine Bank and other terrific clients. As a result, I have doubled my retirement savings.

All my clients have been wonderful but SPP is definitely at the top of the list. I am absolutely passionate about SPP and both my husband and I are members. Because I was receiving dividends and not salary from my company I could not make regular contributions. Instead, over the last seven years I have transferred $10,000 each year from another RRSP into SPP and I would contribute more if I could.

By the end of 2017 I started turning down work, but I was still reluctant to sever my relationship with SPP. However, as my days became increasingly full with travel, caring for my aged mother, visiting my daughter’s family in Ottawa, choir and taking classes at Ryerson’s Life Institute, I realized that I’m ready to let go at long last. After the end of May when people ask me what I do, I will finally be totally comfortable saying “I am retired.”

I will miss working with the gang at SPP. I will also miss the wonderful feedback from our readers. I very much look forward to seeing how both savewithspp.com and the plan evolve. My parting advice to all of you is maximize your SPP savings every year. SPP has changed my life. It can also change yours.

Au revoir. Until we meet again….

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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.

This second installment of the best of savewithspp.com focuses on some of my favourite summer blogs.

By late August, the “getting out of school for the summer” euphoria has worn off and both kids and their parents are looking for inexpensive things to do.  Summer activities for kids on a budget has lots of great ideas from a community parks tour to an all day pajama party to backyard camping.

Staying on budget can be a challenge at any time of year. But when souvenirs and snacks beckon on vacation or the hotel you booked ends up being much more than you expected, your bottom line may suffer an unexpected hit.

A 2016 study from BMO  reports that as temperatures soar so does our spending, and while many don’t feel guilty about enjoying the season, half (52%) admit that their summer habits have negative long-term effects on their savings.

Back to school shopping: A teachable moment was posted in 2013. It highlights that getting ready for the new school term is an ideal time for you to help your child learn the difference between “needs” and “wants.” It is also an opportunity to teach them basic financial literacy skills like budgeting and managing their money.

In September of the same year we featured Your kid’s allowance: Financial Literacy 101.  According to The Financial Consumer Agency of Canada, exactly what you need to teach kids about money depends on the ages of the children. We include their suggestions on what financial lessons are appropriate for different age groups.

And finally, How Not To Move Back In With Your Parents reviews Rob Carrick’s book written in 2014. But the message still holds true. I said it then and I’ll say it again now. Every new parent should get a copy when they leave the hospital with their precious bundle of joy and beginning at a young age children should be taught the basic principles of financial literacy outlined in the book.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

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.

Over the last 6+ years I have had the privilege of blogging for the Saskatchewan Pension Plan twice a week. That means there are over 500 articles archived on this site that you can access on topics that range from retirement savings to income taxes to how to save money.

Whether you have recently started following savewithspp.com or you have been with us from the beginning, you may not be aware of the wealth of information  in our archives. Therefore, beginning with this week, on an occasional basis I will offer links to some of my favourite “blasts from the past.”

Today’s selection includes a series of savewithspp.com podcast interviews.

I interviewed SPP General Manager Katherine Strutt in both January 2012 and February 2015. “The SPP gives members access to top money managers they may not be able to access on their own. SPP also gives members a strong investment product at a very low price,” Strutt said in the most recent interview. “The costs of running our plan are around one percent or less, and this compares to fees in a retail mutual fund that can be anywhere between two and three percent.”

In a July 5, 2012 podcast Derek Foster, author of several books including The Idiot Millionaire and The Wealthy Boomer explained how he retired at the young age of 34 and supports his wife and five children on $40,000/year. He also talks about the advantages of saving for retirement with SPP as opposed to an RRSP.

The Wealthy Barber David Chilton spoke to us in October 2012 long before he joined and then left the popular CBC series Dragons’ Den. He offered strategies for cutting down on discretionary savings to free up more money for savings. Using cash instead of mindlessly swiping a debit or credit card is one of his favourites.

The 2014 series of podcast interviews featured financial bloggers including Retired Syd who left work behind at age 44. Her original budget for retirement turned out to be overly generous, partly because she was kind of careful the first few years since she was so nervous watching the stock market go down. But as of the date of the interview, she and her husband were still spending less than their original retirement budget.

And finally, after I read most of the books in the Joanne Kilbourne mystery series, in March 2015 I interviewed the author and Saskatchewan success story Gail Bowen.  Also a retired professor and playwright, Bowen’s writing career did not begin until age 45. She is still writing in her 70s – truly a role model for all of us who are pursuing encore careers.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

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.

Hello Readers,

We are changing  our webhost for savewithspp.com on Wednesday, August 10, 2016.  It shouldn’t be a big change, however we wanted to let you know.

Why are we doing this?

To make security enhancements and allow us to have a more mobile friendly layout.

What will change?

Not much, other than the layout. We will still be posting blogs on Monday and Thursday, Saskatchewan Pension Plan will still be managing the blog and Sheryl Smolkin will still be our writer.

What does this mean for you?

Nothing! We hope…. You won’t need to follow us again to keep up with this blog and you can still access our blog at http://savewithspp.com.

If you have any questions please email us at so*********@sa*********.com.

And, as always, thanks for reading.

Thanks
Stephen Neiszner
Network Technician
Tel: 1-800-667-7153
Fax: (306) 463-3500
sn*******@sa*********.com
www.saskpension.com

 

 

 

 

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By Sheryl Smolkin

Due to the holiday Monday (yeah!) and other days away from my desk for random reasons, this issue of Best from the Blogosphere is being written super early. So, on no particular theme we present some great content from the last several weeks.

The Apple watch has received a bad tap from many reviewers, but Retired Syd reports on Retirement: A Full-Time Job that the device works for her. She likes being able to do all sorts of things without digging in her purse for her iPhone like paying for coffee; listening to music; getting directions from Siri; dictating error-free texts; and just lifting her arm to display her boarding pass.

In a guest post on the Financial Independence Hub, Michael Drak writes about one thing he wishes his father had taught him. While he learned about the need for working hard, saving and eliminating debt as quickly as possible, his Dad didn’t teach him about the important concept of Findependence (financial independence) and how it could positively impact his life once it was achieved.

Freedom Thirty-Five is authored by a nameless late-twenties male living in Metro Vancouver. He recently wrote about succumbing to lifestyle inflation. It seems he’s ahead of schedule by one year to reach financial freedom by his 35th birthday. So he has decided to succumb to lifestyle inflation and increase his food expenses from $100 to $150/month; eating out from $25 to $50/month and phone and entertainment from $75 to $100/month. Could you get by on these modest amounts?

Boomer & Echo blogger Marie Engen says unless there is room for occasionally splurging in your budget, becoming too frugal can ultimately undermine your budgeting efforts. Don’t banish nice things from your life. Occasional guilt-free splurges can help you stay on budget if they don’t detract from your other goals. When you don’t feel deprived you will likely find it a lot easier to stick to the plan.

And finally, on Brighter Life, I wrote a piece about Five smart ways to use your tax refund. You can start an emergency fund; top up your RRSP; pay down credit card debt; pay down your mortgage; or, open a Registered Educational Savings Plan for your child.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.