The Association for Canadian Pension Management (ACPM) has rolled out a new online course on retirement that will help you up your game when it comes to mastering the topics of retirement saving, and turning those savings into income.

The course consists of six sections, with questions at the end to test your new knowledge. The first section, The Importance of Saving, talks about the importance of making savings part of your financial plan. “Many imagine retirement savings can wait for later,” the course explains, adding that it is far harder to play catch up than to start saving, even a little bit, while you are younger.

Small savings, we learn, can add up due to the “compounding effect” of time — even $50 a month in retirement savings can grow to more than $16,000 in 20 years.

The second section, Individual Registered Savings Plans, looks at registered retirement savings plans (RRSPs), Tax-Free Savings Accounts (TFSAs), the Home Buyers Program and Lifelong Learning Program (these allow you to “borrow” from an RRSP to pay for buying a home or furthering your education) and the new Tax-Free First Home Savings Account.

Ideas expounded on here include how much you should be expecting to live on when you retire — a rule of thumb given here is 70 per cent of your gross, pre-retirement employment income. The course notes that money from an RRSP should be considered to be “deferred income,” since you are able to put it away and grow it tax-free until the time you take it out as future income, when it is taxed.

The Government Retirement Income section walks you through the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement. The important points raise about CPP is that the benefit it provides it quite modest, with the average monthly after-tax payment ranging in the $700 range. And while OAS is a universal benefit, it can be subject to a partial or even full “clawback” if you earn more than a certain level of overall retirement income.

The Workplace Retirement Savings section walks you through the difference between defined benefit, target, and capital accumulation plans. Defined benefit plans provide you a lifetime benefit based on a formula that takes into account your earnings and years of membership in the plan; benefits are guaranteed. Target is similar, but lacks the guarantee. With a capital accumulation plan, what’s “defined” is usually how much money you and your employer contribute — your income will be based on how well those savings are invested. Examples of capital accumulation plans are defined contribution plans, group RRSPs, and of course the Saskatchewan Pension Plan.

The final sections talk about the critical “transition to retirement” stage, where you really need to know exactly what your retirement income will be and what expenses you will need to cover, as well as “decumulation,” which involves turning the money you have saved in a capital accumulation plan into income, either by withdrawing money periodically or converting some or all of it to an annuity, which provides a guaranteed monthly payout.

Estate planning — a complex topic that we all need to know more about — is also covered off.

ACPM has done a great job here. The ACPM Strategic Initiatives Committee (SIC), of which SPP’s Executive Director Shannan Corey is a proud member, led this project, and a broader financial literacy framework for plan sponsors is in the works. The group feel a national effort towards broader financial literacy is an important project, she notes.

Shannan says that response to the program has been good so far since the course was rolled out late last year, with close to 200 people graduating from the program.

Asked if the course might make its way into school curriculum one day, Shannan says “yes, we have talked about that and a contact of mine who teaches financial literacy for high school seniors is using the course as part of this curriculum.” It would be great, she adds, to see usership of the course expand.

“We feel it is a really great tool, but that it will take time for it to gain credibility and exposure. The financial literacy framework is going to be pretty amazing and should help get broader national exposure too — that one may have broader uptake as it is designed for plan sponsors rather than individuals,” she adds.

ACPM describes itself as “the leading advocacy organization for a balanced, effective and sustainable retirement income system in Canada,” and ACPM member organizations “manage retirement plans for millions of plan members. “

The group believes that “part of having a better retirement system is to provide education to those preparing for and contemplating retirement.”

According to ACPM, the motto for retirement savings is “the sooner the better.”

They state that their online retirement savings course is designed to be of value to all ages. “If you are in your twenties or thirties and just starting your career path, this course is for you.  If you’ve reached the point where you are building your household savings but not yet focused on retirement savings, this course is still for you. And if you’re nearing retirement but haven’t already learned how to manage and accumulate retirement savings, there are still many important lessons to be gleaned here,” states ACPM.

Finally, ACPM notes that many Canadians are not well prepared for the inevitable retirement from work that lies ahead of them.

“Nearly one in five retirees has less than $25,000 in savings and investments while more than half of Canadians do not have a financial plan for their retirement,” the group states. “It is our hope that this course will help you gain an understanding of pensions and retirement savings as you plan for your retirement.”

