Managing and Protecting Assets, Tips from the Federal Government of Canada

Have a financial plan in place.

Prepare a budget that sets out your income, benefits and living expenses.

Understand your insurance needs.

Take precautions to avoid scams and fraud.

Do not give anyone your bank card or PIN.

If you need to write down your PIN, keep that information in a safe place at home and separate from your cards. Do not carry it with you.

Make a back-up plan in case you are away or unable to look after your own financial affairs for any reason.

Use direct deposits and automatic bill payments.

If you open a joint bank account with anyone, understand that the other person may be able to withdraw all of the money; when you die, the money may become theirs and may not be counted as part of your estate.

Get independent advice when transferring major assets or before taking out a loan, such as a mortgage of any kind.

Before signing any contracts (e.g., Getting work done on your house), check with your provincial or territorial consumer affairs ministry or department

Setting financial boundaries

We are quickly approaching Christmas and after that, all of a sudden it will be the new year.

So, before the end of the year and holiday craziness ramps up, now is the perfect time to set some financial boundaries. Just like personal boundaries, financial boundaries can help you to prioritize your financial health and set you up for success.

Some examples of healthy financial boundaries you can create or enforce:

·       create a budget and a savings and investment plan centred around your financial goals

·       set clear limits on debt and lending

·       stick to a holiday spending plan

·       let go of any guilt and advocate for your financial health-with family and friends

·       communicate your boundaries and share your wisdom 

Finances after 50

Figures from over 50s finance experts SunLife - released just ahead of Pensions Awareness Week (September 14-18) – suggests that more than 7 million over 50s have no private pension and more than 8 million don’t think they have enough money to fund their retirement.

 New figures suggest up to 4.7million women and 3.6 million men over 50 don’t think they have enough money to fund their retirement

In its Finances After 50 study, SunLife found that 28% of over 50s do not have a private or company pension. The number of people over 50 in the UK is now more than 25million, according to the ONS*, which indicates that around 7 million over 50s across the UK have no private pension savings.

 SunLife’s research shows that women over 50 are less likely to have a private pension than men of the same age – more than a third of women surveyed said they didn’t have a private pension (35%) – which across the UK is around 4.6million. Of the men surveyed, one in five said they didn’t (20%), which is equivalent to around 2.4million men across the UK.

The study also found that a third of over 50s - which equates to 8.3million - say they don’t think they have enough money to provide them with sufficient income for their retirement with women are more worried about not having enough money in later life than men.

 Just 13% of women over 50 say they are confident they will have enough money for a retirement income; 36% don’t think they will have enough, which across the UK is around 4.7million women. In contrast, 22% of men over 50 say they are confident they have enough and 30% (equivalent to around 3.6million) say they don’t.

  Many over 50s say they will look to other income sources other than pensions for retirement income; 27% say they are hoping their partner or spouses’ pension will fund their retirement, rising to 30% of women, 12% say they are going to continue to work to provide an income, while 11% are expecting an inheritance to cover it, which suggests 2.7 million people over 50 are relying on being left money to fund their retirement.

 The research shows that many of those nearing retirement have concerns that they are not ready.

There is a huge amount of wealth tied up in properties – particularly amongst older homeowners who have seen huge increases in the value of their properties over the years. SunLife’s research shows that on average, homeowners over 50 have seen their homes increase in value by £127,316 over the past 20 years.

“What do you want to do when you retire”?

Before I retired, I had dreams of doing nothing, or travelling or just spending time with friends. I have done a few of those things, but I have also done some things that were not even on my radar when I thought about retirement. I give workshops, I mentor, I am on three advisory committees to help seniors. My life is exciting but very different than I thought it would be at this time of my life.

I see this question being asked a great deal “What do you want to do when you retire”? It may be a long way off and it is a hard question to answer. By the way what you think or would like to happen probably won’t. This doesn’t mean don’t think about life after retirement, it is important to think about life after you stop earning a regular paycheque. Whether your goal is to travel, learn a new skill, indulge in hobbies or simply maintain your current standard of living, you’ll need to rely on savings to cover the cost of these activities, in addition to your everyday expenses.

By doing some groundwork well you can and learning how much you need to save, you can let your dreams drive your retirement, rather than letting available funds drive your dreams. Here are three things you should think about now that may boost your retirement savings, and some tips to help you a few years down the road.

Cut spending. Easier said than done, however, most experts suggest that you should save at least 10% of your income, with a portion of that put aside for emergencies. It’s easier than you think to find some extra cash for your savings by trimming unnecessary spending, but it does require some research and some work and discipline. I suggest if you are not saving at all start by saving 5.00 a day, (which is $1,825 a year) by setting up an automatic withdrawal program from your checking account to your savings account or an investment account. Ask the bank to increase the $5.00 gradually over time to $20 a day. $20 a day adds up as it is $7300 a year. Once you have the money flowing set up either a Tax-Free Savings Account or a Registered Retirement Savings Plan so you stay on track.

Start small. If you’re able to save as little as an extra $5. 00 a day, you can invest it in an RRSP or TFSA through mutual funds or the stock market, which can offer good returns. Whatever you do, spending less now means more for your retirement.

Maximize investments to pay less tax. All Canadians have access to a variety of tax-sheltered accounts, like RRSPs, RESPs and TFSAs, which delay or reduce taxes. Take advantage of these accounts by using as much of your contribution room as possible each year

Become debt-free. Eliminating debt, before you stop working, decreases stress on your reduced income – and leaves more room to do what you want in retirement. As soon as you can, start paying off credit cards, mortgages and loans, so you’re free of these burdens when you retire.

