Medical Expenses after retirement, are you prepared?

Data from the Health and Retirement Study (HRS) finds out-of-pocket health care expenses are typically miscalculated. This study (pdf file) estimates how much retirees spend on out-of-pocket health care expenses after age 70 until their death. Unlike many other studies, it includes only expenses for health care services actually used (i.e., Medicare and insurance premiums are not included), and it is based on self-reported expenses of actual retirees and not on projections for hypothetical individuals. The numbers are adjusted for medical inflation and reported in 2015 dollars.

The self-reported expenses are from panel data from the Asset and Health Dynamics Among the Oldest Old (AHEAD) cohort of the Health and Retirement Study (HRS). Here are the key findings:

·  For the majority of surveyed people, out-of-pocket health care expenses are not as high as commonly believed. For those who die at age 95 or later, the median cumulative out-of-pocket expense after age 70 until death is slightly above $27,000.

·  But these expenses are catastrophic for some. Again, for those who die at age 95 or later, the 90th and 95th percentiles are nearly $172,000 and just over $269,000, respectively. In other words, the distribution of cumulative out-of-pocket medical expenses is skewed toward those with higher expenses.

·  Nursing home expenses are one of the biggest contributors driving the skewness of the distribution. Without out-of-pocket nursing home expenses, the 90th and 95th percentiles for those who die at age 95 or later drops to nearly $96,000 and $154,000, respectively.

·  For all surveyed people, the median out-of-pocket nursing home expense is zero. But just like the distribution of total out-of-pocket health care expenses, the distribution of nursing home expenses is also skewed toward those with higher expenses, which means a small percentage of retirees face very high expenses.

·  For those who die at age 95 or later, the 90th and 95th percentiles of nursing home expenses are slightly over $87,000 and $175,000, respectively.

·  When the sample is restricted to include only those who enter a nursing home, the 90th and 95th percentiles go up to nearly $182,000 and $266,000, respectively.

·  There are significant differences between men and women.

·  Women are significantly more likely to enter a nursing home after the age of 70 (38 percent of men vs. 51 percent of women).

Facts women and retirement

Here are 18 facts from the Transamerica survey about women in retirement:

1. Only 12% of women are "very confident" in their ability to retire fully with a comfortable lifestyle.
2. About 53% of women plan to retire after 65 or do not plan to retire at all.
3. About 54% of women plan to work after they retire -- 11% plan to work full-time and 43% part-time.
4. Women could struggle to ensure they are, in fact, prepared to work in retirement. While 63% said they are staying healthy, only 57% are focused on performing well at their current job and 46% are keeping their job skills up to date.
5. Roughly 64% do not have a backup plan for retirement income if forced into retirement sooner than they expected.
6. Paying off debt is a financial priority for almost 68% of women. Only 51% of women cite saving for retirement as a priority.
7. About 73% are saving for retirement through a workplace plan and/or outside of work in an IRA, mutual fund, bank account, etc. Women started saving for retirement at 27, on average.
8. About 45% of women expect their primary source of retirement income to come from savings and investments such as 401(k), 401(b) and IRA accounts, while 30% expect to rely on Social Security.
9. However, 81% of women are concerned that Social Security won't be there for them when they are ready to retire.
10. Roughly 47% of Baby Boomer women said they know a great deal or quite a bit about Social Security benefits.
11. About 66% of women are offered a 401(k) or similar employee-funded retirement plan, but 28% of women work part-time and are less likely to have workplace retirement benefits.
12. About 77% of women who are offered an employee-funded plan participate in the plan. They contribute, on average, 7% of their salary to the savings plan.
13. Women believe they will need to save $500,000, on average, in order to feel financially secure in retirement -- but about 55% said they "guessed" to land on that figure.
14. Women's total household retirement accounts are $42,000 (estimated median).
15. Women's emergency savings are just $2,000, though.
16. Just 28% of women are aware of the Saver's Credit, a special tax break to low- and moderate-income taxpayers who are saving for retirement.
17. One in three women use a professional financial adviser to help manage their retirement savings and investments.
18. Only 26% of women consider their long-term health when making lifestyle decisions.

Low or No-Cost Gift Ideas

My last post of being frugal for a while, as it is time to move on to a different focus. It doesn't have to cost anything in the way of money to give a loving gift.  Try one of these frugal gifts and see how thrilled your recipient is.