Many Canadians don’t have any sort of retirement program at the workplace. If you’re in this group, the responsibility for saving for your future retirement is squarely on your shoulders. Fortunately, the Saskatchewan Pension Plan offers a program for any Canadian with unused RRSP room. SPP, which operates on a not-for-profit basis, will invest your savings in a pooled retirement fund managed at a very low group rate. When it’s time to retire, your income options include choosing one of SPP’s lifetime annuity options, which will ensure you never run out of money. Check out SPP today!

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“The best investment you can make is an investment in yourself.”

This quote, from famed financier Warren Buffett, begins Larry Bates’ book Beat The Bank, a nicely written, witty and fun “how-to” on how to build wealth without handing over a massive chunk of your savings to your local financial institution.

He introduces the concept of Simply Successful Investing by encouraging us all to “learn investment basics,” to “think long-term” when investing, and to “minimize” investment costs.

He rolls out the example of two couples, the Meeks and the Ables, who both manage to save $300,000 by age 65 in their Tax-Free Savings Accounts (TFSAs). At that point, the Meeks have saved $470,000 — a $170,000 gain on their investment. But the Ables, at the same point, have $856,000.

The difference, the book explains, is that while the Meeks followed the bank’s advice and invested their money in equity and bond mutual funds — carrying an average annual fee of two per cent — the Ables invested in index ETFs that charge only 0.25 per cent in fees.

“The Meeks paid total mutual fund fees of $217,600 — an astonishing 73 per cent of the original $300,000 they invested — while the Ables paid total ETF fees of just $63,900, about 21 per cent of their original investment,” author Bates explains. As well, because the Ables have so much more savings by age 65, they will receive more than twice the annual retirement income that the Meeks will.

In another chapter, Bates explains the three “wealth builders” that are out there for investors — amount saved, time (how long one has been saving) and “the magic of compounding.” The more you are able to save, and the earlier you get started, to more your savings growth will be compounded over time, he explains.

To illustrate the idea of compounding, a chart shows how $10,000 invested in Royal Bank stock would grow to $60,822 after 15 years, thanks to growth in the stock price over time. And if dividends are reinvested, the figure goes even higher, Bates writes.

Had you invested $10,000 in TD Bank stock in April, 1978, you would have $4.2 million 40 years later. “The only two investment values that really matter are the amount you pay on purchase, and the amount you receive on sale,” he writes. “The thousands of data points in between ultimately mean nothing… learning to ignore all these thousands of data points is key to Simply Successful Investing.”

Watch out, warns Bates, for “wealth killers,” which include fees (both visible and invisible), taxes, and inflation.

He offers a fee impact calculator (the T-REX calculator) at www.larrybates.ca.

Latter chapters provide detail on investing via discount brokerages or through “robo-investing,” both of which offer lower fees than traditional full service brokerages. Closing advice includes the idea of “automating” your investing/savings by making regular, automatic deposits.

This is a great, clearly written and very digestible walkthrough of what can seem like a very complex topic.

The Saskatchewan Pension Plan operates on a not-for-profit basis. That allows them to keep investment management costs low, typically under one per cent. No fees are charged directly to members. If you are looking for a low-fee, pooled retirement savings vehicle with a sparkling track record since its inception 36 years ago, look no farther than SPP!

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We’re living through some very weird times. First we get a pandemic that keeps many of us from working for an extended period of time, and the rest of us with nothing to spend our money on. Now we’re facing crazy inflation that is making even routine purchases very expensive.

Are there any tricky ways to put away a few bucks for retirement out there? Save with SPP decided to seek out a few new tricks – ideally ones we haven’t covered off before.

A GoBankingRates article posted on Yahoo! offers up 42 savings tricks.

One is to watch the fees in your retirement savings accounts, the article suggests. Here in Canada, this would be in registered retirement savings plans – RRSPs – or Tax-Free Savings Accounts, TFSAs. Do you have mutual funds that charge a high fee, say two per cent or even more? Maybe you can switch to a lower-fee exchange traded fund (ETF). Other ideas include renting out a spare room or an unused garage for extra savings cash, “shopping around” for the best possible insurance rate, and the idea of “putting every tax refund into savings.”

“It’s tempting to use the extra money from your tax refund on a new toy or vacation,” the article states. “But these spurts of cash provide the perfect opportunities to give your retirement savings a big boost.”

The My Money Coach blog has some great ideas, including freeing up money for savings by paying attention to your pre-retirement cash flow.