Consider downsizing. As you near retirement, think about lowering your larger expenses, like your home and vehicle. If you’re paying for square footage that you don’t need, opting for a smaller home will allow you to invest more for later. You can also save on car expenses, like gas and insurance, with a more affordable, fuel-efficient vehicle.

Work longer and ease into retirement. Retiring doesn’t mean you have to stop working entirely. Working fewer hours or getting a part-time job is a great way to transition into retirement and maintain steady cash flow. Try calculating how much your retirement income will be with government pensions and other programs. And, when the time comes, you can choose various registered and non-registered retirement income options, including RRIFs and annuities.

Prepare for the unexpected. Most people underestimate healthcare costs in retirement. As you age, your risk of developing a critical illness increases. It’s important that your retirement plan sets aside funds to cover personal healthcare. You can also investigate health and critical illness insurance from private companies.

TFSA or RRSP - Which one should you choose?

I know that Christmas is coming but soon after we will be looking at how we can save on our income tax and there will be many competing ads out there asking you to invest or save in a Tax-Free Saving Account or a Registered Retirement Savings Program.

When it comes to saving, the TFSA vs RRSP debate is always at the forefront. Many people are confused as to whether to choose the Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA) or a combo of both to put money away for the future. Regardless of whether you choose the RRSP or TFSA (or make use of both!), one of the best things you can do is invest consistently.

Both the TFSA and RRSP are investment vehicles that reduce taxes on investment income but depending on your circumstances, one might better for your money than the other. The TFSA is more flexible and offers a better tax benefit than the RRSP, but doesn’t have as high contribution room. The RRSP will probably let you set aside more, but has stricter rules around when you can withdraw your money, and what for. Ultimately, everyone should aim to have both an RRSP and a TFSA and spread out the savings across both accounts. Two of the most common investment questions are: “What’s the difference between an RRSP and TFSA?” and “Which one should I choose?”

Despite their names, neither the RRSP or TFSA have to be a savings account. You can and should hold a variety of investments in your accounts such as GICs, mutual funds, stocks, bonds, and ETFs. Both of these accounts should be more appropriately named “Tax-Free Investment Account” and “Registered Retirement Investment Plan” because investing is really the best way to unlock the power for these accounts.

The real difference between the RRSP and TFSA come down to their contribution limits and withdrawal restrictions, as well as how and when you pay taxes at these events.

The differences between a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA) are outlined below. Which one you should choose depends on a few factors: your current tax rate, your reason for saving, and your future tax rate.

An RRSP is mainly intended for retirement savings.

·       Annual contributions are tax-deductible.

·       Your contribution limit is based on earned income.

·       Your contribution room begins at whatever age you begin working and filing a tax return.

·       The contribution limit for 2019 is 18% of the earned income reported on your 2018 tax return, up to a maximum of $26,500.

·       If you don’t contribute to an RRSP, your contribution room accumulates and you can contribute even larger amounts in the future.

The TFSA was introduced by the federal government in 2009, as a way for anyone 18 or older to set money aside tax-free throughout their lifetime.

·       Annual contribution limits amounts have varied over the years.

·       From 2009 to 2012, the maximum for each year was $5,000.

·       From 2013 to 2014, the amount increased to $5,500 for each year.

·       In 2015, the amount increased again to $10,000.

·       From 2016 to 2018, the amount decreased to $5,500 for each year.

·       In 2019, the amount increased to $6,000.

·       TFSA contributions are not tax-deductible and contribution room accumulates if unused. Anyone who was 18 or older in 2009, and has not yet contributed, will have $63,500 of contribution room available in 2019.

The chart below shows how different tax rates during your working years and retirement years can affect your decision to invest in an RRSP or a TFSA today, and the after-tax value after 20 years. 

News from Australia.

I have a special interest in Australia as my daughter lives there, so I was intrigued by this survey from Stockspot and the magazine Women’s Agenda. Here is some of what the survey of 800 women found.

First, women in Australia, wield a huge amount of power when it comes to household finances, with four in five saying they’re responsible for the purchasing decisions at home. Yet a number of barriers continue to hold women back from investing, widening the ‘investment gender gap’.

More than half of Australian women say a lack of trust in banks and financial advisers stops them from seeking out investment advice.

In the survey, women said that just over half (53 percent) of them have never seen a financial or investment adviser, while a majority (57 percent) cited a lack of trust in the guidance they offer.

Two-thirds (66 percent) of all women said revelations from the royal commission had affected their trust in the sector – with the respondents being more likely to trust their own online research above anyone else when they seek advice.

The survey saw 57 percent of women list internet research as their most trusted source for advice and innovation, compared with 39 percent who felt most at ease with their investment or financial planner.

Only 37 percent said they would trust a partner and 12 percent would trust a bank, the same proportion as those who trust no one.

Around 57 percent of women have invested in shares at some point.

The report noted that 48 per cent of women said they had a lack of money to make it worthwhile, as a reason preventing them from seeing an adviser.

The figures for women seeking advice escalated when considering individuals under the age of 35, with a third reporting having ever seen an adviser, with around half (48 percent) citing a lack of trust in the guidance given by professionals.

“A lack of money” was cited as the number one barrier to investing for 59 percent of all respondents.

Other top reasons included fear of losing money (48 percent), trust issues, lack of confidence (48 per cent) and knowledge (56 percent).

The report also found almost half of the women (44 percent) believe they are socially discouraged from investing in stocks.