• Print them off a handmade coupon for a back massage.
• Cook a special dinner for a friend or loved one.
• Give someone a special a day of pampering.
• Write a poem or a quote in honor of someone's birthday.
• Create a drawing or painting that has special meaning.
• Make them a piece of jewelry out of seashells or pinecones.
• Print off information on a topic of interest to someone.
• Pass along a family heirloom or something that has sentimental value.
• Surprise someone with a picnic using food that you already have on hand.
• Make cookies or fudge and wrap them in tissue paper.
• Send an e-mail that lists out the reasons why they are special or why you love them.
• Give them an old photograph that has been tucked away for some time.
• Create a hobby scrapbook with images, articles, and tidbits about their favorite activity.
• Give them a seedling to grow using one of your own plants.
• Find a funky shaped rock and write a story about what it reminds you of.
• Sew together pieces of old clothing for a truly unique table runner.
• Create a gift voucher for one hour of doing whatever they want.
• Weed their garden for them or rake their lawn.
• Decorate a household utensil with craft items you have on hand.
• Give them a hug.
• Give them a kiss.

Don't be embarrassed if you are a little short on cash or if you want to try one of these free gift ideas. The best gifts really do come from the heart.

Being Paid to Shop

Always use items that are reusable rather than throw away. You'll find that doing these little things like using real cups and plates instead of paper or plastic throw away, and recycling containers for storage or even to use in craft projects, you can save a lot of money. Each by itself may seem minor, but when put together they can amount to tremendous savings over time.

Don't buy it if you won't use it. Things like small kitchen appliances, repair tools, and gardening tools are good examples. We know they'd make our life easier if we just had the opportunity to use them. Simplify your life and narrow it down to a couple you just can't live without like a can opener and coffee maker.

 The above are examples of things you can do to save money on your quest to live to live the frugal lifestyle.  I want to tell you about another frugal activity that can result in hundreds of dollars a year-rebates and coupons.  I list both together, because using both, along with your weekly sales ad, is the best way to save money.

If you think this will take up time, you are correct, it will, but the time spent on this organization will be well worth it to you. An hour or two spent organizing your coupons and rebates and then using them at a store where there is a sale on, may save you hundreds of dollars a month on your food bill. You save money without sacrificing the quality of the food you purchase. The first few times getting organized will take some time, but stick with it and over time, you will find that your ability to get organized will become faster and easier. Think of applying your savings to yourself as an hourly wage, and you may find that you are paying yourself up to $30.00 an hour. Well worth it, I think.

Gather all your coupons-you have been clipping them, haven't you? Now check your weekly sales ads and see what items are on sale that you have coupons for.  This done, check and see if the store offers double coupons.  These are the stores you want to check first.  Now go online and put in a search for rebates plus your product.  Many will be printable.

This done, do your shopping and mail out your rebate forms, then sit back and relax.  Oftentimes. You will find you actually come out ahead in this deal, as the rebate will be the price of the item before the use of the coupon

Find the Savings--More tips on being Frugal

There are lots of ways to save money, no matter how much of it you have - or don't have. All you need to know is where to look to find the savings.

The first thing you need to do is eliminate ALL of your unnecessary expenses such as eating out on the weekends, buying lunch at work every day subscribing to magazines and newspapers and cable television.

It's OK to reward yourself once in a while, but if you are really looking to live frugally, you owe it to yourself to save every single penny you can!

To find other ways to reduce your expenses, take a close look at your chequebook and credit card statements. You should also call your credit card companies to see if they will lower your interest rates.

You'll be amazed at how many ways you can save money, especially once you start looking carefully at how you spend your money every month.

For those expenses you can't eliminate, it's time to start shopping around for the best prices. Things like car insurance, groceries, clothing and gifts can be found at very reasonable prices if you take the time to seek out the bargains.

The same is true of many of your monthly expenses - like long distance telephone service, internet service, all types of insurance, mortgages, and in some places even your utility bills.

So, if you'd like to save yourself lots of money every month - and who doesn't - start shopping around and looking for ways to lower your monthly bills right away.  Add this to cutting out unnecessary expenses and you could find yourself being able to save thousands of dollars each year. The initial investment of time to seek out the best values will be well worth it in the long run.

