Will pandemic debts impact Canadians’ retirement plans?

New research from the Canadian Institute of Actuaries (CIA, and no, not that CIA) suggests that many Canadians worry that debt taken on during the pandemic will delay – or indefinitely postpone – their plans for retirement.

The research, carried out by Ipsos Public Affairs, is covered in a recent story in the Toronto Sun.

The research found that “with Canadians earning less” during the pandemic, “increases in debt followed suit,” the newspaper reports, quoting another media outlet, Blacklock’s Reporter.

“The report reveals 25 per cent of respondents took on additional debt due to the pandemic with higher percentages seen among students and self-employed Canadians, both at 33 per cent. Also exposed were those who rent, 34 per cent,” the article notes.

How much did incomes drop during the pandemic?

According to the Sun story, citing the research, one third of the 1,529 people questioned by Ipsos reported a pandemic-related income drop. A further 69 per cent say “COVID has changed their retirement timelines.”

While the average retirement age, according to Statistics Canada, is 65, the research found that 40 per cent of those surveyed “do not know when they will retire, and a further 14 per cent state they do not expect to ever retire,” the Sun reports. Four per cent of those surveyed said they expect they will have to work beyond age 71, the article adds.

The article points out that the large percentage of “don’t know” answers to when retirement will occur “reflects the fact some Canadians are not engaged in work outside the home.” The largest segment of those polled saying they didn’t know when they would retire are “students (65 per cent), homemakers (69 per cent) and those who are disabled (62 per cent),” the article notes.

The article concludes by indicating that CIA estimates the average Canadian needs $900,000 worth of savings to retire by age 65.

These conclusions are interesting, particularly since other research has found that some Canadians have been saving like crazy during the pandemic, due to having less things they can spend their money on.

The Globe and Mail reports that “Canada’s stockpile of savings earlier this year was $280 billion bigger than before the pandemic,” citing research from RBC Economics.

It’s not known, the article adds, what Canadians plan to do with this cash stockpile. Retirement savings is not mentioned specifically as a destination for this cash, at least in this article.

So, some of us are having to borrow to make ends meet, while others are sitting on a pile of cash.

Those with extra cash should take note of the struggles of those without it. The folks that are pushing retirement into the future are doing so because (we can assume) they are carrying too much debt and thus not putting as much away for retirement as they would like. These folks will have to get back into retirement saving when they can, but understandably they can’t do much at this point.

If you are sitting on cash, consider putting at least some of it away for retirement. This is especially important if you don’t have a retirement savings plan at your place of work. Folks in this situation have to rely on themselves to fund their future retirement income.

Don’t have a plan at work? Consider the Saskatchewan Pension Plan, a “made in Saskatchewan success story” that has been helping people save for retirement for 35 years. SPP can take your hard-earned savings and invest them for you in a low-cast, professional way. Better, when it’s time to finally exit the stressful world of work, SPP can turn your invested savings into a stream of income. Check them out today!

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As – touch wood – we begin to see the end of the COVID-19 pandemic, we ought to begin to see a return to normal, at least in terms of how we save money and how we spend it.

But the pandemic has changed the way we do those things, research by Save with SPP has found.

According to CTV News, the pandemic “has changed grocery shopping forever.”

It’s expected, for instance, that the trend towards online grocery shopping will continue even after the pandemic.

“The online buying, based on the numbers that we have now, I don’t think it’s ever going to go away,” Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, tells CTV. “I think more and more people will continue to buy food online, regularly, whether it’s through order and pick-up or to get the food delivered.”

And it’s not just big grocery stores, the article notes. The owner of a small Nova Scotia-based meat shop says she thinks online ordering and curbside pickup will continue after the all-clear is given on the pandemic.

The Times of India says there are six lasting money lessons from the pandemic that we all can learn.

“One thing that the pandemic has made us all realise is that we can all save way more than we think. We were forced to stop eating out, go shopping, partying, go to movie theatres or concerts etc. While these are the things we will want to do as things slowly go back to normal, we have had a glimpse of how much we can save if we do not indulge in them as often as we used to,” the article begins.

The point of having an emergency fund has been underscored by the pandemic, the Times notes. The job loss many of us experienced impacted our workplace benefits, prompting some to consider self-insuring, the article adds.

The pandemic also shows us the danger of high-interest debt – what happens with it when our work is reduced or outright ended.

“High-interest debt, like credit card or personal loan, is harmful to you financially even when you have a regular paycheque in your hand. The damage caused by them increases many folds if you are out of a job. Further, if you are unable to pay on time, the piling interest rate can increase the debt amount,” the Times tells us.

A Toronto Sun article provides seven tips – aimed at small business owners, but useful for all of us – based on lessons learned from toughing it out during the pandemic.

Keep track of your credit score, and pay down debt, the article advises. Diversify your investments. Stick to a budget, and set up an emergency fund, the article tells us. “You don’t want to be caught off guard when it comes to unexpected expenses,” we are told. Finally, the Sun says, get back on track with your retirement savings.