Around 37 percent of women disagreed they would feel confident investing in shares if they had the money to do so and a further 17 percent strongly disagreed.

Looking at where women place their money, half of the survey respondents said they invest in a high interest savings account, while 60 percent own their home.

Around 39 percent reported making additional superannuation contributions while 38 percent had invested in shares and 29 percent had placed money into an investment property.

Currently, Australian women are retiring with around half (47 percent) the superannuation of men, indicated by Rice Warner figures. They are also earning less – with the national average for full-time workers is 14.1 percent less than their male counterparts.

Despite this, most respondents in the Stockspot survey did not lack financial ambitions: more than three-quarters stated they have “specific financial goals” they are looking to achieve or have already completed.

Women were also found to be much more confident about investing in property, with 61 percent agreeing with the statement and with 41 percent adding they would opt to pay off a mortgage before investing in the stock market.

Saving for retirement in the gig economy

Saving for retirement in the new economic reality will be hard. The new “gig economy” consists of freelancers, part-time workers, independent contractors, and the self-employed. It’s estimated that more than 40 percent of workers are no longer salaried employees and that this percentage will continue to grow.

These people will be solely responsible for their own retirement and financial well-being, if we don’t provide easy digital tools for savings, we could be looking at a generation of workers struggling to achieve financial security in retirement.

Apple Pay and Amazon’s one-click buying are examples of digital tools that have made it easier than ever to spend money. With tools like Robo-savings apps, the goal is to make saving money just as easy.

Another example is to provide just in time feedback to your mobile device. Apps that track your investment performance and spending habits can have a huge impact on your behaviour. Users of a U.S.-based app called Personal Capital decreased their spending by 15.7 percent. Most of that decrease came from discretionary spending, with users spending less on categories like dining out.

Results from government surveys support this behaviour. The majority of consumers with access to their financial information on mobile phones check their balances before making large purchases, and of those who check, 50 percent decide not to buy an item because of the feedback.

When I was teaching, one course I taught was financial literacy. A major issue with teaching financial literacy in school is that students can’t apply the concepts they learn until many months or years later. One study found that, like other education, financial education decays over time; even large interventions with many hours of instruction have negligible effects on behaviour 20 months or more from the time of intervention.

Using technology and apps that provide just-in-time financial information perhaps can solve this timing issue, providing people with crucial information when they need it the most.

Procrastination

Procrastination is a nearly universal human trait. The tendency to procrastinate also undermines our self-confidence, convincing us that we are lazy or worthless. What is it in human nature that makes us delay doing certain things until the last minute--or forever?

Somewhere in your life, at home or on the job, you’ve been putting off doing something. The task itself might not be all that important, but it’s something you think you ought to do, and that persistent inner voice won’t quit until it’s done

Psychologists tell us that procrastination is a symptom of a hidden fear or conflict, a buffer that protects people from taking actions that may force them to confront painful feelings and unresolved issues.

For some people--a relative few--procrastination brings serious consequences. They lose jobs or relationships because of their apparent inability to complete projects on time or follow through on commitments or they realize too late that they have nothing saved for retirement.

How do we overcome our tendency to procrastinate? One way is that instead of setting vague, general goals, we pursue concrete behaviours that, pursued step by step, will lead to a goal. Another suggestion is if you have to start a project don’t wait until you think you have the time to do it all at once. Better to get started and use small bits of time--15 minutes here or there--to make continual progress toward your goal.

Some believe that the right dose of discipline and effort can help curb our procrastinating nature for a while, but this habit is powerful and we quickly fall back into bad habits. Savings plans get derailed, diets get cheated on, and, well, you never did go to the gym.

So what’s the solution? It’s called automation, and it goes beyond simply paying yourself first.

There is a lot of research that suggests that one of the best ways to get people to save for retirement is to automatically enroll them into the group savings plan instead of leaving it up to individuals to opt-in. Automatic savings plans are the most effective way to build up a nest egg. If you have to actively think about saving, odds are you won’t do it.

People were asked in a survey could you save $150 a month or would you save $5.00 a day. 7% of those surveyed said they could save $150 a month, yet 30% said they could save $5.00 a day. (Do the math…:-) Putting away even a small amount every month is a great first step, but perhaps there’s more you can do to ensure that you have a good retirement.

Back in the mid-1990s, behavioural economists devised a program called Save More Tomorrow that used nudges to help people make better long-term financial decisions. The program invites employees to gradually increase their savings rate over time.

Save More Tomorrow turns our natural tendency to procrastinate into a positive outcome. While most people would cringe at the idea of saving an extra $100 today, they’re more likely to agree to save that much in January, when their raise kicks-in. The Save More Tomorrow program asks the question and then automatically commits you to that increased amount in the new year. You don’t have to think about it again.

Financial Stress: Impacts on Health & Relationships

In spite of the trade wars and the volitility in the American political system, virtually every economic indicator shows the economy moving in the right direction. Consumer sentiment is still on a steady rise and corporate profits just hit a new all-time high. Foreclosures and credit card delinquencies are way down. 

You would think all this positive news would mean people are feeling good. Well, good is a relative term. The single biggest source of stress is still personal finances, as cited by 71% of adults. This is a slight improvement from 2010 when 76% reported finances were their biggest source of stress. Financial stress has a big impact on all aspects of life and at all age groups.
The American Psychological Association’s annual report: Stress in America (pdf file)  points out some interesting facts.

Since APA began conducting this survey, women, on average, have reported higher stress levels than men, though generally, the changes in stress levels have moved in the same direction each year. In 2017, results showed a slight but not significant shift, as women experienced an increase in their stress levels (from an average of 5.0 in 2016 to 5.1 in 2017) and men’s stress levels dropped (from 4.6 to 4.4).