Six Traits of the Frugal Shopper

A frugal shopper has skills that help him or her gain benefit of the money-saving opportunities in life. Below I have listed several traits found in frugal shoppers.  By incorporating these into your life, you too can become a frugal shopper.

A frugal shopper studies other people. I love to watch and study people because they are so interesting and I learn so much from my observations. There are probably people near you living a good life on half of what you make. Learn how others do things, so you'll know your options.

Frugality requires knowledge of values. It's hard to get a huge deal on a car if you don't recognize what a big deal is. Start enlightening yourself on prices, especially before you're ready to buy anything that costs a lot.

Frugal shoppers pay cash. Things are cheaper when paid for in cash instead of credit. Want that new patio set? The cost divided by the number of weeks you can wait to get it equals how much you need to set aside each week. You'll not only save on interest when you pay cash, but you'll often get a better price. Frugal shoppers also use credit cards, but pay them off in full every month and do not pay any credit charges.

A frugal shopper looks for alternatives. Maybe you'd have just as much fun taking that discounted trip to the Bahamas as you would be going to Jamaica. If you happen to enjoy pizza just as much - or more, skip the expensive restaurant and pay the frozen or fresh pizza in the grocery store and add your own toppings.

Frugal shoppers tell people what they need. Just mention it in conversation. Do you know how many people get free or cheap things, just because they talk?

Do the math. You didn't really save $400 on that car if it costs you $500 more in gas each year. Also, be aware that some stores are cashing in on shopper's assumptions that larger is cheaper. Yes, the gallon of pickles might actually cost more than four-quart jars. Be ready to do the math if you want to be a frugal shopper. There are many apps that you can get that will help you with this goal.

How Can I Be Frugal?

Buy everyday items you use in bulk. Buy the biggest package you can find, which gives you the most for the money. 

Cut out most frozen foods. Some frozen foods make sense, like buying frozen bread dough. It is cheaper to buy three or four unbaked loaves together, than to buy one loaf of bread in the bread section. You can dress up frozen bread dough by rolling it out, brushing it with butter and spreading cinnamon-sugar. Just roll it back up and bake. Voila, you have cinnamon bread. Throw in raisins or pecans for variety.

Buy fewer convenience foods, and more staples like dry beans, rice, fresh fruits and vegetables, meat, milk and butter (store brand.) Buy food in bulk when possible. Forego the nicely packaged pre-made honey butter, mashed potatoes, or other prepared foods. 

Eat out less. If you must eat restaurant food, get the whole meal as a take-out. That saves you from buying pricey mixed drinks, paying gratuities, and buying that fancy dessert you couldn't live without but didn't need.

Instead of going to the theater, buying popcorn and expensive tickets in prime time stream it or watch it on NetFlix later. Maybe the movie won't be "new" when you see it, but you will save a bunch of money. Call the museum or zoo and see if there's any price discounts for certain days of the week.

If you need to buy clothes, avoid any that need to be dry cleaned only. During tough times, shy away from outfits that have special care needs. Go for anything that can be thrown in the washer and dryer.

Use the car less. This is obvious but worth mentioning. Combine trips, so you aren't wasting gas. If your car doesn't require high-octane gas, forget about it. Regular works fine. To save even more money, use public transportation.

Is Being Frugal Worth It?

Considering retirement or starting to plan your retirement? When many retire, they experience a decrease in income, but they also experience a decrease in expenses. It takes a while to get a handle on living on a fixed income, that is reduced from what you had when you were working. One way to prepare for this reality is to think about being frugal while you are working. Frugality can become a way of living.  Frugality is simply the practice of looking for the less expensive alternatives. Frugality doesn't have to mean being a Scrooge or living without comfort.  Is it really worth the time and effort you put into things like homemade cleaners and clipping coupons?  Many say it is.

Search the Sunday paper for coupons and clip them out. Make a list of things on sale that you can stock up on in order to get your average cost down. Plan and run a route to four stores in order to get everything where it is the cheapest. Total extra time spent: three hours. Now, save sixty dollars.  This translates into twenty dollars an hour-a pretty good deal.

Sometimes the small stuff is the big stuff, especially when it is repeated over and over. This is why it makes sense to save money on groceries. They are something you buy every week. Saving sixty dollars every week or two adds up over time. How you do it makes a difference though.

