How to get your retirement savings back on track when money’s tight

Writing for the GoBankingRates blog via Yahoo!, Vance Cariaga offers up some interesting tips on how to keep your retirement savings effort going, even while record inflation and roiling markets are battering away in the background.

A survey from Allianz Life, he writes, found that 54 per cent of Americans “have stopped or reduced retirement savings due to inflation.” A further 31 per cent have reduced contributions to their 401(k) plans (similar to a capital accumulation savings plan here in Canada), he notes.

“Cutting back on retirement contributions is understandable in periods of high inflation — especially if you need the money to pay for essentials such as housing, utility bills, and groceries. However, doing so comes with serious consequences,” he warns in the article.

Cutting back now, even for good reasons, means you will have to play catch up later, the article continues. The “worst move” we can make is to cut back completely on retirement savings, he writes.

Here are the ideas Cariaga has for keeping the savings going despite living through a tight money era:

• The first idea is to tweak your budget. “You’d be surprised how many discretionary expenses can be reduced or eliminated altogether,” he writes. Brewing your own coffee, cutting back on dining out, avoiding “pricey” vacations and trimming back on memberships are ideas to free up money for savings, the article suggests.
• Next, he recommends cutting back on credit card spending. “The best move is to cut down on your credit card use. After that, try to pay the balance in full every month to avoid interest charges,” he explains. Another idea expressed in the article is doing a “balance transfer” from one card to another with a lower interest rate.
• Side gigs, the article notes, can bring in up to $1,000 a month, creating some more cash to save.
• If you have some sort of ongoing retirement savings arrangement, either through work or individually, Cariaga suggests you “reduce, instead of eliminate, retirement savings.”

Some workplace pension systems require contributions at a mandatory rate, but if you are doing your own automatic contribution to a savings vehicle, you could temporarily dial down the amount, the article notes – and then dial it back up when better times return. This is completely doable if you are a member of the Saskatchewan Pension Plan (SPP), for instance.

Even if you squeak through this economic downturn with reduced retirement savings, your future you will be thankful you kept your eye on the ball.

And as mentioned, with the Saskatchewan Pension Plan, you are the quarterback when it comes to deciding how much you want to set aside for retirement each payday. You can contribute any amount you want up to $7,000 annually to SPP, who will grow your savings at a very low management expense rate, and then convert your nest egg into income down the road. Be sure to check them out today.

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Is “semi-retirement” a way to address a lack of readiness for “full” retirement?

Could the lack of adequate retirement savings prompt most of us to move to “semi-retirement” following the end of full-time work?

Writing for the GoBankingRates blog, Vance Cariaga notes that semi-retirement may be “where a lot of boomers might be headed, as employers try to convince older staffers to stick around longer in a labour market plagued by a shortage of workers.”

He notes that recent research by The Harris Poll in the U.S. reveals that only 48 per cent of employees believe their companies have “an adequate successor in place when they do retire.”

“One potential answer,” writes Cariaga, “is ‘semi-retirement.’ This might take several different forms, ranging from flexible schedules and consulting work to reduced hours,” he notes.

The Harris research found that “most employees would take part in semi-retirement if it were offered. Nearly eight in 10 (79 per cent) favoured doing so through a flexible work schedule, while 66 per cent said they would be willing to transition to a consulting role…and 59 per cent said they would be open to reduced hours and benefits. But only about one in five (21 per cent) said their employers offer semi-retirement options.”

The idea of encouraging older workers to hang around is a pretty big change. It’s not that long ago that retirement was mandatory at age 65, and most people completely left the workforce and entered the Golden Years without a backward glance. This practice is now known as “full retirement,” where the retirees do no work of any kind.

So what’s changed from long ago to now?

The article notes that two things are driving the new outlook for semi-retirement – the lingering effects of COVID-19, and a general lack of retirement saving.

Regarding COVID, Cariaga writes, “more than one-fifth of the survey respondents said the pandemic has caused them to delay their retirement plans, while about one-tenth said COVID convinced them to retire earlier than planned.”

However, he adds, “a much larger percentage — more than two-thirds — said they are worried about saving enough for retirement, making them prime candidates for work arrangements that would let them keep earning money.”

The article concludes by suggesting that employers “investigate all available alternatives to fill their payrolls.”

Save with SPP has friends and family members who are still working into their 60s and beyond. When we asked why, some said they wanted to max out their company pensions and government benefits by retiring at 70. Others still had younger kids in post-secondary and/or mortgages to finish off. Some just like working, love the people at work, and the fun of being part of a team. A few really like remote work and are hanging in while it is still available.

All valid reasons.

There is a factor to be aware of with the “let’s just keep working” approach to retirement planning, however. If, heaven forbid, one gets ill, or develops a physical problem that prohibits working, that retirement date may get moved forward, rather than into the future. So don’t lose sight of the importance of retirement saving.

If you have a pension plan at work – or you wish to supplement it – consider the Saskatchewan Pension Plan. Once you’ve joined, you decide how much you want to contribute, and SPP does all the rest. SPP professionally invests your savings, building them over time, and can turn them into an income stream at any time once you reach age 55.

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