Not only do stress levels vary between men and women, but the reported stressors themselves differ as well. Though one in four men (25 percent) feel stress related to hate crimes, wars and conflicts with other countries, and terrorist attacks in the United States, women are significantly more likely to report experiencing stress related to these issues.

Women say that hate crimes (37 percent), wars and conflicts with other countries (36 percent), and terrorist attacks in the United States (35 percent) cause them stress when thinking about our nation.

Men also may experience different stress levels depending on their race. Though White men report an average stress level of 4.2, Black and Hispanic men reported experiencing significantly higher stress, with both groups reporting an average stress level of 4.8.

Which demographic groups are the most stressed
Older adults (72+ years of age in 2017), on average, have had the lowest stress levels among the generations since the survey began. The stress levels of older adults (classified as “Matures” in the Stress in America survey) this year remains the lowest (3.3 on a scale of 1 to 10) among the generations, but their stress levels increased slightly from last year (2.7 in 2016). This increase was greater than the change in stress levels for the other generations. As they have since 2014, Millennials continue to have the highest
reported stress levels, with this year’s survey finding an average stress level of 5.7, a slight increase from 2016 (5.6). For Boomers and Gen Xers, stress levels decreased slightly since 2016, to 3.9 (from 4.1) and 5.3 (from 5.4), respectively.

Sources of stress vary by generation. When asked to think about the nation, the economy was most likely to be cited as a cause of stress for nearly two in five Millennials (38 percent). However, health care is most likely to be a source of stress for Gen Xers (47 percent) and Boomers (49 percent). Older adults were most likely to report that trust in government (45 percent) is a stressor when thinking about our nation.

Similar percentages of each generation believe this is the lowest point in our nation’s history that they can remember, with around three in five Millennials (59 percent) and Gen Xers (61 percent) and more than half of Boomers (57 percent) and older adults (56 percent) agreeing with this sentiment.

This year, Americans expressed feelings of uncertainty —and resulting stress — due to concerns about a variety of high-profile issues. When asked specifically about the issue of safety for either themselves, their loved ones or in general, two-thirds of adults (63 percent) say they are stressed about crime, with terrorism (60 percent), gun violence (55 percent) and hate crimes (52 percent) being most commonly reported.

When identifying specific health-related stressors, two in three adults (66 percent) say the cost of health insurance causes them stress. Health care policy changes and having good health insurance cause stress for 60 percent of Americans.

When asked about stressors related to money, about one-third of adults (34 percent) worry about unexpected expenses, while three in 10 (30 percent) experience stress when thinking about saving for retirement. For one in four Americans (25 percent), the ability to pay for life’s essentials proves stressful.

Thinking about the economy, one in three Americans (33 percent) revealed stress about tax increases, while 30 percent feel uncertain about the economy in general, and 26 percent are stressed by a feeling that they are unable to get ahead financially in the current economy.

Half of those surveyed (51 percent) express that the state of our nation has compelled them to volunteer or otherwise support causes they value, and 59 percent have taken some form of action in 
the past year to address the issues of concern to them, including signing a petition (28 percent) and boycotting a company or product due to its social or political views or actions (15 percent).

Stress creates numerous psychological and physical reactions that are generally bad for your health. In addition to affecting your health, financial stress among couples is the number one cause of divorce.
So how do you reduce your stress? The best way to manage stress is exercise, followed by listening to music. Always remember that money is a tool that can be used to create a life you love. Studies have shown that material things such as big houses and fancy cars don’t make people happy. Living beneath your means provides financial security, which creates happiness. 
 

What is an RRSP?

Many of in Canada have heard of or think we know about Registered Retirement Saving Plan’s (RRSP), but many of us do not really know very much, as RRSP’s can be quite complex.

A recent poll showed 39 percent of Canadians believe that RRSPs are pointless because you’ll pay back all of the savings in taxes anyway. Although you do pay taxes on RRSP withdrawals, most investors will pay less tax and end up farther ahead by putting this money into an RRSP since their income in retirement will be less than while they’re working.

Even if you pay the same tax rate during retirement as you do while working, your “worst case” is getting the same net amount as you would with a Tax Free Savings Account so you’d get a similar tax-free rate of return.

All other things being equal, an RRSP contribution is typically better than a TFSA one (better equals you’ll have more money net in your pocket in retirement) if you’re income will be lower during retirement. RRSP vs TFSA will be a wash if you expect to be in the same tax bracket during retirement and the TFSA option will generally win out if your income is expected to be higher.

One big catch is what you do with the tax refund you receive after making the RRSP contribution – if you re-invest the refund into the RRSP you end up taking full advantage of the program’s features but if you use the refund to go on a trip or go shopping, you’re really missing the point.

Many people feel that they don’t have enough money left at the end of the year to put some aside in an RRSP. While balancing a budget is certainly challenging, you really can’t afford to not put money away.

While paying off debt is often at the top of the priority list for many Canadians, doing so in place of saving for retirement doesn’t always make sense. High-interest debt such as credit cards should take priority, but neglecting your retirement savings in favour of paying extra onto a mortgage is often the wrong move depending on your unique circumstances.

There is an unwarranted concern by many of saving too much money in an RRSP since they fear a large tax bill when they die. While the market value of your RRSP or RRIF does, in fact, need to be included as income on your terminal tax return, there are numerous exceptions.