For example, suppose you don't want to clip coupons or spend time looking at sales flyers. Why not invest just an hour or two to figure out which store is cheapest for the things you buy? Then shop only there, and buy more of the things you use and like when they are on sale. You might still save $20 per week, with no additional investment of time. That's a $1,000 per year!

You need to sit down and decide how much time you have to spend on your efforts.  If you do this and then figure out what your yearly savings can be, you will have a much clearer idea of how you want to proceed.  It will also give you encouragement on those days when it feels you are missing out on something. A small saving here a small saving there, it all adds up and what is more important over time it can become a habit and a way of living without sacrificing.  

Facts About Credit Scores

If you are considering managing your debt, then one of the first things you will want to do is to know your credit score. To people who are not familiar with the term credit score, they often assume that this is the score that we get in our credit cards for the number of purchases that we have made every year. But nothing is further from the truth. Credit scores are actually the grade that you get depending on how reliable a person is in paying their debts and credits.

Credit scores are determined by a lot of factors, how much your outstanding debts is, how regular do you pay for it, how much you spend and how much you earn. It will also be determined by your past credits and how were you as a borrower. These are all being gathered and recorded by credit bureaus and credit reference agencies like Equifax, TransUnion and Experian.

So, if you think, you are the only one who knows that you owe a credit card company a big amount, think again because they do keep records and what is more, all the credit transactions that we get are being filed for future reference of every credit and financial institution in the country.

Credit scores is important because it can mean being accepted or rejected for a loan. With a really bad credit score, you may not be able to get a house loan, a car loan, a school loan and even a credit card. In short, with a bad credit history, your days of borrowing money is history. As an added salt to the injury, it is not only credit card companies, lending companies and banks that do get information from the credit scores.

Even private companies and government agencies use this to background check a current employee or a potential employee. You see, a credit score will determine a person’s financial savvy and sense of responsibility. This will also show just how much a person is willing to face up to a problem instead of running away from it.

This is especially true with employees that are being hired or were hired to assume posts that deal with really sensitive financial issues or those who are directly in contact with money. A credit history and a credit score are important in determining if they will be able to handle the finances well.

Mobile phone companies and credit card companies also use credit scores to determine the clients that they should target. People who have good credit scores are often those who have the spending power. Thus, they are good people to offer mobile phone packages and credit card services.  

In securing a loan, credit scores are also used in determining the kind of loan that will fit your credit profile. People who have high credit score are given higher amounts in loan, lower interest and longer time frame in which to pay the loan.

In contrast, people who do not have a good credit score may be refused a loan or at the very least be given a small amount in loan, much higher interest and shorter time frame to pay the loan. This is because credit card companies and lender also want to protect their interest. Low credit scores are more riskier and therefore warrant higher interest rates.

Debt Management

I know it is only 10 days into the new year, but the bills from Xmas and the holidays will be starting to arrive soon. Many Canadians overspend during this time of year and one of the resolutions made is to try and get debt under control.  Debt management is something that can be very beneficial to every one of you out there that seems to be struggling with managing your finances, which far too many of us know plenty about right. I want to discuss with you some important information about debt management that will hopefully be quite helpful to you all and will help to get you back on the financial path that you need to be on. 

Debt management can totally change your way of thinking and spending, whenever it comes to knowing exactly what kind of corners need to be cut and everything else in your life that could be changed to potentially help you out financially. Managing your finances properly can completely turn your life around and send you into a great big spiral of financial freedom, which so many of us only dream about our entire lives and normally never get to actually experience.

There are plenty of good and most helpful books on the Internet where you could find out all there is to know about debt management and different helpful tips that could guide you in the right direction when it comes to learning how to save your hard earned money for your future and the future of your children. Learning and growing as a person can truly benefit every single aspect of your life and get you set up for an incredible journey, a journey free from unnecessary stress that is caused due to too much debt.

Debt management can make all the difference in the world whenever it comes to your future financial freedom and knowing how to live much more by your means than ever before in your lifetime. You will finally have the opportunity to see and experience what it feels like to have the ability to sleep better at night because of knowing that your bills are going to be paid on time and you might actually even be able to save yourself and your family some extra money each and every month.

Having extra money is definitely a very nice change, especially whenever your used to having to always struggle, thinking to yourself that $20 is a great deal of money. It is so difficult to never have any money so that you and your family can go out and have a good time but if you learn better debt management, that opportunity might actually become a reality for you, over a period of time and patience.