There’s a general theme to these messages, and it is a good one to listen to. We’ve been limited on spending, and are often involuntarily saving more, for more than a year. A spending “explosion” is expected when things are fully reopened. The experts here are warning us not to go overboard, to follow a budget, to continue to save, and to wade, rather than jump, back into the re-opened economy.

Retirement saving is a great thing to be doing in good times or bad. With the Saskatchewan Pension Plan, you are in control of how much you want to contribute to your future retirement. If money is tight, you can gear down; if money is more plentiful, you can contribute more. And the money you do contribute will be professionally invested for you. It will be waiting once you punch the timeclock for the last time. Check out SPP today.

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TFSAs are great, but may not be ideally suited for retirement savings: MoneySense

Writing in the Toronto Sun, MoneySense writer Joseph Czikk opines that the rise of the Tax Free Savings Account (TFSA) may spell trouble for the venerable Registered Retirement Savings Plan (RRSP).

He writes that the TFSA has been “a huge hit” since its inception in 2009, with more than two-thirds of Canadians now the proud owners of accounts.

“But,” he writes “there’s reason to suspect that the TFSA’s popularity is growing at the expense of the RRSP, and if that’s true, it should lead many Canadians to rethink how they plan to invest for retirement.”

Before 2009, he explains, the RRSP was the chief retirement savings tool for Canadians.

“RRSP contributions aren’t taxable, which incentivizes people to top up the accounts every year. The more money you put into your RRSP, the less tax you’ll pay,” the article notes.

When Canadians stop working, the article explains, they “generally convert their RRSP balance to a Registered Retirement Income Fund (RRIF), which they then draw from to cover expenses.” Money coming out of the RRIF is taxable, but “the idea… is that you’ll probably be in a lower tax bracket in retirement than you were in your career, meaning you’ll get to keep more of the money than you otherwise would have.”

Then, Czikk notes, “along came the TFSA,” which works opposite from an RRSP. No tax break for putting money into a TFSA, but no taxation when you take it out, the article adds.

There are tax penalties for robbing your RRSP savings before retirement, but with the TFSA, not so much.

“You can see how such an account — which could be drawn upon like any bank account and which sheltered capital gains — would become popular,” he writes.

“And so it went. Just eight years after TFSAs came on the scene, their aggregate value rocketed to match 20 per cent of RRSPs, RRIFs and Locked-In Retirement Accounts (LIRAs).”

But, the article says, there are unintended negative consequences with the TFSA.

Quoting The Canadian Tax Journal, the article notes that $4 of every $10 that would otherwise have gone to an RRSP are now going to TFSAs. The number of Canadians contributing to RRSPs is in decline. And, the article says, that’s a problem.

Research from BMO suggests that Canadians need about $1.5 million in retirement savings to retire comfortably, the article says. And while for some a TFSA could get you there, the fact that there are no withdrawal rules is posing problems, the article says.

Prof. Jonathan Farrar of Wilfrid Laurier University is quoted in the article as saying “we’re seeing that … a lot of people are not using it for retirement. People are using the TFSA as a bank account instead of an investment account, from which you make a very rare withdrawal.”

“Part of the genius of the RRSP is how it disincentivizes people from taking money out before retirement. The TFSA lacks that aspect,” the article adds.

If you rob your retirement nest egg before hitting the golden handshake, the article concludes, you’ll have to rely more on government income programs like the Canada Pension Plan and Old Age Security. The government is thinking about creating a TFSA that has withdrawal rules more like an RRSP to address this problem.

Save with SPP once spoke with some Australian colleagues. There, everyone gets put in a mandatory defined contribution pension plan where their employer makes all the contributions. But, as with a TFSA, there aren’t any strict rules on withdrawals – so you could take all the money out and buy a house, for instance. In a strange paradox, a country with one of the highest rates of pension plan coverage has experienced senior poverty and a heavy reliance on the means-test Age Pension – and the lack of withdrawal rules may be to blame.

TFSAs are awesome, for sure, but perhaps not ideally suited for retirement savings. The tried and true approach may be a better path. The Saskatchewan Pension Plan operates similarly to an RRSP, but has the added feature of being a locked-in plan. You can’t crack into your SPP early, meaning there will be more there for you when you don’t have a paycheque to rely on.  Be sure to check out SPP – delivering retirement security for 35 years – today.

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We’ve all been told, repeatedly, about the various public health and safety measures we can follow to try and reduce the risk of catching COVID-19. Up to now, it has been physical distancing – staying two metres apart – plus masks, hand sanitizing, and staying at home as often as possible.

Some folks say these steps are causing other problems, particularly the idea of isolation.

Writing in the Toronto Sun, columnist Sue-Ann Levy asks “if Ontario residents are distressed and frustrated by the latest lockdown, think of what a living hell it must be for seniors confined to their rooms in long-term care and retirement homes for now what is going into our 11th month of pandemic restrictions.”

The article notes that isolation is particularly harmful for the mental health of seniors. It’s not great for the rest of us, warns an article in the Sarnia-Lambton (Ontario) Journal. Public health officials in the Southwestern Ontario city say they are seeing a rise in domestic abuse there.

“Social isolation, financial instability and reduced access to friends and family has increased both the level of violence and its intensity,” the article reports, quoting Ange Marks, executive director of the Women’s Interval Home in the area.