Your RRSP value can potentially be rolled over to a surviving spouse, a financially dependent child or grandchild or an RDSP (disability) savings plan. More likely, you will draw down on your RRSP values over many years of retirement.

Many (most?) Canadians still don’t fully understand the tax consequences and planning opportunities that exist with the RRSP program. Don’t let unfounded RRSP myths or advice from un-informed people keep you from maximizing your RRSP savings opportunities.

And don’t allow missing this year’s “deadline” (March 2) keep you from getting your retirement savings plans in order. You can start to get on track at any time of the year.

Given that we don’t know much about RRSP the following question and answer found on a site for new Canadians may be worth reading.

Question: What are RRSPs and why are they beneficial? Do I need to set up RRSPs in order to be financially successful in Canada or are there other, better, immigrant-friendly options for me to go with since I am new to the country?

Answer: RRSPs or Registered Retirement Savings Plans are another unique Canadian financial tool that helps you plan for your future retirement. Within an RRSP you can hold a wide variety of investments including cash, mutual funds, stocks, bonds etc. An RRSP is registered with the Canada Revenue Agency and has two key advantages: 

1. Contributions made to your RRSP are tax-deductible. This means an RRSP contribution reduces your total income used to calculate taxes owed when you complete your annual tax return.
2. Investment earnings are tax-deferred. This means your investment earnings can grow over time and are only taxed when you withdraw from the plan — usually at retirement. 

While RRSPs reduce the amount of tax payable to the government, there’s a limit on how much you can contribute each year.  Your maximum contribution is generally 18 percent of the amount that you earned from employment during the previous year, up to a specified dollar maximum set by the government.  After your first year of filing a tax return in Canada, your annual Notice of Assessment from the Canada Revenue Agency will outline your maximum RRSP contribution.

The main purpose of an RRSP is to help save for your retirement. But the government also allows you to use those funds for other important life goals such as buying a home or for the post-secondary education of you or your spouse.

  

Ask your financial institution for more details on how you can use an RRSP to plan for retirement, education or buying a home.

Perspectives on Retirement: Generation X

Generation X (born 1965 to 1978) entered the workforce in the late 1980s and is the first generation to have access to 401(k) plans for the majority of their working careers.

Seventy-seven percent of Generation X workers are saving for retirement and they started at age 28 (median). Among those participating in a 401(k) or similar plan, they contribute seven percent (median) of their annual pay.

Unfortunately, 30 percent of Generation X retirement plan participants have taken a plan loan or early withdrawal, with commonly cited reasons relating to paying off debt or unplanned major expenses. This may be partly explained by low levels of emergency savings. Generation X workers have saved just $5,000 (estimated median) to cover the cost of unexpected financial setbacks. Twenty-four percent have saved less than $1,000 for such emergencies.

The total household retirement savings for Generation X is $69,000 (estimated median). Just 12 percent are very confident that they will be able to fully retire with a comfortable lifestyle.

Generation X has entered its sandwich years, with many in the middle of raising children and looking after aging parents –while juggling their jobs. They may feel that they cannot afford to invest in their own retirement –or they may be strapped for time to plan for retirement. Forty percent of Generation X workers agree with the statement, “I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date.”

Generation X is behind on their retirement savings, but they still have time to catch up if they begin focusing on it right now and start saving more. An excellent starting point is calculating retirement income needs and a savings goal. Fifty-two percent of Generation X workers say that they guessed their retirement savings needs. Just 12 percent used a retirement calculator or completed a worksheet.

One of the most important secrets to attaining retirement readiness is having a well-defined written strategy about retirement income needs, costs and expenses, and risk factors. The majority of Generation X workers (60 percent) say that they have a retirement strategy, but only 16 percent have a written plan (the other 44 percent have a plan but it is not written down)

Retirement Perspectives: The Millenials

 Millennials (born 1979 to 2000) are the youngest and largest generation in the workforce. They are also a do-it-yourself generation of retirement savers. Millennial workers most frequently cite self-funded savings (55 percent) as their expected primary source of retirement income, including 43 percent expecting to rely on income from 401(k)s, 403(b)s, and IRAs and 12 percent from other savings and investments. Just 17 percent are expecting Social Security to be their primary source of income when they retire.

Millennials have heard the word that they need to save for retirement. Seventy-two percent of Millennial workers have started saving –and at the young age of 22 (median). Among those who are offered a 401(k) or similar plan, 72 percent participate in the plan and contribute seven percent (median) of their annual pay. An impressive 30 percent contribute more than 10 percent of annual pay. The total household retirement savings among Millennials is $31,000 (estimated median).

Millennials can do more to improve their retirement outlook by learning about investing. Seventy-two percent agree that they do not know as much as they should about retirement investing. Among those currently participating in a 401(k) or similar plan, one in four are “not sure” how their retirement savings are invested. Another 22 percent indicate their retirement savings are invested mostly in bonds, money market funds, cash, and other stable investments, thereby suggesting that they may be investing too conservatively given their long-term investing horizon until retirement.

Hungry for more education, most Millennials (75 percent) say they would like more information and advice from their employers on how to achieve their retirement goals. Of the three generations, Millennials are most likely to find digital technologies offered by their retirement plan providers to be helpful, including 80 percent who find mobile apps for managing their accounts to be helpful (compared to just 48 percent of Baby Boomers).

Surprisingly, Millennials have also made retirement a topic of conversation. The survey found that 22 percent of Millennial workers frequently discuss saving, investing, and planning for retirement with family and friends, which is more than twice as many as Generation X and Baby Boomer workers (both 10 percent).