“A very important key to saving for retirement in Canada – that many have lost sight of – is to earn more than you spend,” the blog explains.

If you are following a budget and still have little room for savings, the blog continues, “the next thing to do is to up your income. You can ask for a raise at work, or you can apply for a job that offers a higher pay and better benefits. You can also pick up extra shifts or take on a second job during the weekends or evenings, if your schedule allows it.”

Other ideas to boost cash flow (and create more savings) are “a side business or freelancing,” the blog notes. “Capitalize on one of your passions and see where it takes you.”

From the Union Bank of Switzerland (UBS) site comes a little bit of savings psychology advice.  “Try this little trick to motivate yourself,” the site suggests. Simply change the name of your savings solution. Seeing “My world trip,” “Better living” or “Playa del Carmen 2030” every time you log into… e-banking or (a) mobile banking app will remind you of your big dream, and give your motivation a boost,” states Daniel Bregenzer of UBS.

Other tips from UBS include making it “harder” to access your savings account so the temptation to spend it is lessened, “like keeping a box of chocolates out of sight,” and making savings an automatic habit.

Save with SPP can add a couple more.  First, if you get a cash gift card – say it’s issued as a rebate on a purchase of tires, or contact lenses, or whatever – did you know that you can use that gift card to make contributions to your Saskatchewan Pension Plan account? SPP allows you to make credit card contributions, and we have used gift cards quite a few times over the years. Here’s the page where credit card contributions can be made.

And, if you have a cashback card, what better place for the cash than your retirement savings plan – just set up SPP as a bill payment on your bank website or app, and when the cash is deposited, contribute it.

Whatever way you can wring a few extra bucks out of your living costs will work, and your future self will greatly enjoy the work your current self has put in!

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Canadian millennials now focused on long-term saving: report

It’s hard to find many silver linings to the dark, terrible cloud that is COVID-19, but a report from Global News suggests the crisis has caused millennials to think longer-term when it comes to savings.

Carissa Lucreziano of CIBC tells Global that Canadians aged 24-35 “are very committed to saving more and investing.” That’s great news for this younger segment of our society, she states, “as actions now can have long-term benefits.”

The report also cites data from Semrush, an online data analysis company, as showing 23.6 per cent of millennials regularly visit their online banking websites, as compared to 20.7 per cent of older Canadians aged 35 to 44.

Semrush’s Eugene Levin tells Global this suggests younger people “are more conscious moneywise… they are using this time (the pandemic) to plan out their finances to either mitigate their financial insecurity or improve their financial security.”

Other findings – more people are searching for information on Tax-Free Savings Accounts (TFSAs), and investment apps like Wealthsimple and Questrade, the article reports.

CIBC data noted in the Global report found that 38 per cent of millennials have decreased spending, 34 per cent plan to add to TFSAs or Registered Retirement Savings Plans (RRSPs), and to establish emergency savings accounts.

While there is also interest in topics like payday loans and installment loans, the article finds it generally positive that younger people are thinking about long-term savings.

For sure it is positive news. Data from Statistics Canada reminds us why long-term savings are so important.

The stats show that as of 2019, 70 per cent of Canadians are saving for retirement, either on their own or via a workplace savings program – that’s up from 66 per cent in 2014, Stats Canada reports.

“Interestingly, this may reflect the fact that over the past five years, Canadians have become increasingly aware of the need to save for retirement,” reports Stats Canada. “For example, almost half of Canadians (47 per cent) say they know how much they need to save to maintain their standard of living in retirement—an increase of 10 percentage points since 2014 (37 per cent).”

Those who don’t save for retirement on their own (or via a workplace plan) will have to rely on the relatively modest government benefits, such as the Canada Pension Plan, Quebec Pension Plan, and Old Age Security, the article notes. And surely, the terrifying pandemic era has more of us thinking about our finances, both current and future.

So that’s why it is nice to see the younger generation is focusing on these longer-term goals. The best things in life, as the song goes, are free, but many other things carry a cost. The retired you will certainly be thankful that the younger you chose to stash away some cash for the future.

If, as the article notes, you don’t have a workplace pension plan and are saving on your own for retirement, there’s a plan out there for you that could really be of help. For 35 years, the Saskatchewan Pension Plan has been delivering retirement security; the plan now manages $673 million in assets for its 33,000 members. Check them out today!

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