Similarly, an opinion article in the Chicago Sun-Times warns that remote learning also has downsides for the kids.

“Evidence from the first year of the pandemic in the United States suggests that the social isolation created by school closures has exacerbated an ongoing childhood mental health crisis,” warn five doctors from the Chicago area.

Even the masks themselves are getting into the headlines. Is one sufficient, a report in the National Post, or should we wear two?

“If you have a physical covering with one layer, you put another layer on, it just makes common sense that it likely would be more effective,” states Dr. Anthony Fauci in the Post article.

That’s a lot to take in. Are there other approaches we can take that might be a little easier to handle?

Well, yes, people are hard at work on new approaches.

In Malaysia, reports Bernama, researchers are working on a new method to detect the virus using DNA and fibre optic sensors.

In Nova Scotia, reports Global News contract tracing will soon be much easier thanks to a new app that tracks restaurant patrons all over the province.

Up to now, the work of contract tracing has been done with dozens of different methods, but mostly pen and paper. “It is our hope that contact tracing will assist in preventing the spread of COVID-19 and help get us one step closer to a pandemic-free future,” states Gordon Stewart of the province’s Restaurant Association in the Global article.

Other research is being carried out on whether air purifiers might have a role to play in lessening the risk of COVID-19 infections, according to a second Global News report. The kinks of this approach are still being worked out, but it is believed that an air purifier with a HEPA filter, if correctly positioned, can help “remove viruses and germs from the atmosphere.”

We’ve all read about the various (and numerous) vaccines that are being rolled out, and administered across Canada.

Putting all this together, yes, the distancing and masking and isolation are tough medicine. But humans are an innovative bunch, and the same innovation that led to the rapid development of new vaccines is helping with new treatment approaches. That allows all of us to take a moment, now and then, to think of life after the pandemic.

The post-pandemic world, for many of us, will represent the run-up to retirement. If you don’t have a plan for retirement, the Saskatchewan Pension Plan could be a plan for you. Once you’ve joined up, you can contribute at any rate you choose, up to $6,600 per year (subject to available RRSP room). The SPP will invest that money (they’ve averaged an annual return of eight per cent since the plan’s inception 35 years ago) and, when work is done, can turn your invested cash into a lifetime income stream. Why not check them out today!

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In this peculiar era of social/physical distancing and avoiding crowds, it should probably come as no surprise that many city-dwellers are thinking of chucking city life for either the suburbs or the country.

According to the Toronto Sun, “nearly three in five people say living in a rural area is more appealing to them now than before the pandemic,” and the same percentage “say the same thing about living in the suburbs.”

“I think it’s too early to predict if it’s going to be a long-term trend or not…but we have all been locked up in our houses during COVID-19 and have had a lot of time to sit around and evaluate what’s important to us and we’re starting to see that shift outside of the major urban centres,” states Sean Morrison, president of the Ontario Real Estate Association, in the Sun article.

The article goes on to point out that it’s not just about avoiding crowded cities – the “work from home” aspect of the pandemic has also made getting a larger yard and perhaps a bigger house more attractive.

Commenting on the similar trend south of the border, Zillow’s Chief Economist Joshua Clark says the pandemic is at play in other ways.

Speaking to Realty Biz News, Clark notes “it may be tempting to conclude that urban renters who have been cooped up without outdoor space and unable to visit their favorite local bar are ready to commit to suburban life, and that is likely true for many. But that narrative ignores the job loss that has hit renters, who are disproportionately employed in the industries most affected, and has likely played a bigger role in recent moves.”

So those who were renting in the city may now only be able to afford to rent somewhere farther from the downtown core, he explains.

The Simple Dollar blog looks at the core question of whether or not it is truly cheaper to live outside of a city in a suburb or rural setting.  Buying a house, the blog reports, “can cost twice as much in the city versus the suburbs.” However, cities offer the best public transit, and groceries tend also to be cheaper downtown, the blog adds.

If you live far away from where you work, beware the perils of commuting, the blog warns.

“This means that if you are returning to your place of work from your home in the suburbs or a small town, you could be back to spending a great deal of time, money and stress sitting in traffic, which can take a toll on your health; Scientific American recently noted that long-distance commuters could suffer from physical maladies, including headaches and backaches, along with mental issues, ranging from sleep disturbance and fatigue to concentration issues,” the blog reports.

As one who has lived in the downtown of a major city, the suburbs, and in small towns in Ontario and Alberta, this writer can attest to the importance of the last point raised by Simple Dollar. A long commute to work – sometimes it can be hours each way – really takes it out of you. While most of us are working from home, that may not be the case forever – so think long-term if you are planning to move farther away from your place of work. If there’s a way to get to work without driving, that makes the suburban or rural property much more attractive.

You don’t have to travel to Kindersley, Sask. to open up a Saskatchewan Pension Plan account. Whether you’re downtown, flipping burgers in the ‘burbs or surveying your pasture, you can connect with SPP online to see if this plan is an option for you.  Once you’re a member, you can use MySPP to track the balances of your retirement accounts – all from the comfort of home.

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