Millennials are doing a great job saving for retirement. By learning about investments and through careful planning, many maybe well-positioned to achieve a comfortable retirement.

Some more money saving ideas

Regardless of the time in history and no matter what the current state of the economy, no matter what the current trends are, no matter what the unemployment rate is or where interest rates are, some money-saving ideas always work and stay true.

Big changes come from small steps and if you determine to put even one of these many savings secrets into place, you will see a big change in your life. The great Albert Einstein once said, “It takes a genius to see the obvious.” What he meant by that is that sometimes the simpler things in life are the most powerful ... but because they are so obvious, we tend to ignore them, and not let them work for us.

One of the most powerful money-making ideas is this: keep a daily diary of everything you spend. Go to the dollar store, buy a little book, and carry it with you wherever you go. Write down every penny – every single penny - you spend. It’s just as simple as that.

There is something incredibly powerful about writing down each of your expenditures. It makes the flow of money through your life more realistic and exacting. It shows you simply and clearly just exactly where you are spending your money, on what and why. Once you know this, it becomes much easier to control your spending. You will feel empowered with self-control and this will encourage saving.

Many people who have taken up this practice have not only learned something about themselves, which they never before understood, but they are often astounded by the simplicity of the lesson learned.

A daily expense log can help you achieve the insight and clarity you need to realize control of their finances. That’s what a simple spending record will do for you - it will give you much needed control over your spending, and thus your financial life. There may be nothing but a 75-cent notebook and a ballpoint pen between your life of financial struggle and financial freedom.

Stop deficit spending! We all know how our government has been creating debt—spending more money than our country takes in. It’s called deficit spending. Well, don’t do the same! The same rules apply to you and me. Using those nasty little plastic cards is a debt making system. Today, the average credit card holder is carrying around $8,000 in plastic debt!

Spending yourself into such debt with a credit card is certainly very easy, as many of you already know. The reason is psychological. When you give that clerk a credit card, it’s just not the same as handing over a stack of green dollar bills. Would you as readily hand over a pocketful of ten-dollar bills as toss a credit card across a counter? Probably not.

Credit cards put you in debt and keep you there. Even for people with good incomes, paying your credit card debt down to zero can be amazingly difficult. In addition, make no bones about it; credit card debt will sap your financial strength just as readily as an open vein will deplete your physical body of its very life force. Using a credit card by choice can quickly turn to use it for need. Once you get to that point, you are already in trouble and it becomes time to get some help.

There is no secret in freeing yourself from the credit card game. You must take out a pair of scissors today, cut your cards in half, and begin paying them back, slowly but surely. Be sure to always pay more than the minimum amount due, even if it is only $10 more.

Once you stop adding to the debt, even small payments will eventually, add up. You can get out of debt if you are patient and self-disciplined. Once your cards are history, you must adopt a strict pay-as-you-go policy. Instead of buying now and paying later, save now and buy when you have the full amount. This is key to being able to save.

Once again, stopping credit-oriented consuming is one of the most powerful financial tools available to anyone today. Why not pick up this tool and use it for yourself?

Saving for an emergency

Financial or other emergencies happen even in retirement, if your plan for money for your next emergency is to scoop up the change that falls between the cushions, you might want to come up with a plan to add to that stash. It is always a good idea to have a little extra green for the lean times. Rainy days could be just around the corner. Rainy day funds become necessary! Here are some very clever and painless ways to put aside some money now!

Put aside a large envelope, cookie tin, coffee jar or something similar. At the end of every week, throw a couple of dollars aside. By the end of your first month, you should have some extra cash put aside to have a nice start on an emergency fund. The idea of doing this is don’t count it or spend it. Place it somewhere that is hidden away. Put it somewhere that you won’t be tempted to dip into it. This kind of money really adds up!

The next time you treat yourself or your family to a meal out, tip yourself! Just as you go to tip the waitress 15 to 20 percent, put the same amount aside for yourself. When you get home, stash it away in your cookie jar. Every time you go through a fast food window, put a dollar away for that cookie jar, too!

Take advantage of that cash back option! Next time you make a purchase using your debit card, ask for a small amount of cash back. Instead of spending it, stash it away in your cookie jar! Chances are you won’t even miss that extra $1, $2 or $5 bill and come an emergency time, you will notice how the amount has piled up.

Next time you pay off that big-ticket item like a new car or tuition, continue to make the payments to yourself! Set up a savings account and each month slip the ghost payment into it. Watch as it builds nicely.

Consider joining a Christmas club. You will save a lot of money. Each year you put aside a bit of money and place it into a hamper program. Then, as Christmas rolls around you don’t need to scramble looking for Christmas cheer to share with your family. Your hamper arrives filled to the brim with all kinds of seasonal goodies that you paid for over the previous year. You can easily put aside $50 each year towards your emergency fund this way and you and your family will enjoy a hassle-free Christmas.

Sign up for a grocery shopping membership card. At the bottom of your store receipt, you will see a print out that states how much you save each week. It really adds up. You can easily save an average of $15 on each weekly grocery trip. Add that amount, each week, to your savings cookie jar.

Did you enjoy your tax refund this year? Sure you did, we all did. That’s because of the new tax laws. Many people will have a little extra money coming their way. Decide to deposit that extra money right away into your savings account or cash it and then stash it.

If you are a responsible spender, take out a credit card that rewards your loyalty. When you pay off the bill every month, use a card that promises a cash reward and bank the money. Use your reward credit card smartly and you could end up with a very nice windfall for your rainy-day fund.

Put aside a large mouthed jar in the kitchen. It is very likely that your parents and grandparents had one. At the end of each workday simply empty your pockets or clean out your change purse. All the change goes into the jar. Who wants to carry around all that dead weight, anyway? Your spare change adds up a lot faster than you think. While you are at it, add at least one bill to your change jar at the end of each week. Aim for a $20!

Is it time to give up that nasty smoking habit? Imagine the money you will save! If you are not quite ready to quit at least cut back by half. Put the savings each day into your change jar and watch it overflow!

Convert to a coin-operated laundry. Keep a jar on your washer and dryer and every time you go to do a load of laundry, slip in a coin or two. This adds up month by month.

If you yearn to lose some weight, try rewarding yourself the cost of the item that you do without each day. Put that money into your change jar. You will look great and you will be saving for a rainy day! 

Saving for Retirement at 30

Yesterday I wrote about how it is never too early to plan for your retirement, today and for the next couple of days, I will look at what you could do if you are younger. I wished I had received and listened to this type of advice when I was young. 

Are you in your thirties?  If you are, retirement may be something that you occasionally think about.  If not, now is the time to start.  While there are a number of benefits to saving for your retirement years when you are in your twenties, it is imperative that you start in your thirties.  If not, you may find yourself with little or no money to retire with.

One of the easiest ways to set aside money for your retirement years is by saving money. Take any bit of money that you are able to save, by eliminating unnecessary purchases, and put it away.  To save the most money, examine your spending habits.  Buying an expensive pair of jeans is a nice pick-me-up when you were twenty, but now is the time to start worrying about your future.  Remember, apply any money saved to your retirement future.

As for what you should do with your saved money, you do have a number of different options.  One of the easiest approaches to take is to open a savings account.  Often times, all you need is $50 to do so and your account should be fee-free, as long as you maintain the minimum monthly balance.  As easy as it is to open a savings account, only do so if you are good with money.  You will want deposit money into your savings account and forget all about it.  If you have a passbook, hide it.  Ignoring your savings account, aside from putting money into it, is the best way to leave it untouched.  Unfortunately, with a savings account, it is much easier to get a hold of your money and you can do so without any immediate consequences.

As nice as savings account is, there are many other profitable and convenient approaches for you to take.  These include an RRSP plan in Canada and a 401K plan in the United States.  If you are employed and full-time, you should be able to contribute to either plan.  Have you already been doing so?  If not, it is recommended that you start.  Those in their twenties are encouraged to deposit at least 5% of their income into a plan.  The same percentage is recommended for those in their thirties, as long as contributions were previously made.  If this is the first year that you contribute then, 7% to 10% is recommended.  401(k)s are nice because they offer tax savings and many employers will match contributions.

As previously stated, now is the time for you to start saving money.  Eliminating unnecessary purchases and carefully tracking your spending is a great way to reduce your living expenses and save additional money for retirement.  Before you put all of that money into a savings account or a Retirement Account, examine your debt.  Do you have any?  Retirement and debt do not mix, so take steps to rid yourself of debt and start doing so now.  The best step to take is to reduce your expenses, which was outlined above and split the money saved from a retirement savings account and your unpaid debt.

Now is also about the time that you should start thinking about what you want your retirement to be like.  Many people think this is a step that is too early for someone in their thirties to take, but there is no harm in planning ahead.  Where do you see yourself when you retire?  What kind of home would you like to live in?  Do you intend to travel?  What activities do you want to enjoy?  These questions can help you determine how much money you need to retire.  Of course, you can still continue to save money for retirement even if you don’t know the answers to these questions, but a goal can help make sure you are able to retire comfortably and with ease.

The above-mentioned steps are just a few of the many that you, a person around the age of thirty, can take to prepare for retirement.  They are, however, the easiest steps to take.

Retirement not so super for women

Women around the world are faced with a major problem, and that is they are not prepared for retirement, and the countries of they live in are not addressing their needs. Australia can be seen as a harbinger of the issue.

A recent report from Australia by the group Per Capital titled Not so Super, for Women: Superannuation and women’s retirement outcomes, listed many factors contributing to poor outcomes for women: an inadequate age pension, over-representation of women in lower-paid occupations, the gender pay gap, no super at low pay levels, high effective marginal tax rates, carer responsibilities, unpaid domestic work, the complexity of the super system and frequency of changes to it, age discrimination, unaffordable housing, longer lives, poor financial literacy, cost and availability of childcare, relationship breakdowns and casualised work.

In the report, they state that there is no single solution. Instead of a silver bullet, the report proposes a range of recommendations. Central to these recommendations is the idea of an ‘accumulation pathway’, which maps the superannuation balance at any given age that a person should hold in order to expect a basic living standard in retirement based on a combination of superannuation and the age pension.

Not only is the superannuation system is systematically biased against half the population in Australia, I would argue it is so stacked so in every industrial nation. Women are simply not being assisted by super towards a reasonable standard of living in retirement. In Australia, women’s superannuation balances at retirement are 47% lower than men’s. As a result, women are far more likely to experience poverty in retirement in their old age. Superannuation is failing women. In Canada, women contribute less to our Canada Pension Plan and will also experience poverty in retirement.

In almost every nation we can see the reasons and the reasons are obvious. Superannuation/Pensions were designed around a model of employment that is rapidly disappearing. In this model, household income was provided by one breadwinner, usually a man, via a job that was full-time and dependable.

Implicitly, the benefits of superannuation would largely flow to women through their male partners. What’s happened since the mid 70’s is that many more women have entered the workforce to earn and save independently, but the nature of work available to them has been more intermittent and lower paid than that of their male counterparts. This combined with the fact that women still do the overwhelming majority of unpaid housework, caring, and parenting means that the benefits of super/pension plans, which move in direct proportion to pay, have not flowed to female recipients as hoped.

Sadly, and unnecessarily, women’s retirement income not only in Australia but around the world has taken on the features of a wicked problem. It arises thanks to a confluence of diverse circumstances: an inadequate age pension, overrepresentation in lower paid occupations, the gender pay gap, no super/pension at low pay levels, effective marginal tax rates, carer responsibilities, unpaid domestic work, the complexity of the super/pension system and frequency of changes to it, age discrimination, unaffordable housing, longer lives, poor financial literacy, cost/ availability of childcare, relationship breakdowns and casualised work.

One of the main sources of retirement poverty for women is the breakdown of relationships. As the title of the Senate Committee report suggested, “a husband is not a retirement plan”. Women believe that in cases of separation, male partners inevitably end up better off. From the report women talk about this issue:

“…Due to the breakdown of my marriage and having two young children, the opportunity to engage in full-time work was not available to me until my children were old enough to not require full-time care as this was not affordable to me. I did not move into full-time employment until approximately 9 years ago - Now at age 50, I have the grand total of almost $27,000 in my Super. There is no possible way that in the working time I have left I am going to be able to provide funding for my retirement and due to raising two children on a single income, the possibility of owning a home was not an option either as we did not own when we separated. After 11 years of marriage and spending what is now 24 years raising my children, I have not a lot to look forward to in the way of financial security in my older years...”

“…I can’t afford to contribute to my own superannuation, can’t afford to take holidays, nor can I take extra paid leave as I live pay to pay. There are many like me who, after a midlife divorce, accepted extra in the equity of their home so that the children were not disturbed rather than a share of his super. My husband had a for life government pension which, after 20 years of support, I could not make a claim on. I maintained the home and fulltime care of our child while he went offshore and earned big tax-free dollars. He now lives on a luxury yacht and travels regularly while I live from pay to pay. Thanks for listening!…”

Women express great dissatisfaction with a system that is not serving their retirement income needs. Specifically, they feel that:

• Poverty is a realistic expectation in retirement for many women;

• The structure of superannuation puts them at a systematic disadvantage relative to men and the wealthy;

• Women experience excessive dependence on male partners in matters of retirement income, and that relationship breakdowns are a leading cause of retirement poverty; and

• Many women lack a basic understanding of the retirement income system and that more should be done to improve financial literacy.

When we look at the savings for retirement we see that in Australia, the numbers back up the women’s perspective. Over 70% of women in Australia, who have Supers have estimated balances under $150,000 while less than 38% of men do. 23% of men have balances over $500,000 while less than four percent of women hold such balances. Conversely almost a quarter of all women have balances less than $50,000.

In the report, they say that one contributing factor to women’s lower balances is that they tend to spend less time in the workforce than men, and therefore have less opportunity to contribute to superannuation accounts. In part, this is because of their caring responsibilities, either for children or other relatives. Amongst the October 2016 survey respondents, over 55% of women had experienced periods out of the workforce in order to care for family members. By contrast, less than 12% of men had taken time off for similar reasons

Over 70% of women have estimated balances under $150,000 while less than 38% of men do. 23% of men have balances over $500,000 while less than four percent of women hold such balances. Conversely almost a quarter of all women have balances less than $50,000.

One contributing factor to women’s lower balances is that they tend to spend less time in the workforce than men, and therefore have less opportunity to contribute to superannuation accounts. In part, this is because of their caring responsibilities, either for children or other relatives. 

Amongst our October 2016 survey respondents, over 55% of women had experienced periods out of the workforce in order to care for family members. By contrast, less than 12% of men had taken time off for similar reasons.

Not only do far more women take periods out of work to care, but they are away from the workforce for far longer when they do. Two-thirds of men who take time out are away from work for less than one year, but only one-fifth of women take so little time away. Almost 45% of men are away from work for fewer than three months. By contrast, over a quarter of women are out of the workforce for more than six years This has a dramatic impact on their ability to put money away for retirement.

The Association of Superannuation Funds of Australia (ASFA) has used a budget standard approach to construct retirement standards. These are in Table 2.(below)

These indicative retirement standards give us a benchmark against which to measure our recommendations regarding adequate superannuation balances.

If we assume that somebody works full time from age 18 to age 65, earns the minimum wage (assumed to have zero real wage growth) for their entire working life, makes Superannuation Guarantee contributions at 9.5% and gets a real return (net of fees and charges) on their superannuation account of 3% then their balance would be $347,000 (in today’s dollars) at age 65. While the assumption of zero real wage growth of the minimum wage is not realistic, this underestimates both simplifies the assumptions and allows for short periods of unemployment or other absence from the workforce.

This balance of $347,000 allows for an annual income (part superannuation and part Age Pension) of about $38,500 up until the age of 90 with the full Age Pension as the fallback after that. These figures assume the person is single – which is important to assume even for couples to ensure against relationship breakdown. We suggest this position, substantially higher than the ASFA modest standard and about $5,000 less than the comfortable standard, as an acceptable target accumulation pathway with the minimum wage for an uninterrupted career providing a modest benchmark

What I like in this report is we can see how much a person should have in their Super/pension when they retire to give them a modest lifestyle. The report goes on to give recommendations to the Federal Government, State Governments, Unions, Employers and Superannuation Plans. To see the full report (which is a pdf file) go here