Once you learn more about debt management, whether it is you gaining your knowledge from books, the internet or even from a professional, your life is going to take a turn for the better and you are going to finally know what it feels like to live a fun filled life, without all of the strain and struggles from piling up debts that can never possibly be paid on time or even paid at all

Divorce costs women when they retire

More than seven in 10 (71%) couples don't consider pensions during divorce proceeding, leaving women £5bn out of pocket every year, a report by Scottish Widows has found.

The 13^th edition of the annual report Women and Retirement (pdf file) found two-fifths (40%) of women said their retirement prospects worsened because of divorce, compared to less than a fifth (19%) of men.

It found just 9% of women claimed they want a fair share of pensions, despite the average married couple's retirement pot totalling £132,000 - more than five times the average UK salary of £26,000 or just over the average price of a house in Bradford.

The report found married people would be more concerned about their fair share of any jointly owned property (56%) and more than a third (36%) would want to split their combined savings.

Some 13% of married people said they would be more worried about losing a pet during a settlement than sharing a pension.

The report pointed to a general lack of knowledge about pension-related legalities that could be contributing to women's retirement saving woes post-divorce.

Nearly half (48%) of women have no idea what happens to pensions when couples get divorced, which would explain why so few couples consider them as part of a settlement.

Furthermore, a fifth (22%) presume each partner keeps their own pension and 15% believe they are split 50-50, no matter what the circumstances.

The report suggested to even out the inequality between men and women in retirement, the automatic enrolment minimum earnings threshold should be scrapped and the minimum age to qualify for automatic enrolment should come down from 22 to 18.

It also suggested the inclusion of pensions in divorce proceedings should be made compulsory and the workplace should be used better as a key channel for addressing the retirement savings gap.

The report also recommends that the inclusion of pensions in divorce proceedings be compulsory. ONS data shows that 42% of marriages end in divorce, but their research reveals that seven in 10 (71%) couples don’t consider pensions during divorce proceedings. They would like to see a Government-led education campaign to address this issue and help men and women better understand the legalities. As the Department for Work and Pensions scopes out the remit of the new Financial Advice and Guidance Body, there’s an opportunity to encourage the inclusion of a module focusing on discussing pensions as part of divorce negotiations.

Retirement and work, which to you chose?

I thought I was one of the few who retired many times before taking full retirement. However I am, it appears soon to be in the majority. Some 40 percent of people 65 and older who are currently employed were retired at some point according to according to a 2017 Rand Corp. study authored by Nicole Maestas, an economist and associate professor of health-care policy at Harvard Medical School. 

She used data from the Health and Retirement Study, funded by the National Institute on Aging, which has tracked thousands of people age 50 and older over the past two decades.

Almost 20 percent of those age 65 or older old full-time jobs, up from 12 percent in 2000. Falling fertility rates and tighter immigration rules are propelling more employers to retain and hire older workers to fill shortages. That’s providing seniors with extra income to use for travel and entertainment or for new technology and other products.

More than half of men and women age 50 and older who weren’t working or seeking jobs said they’d return to work if the right opportunity comes along, according to an analysis of the 2015 American Working Conditions Survey conducted by economists at the Rand Corp. The percentage is higher among college graduates, 60 percent of whom said they could be enticed out of retirement.

Even retirees in their 70s are finding jobs when they want to earn money and be active, so there is still hope for me if I want to unretire for a while.

How about a cup of coffee a day?

Looking to save money for retirement and don't have any idea on how to start?

How about a daily coffee? Here are some interesting statistics.

 One Latte per day at $4.50 over 25 years = $41, 062.50 

 One lunch per day at $10.00 over 25 years =$91, 250.00

 One dinner per week at $50.00 over 25 years = $65, 000.00

If you added a tip, then the amount could be higher by between 10 and 20%

Saving Money During a Recession:

Recession is a word that fills people with dread and bad visions.  It's a time people consider bad for finances, a time capable of magically shrinking a dollar's value overnight.  It also automatically increases the cost of basic living.  And where money is a huge concern, people always ask, 'Can I still save for real during a recession?'  The answer is: of course you can.  You just need to be wise and creative about the whole thing.  Here are ways how:

Plan your purchases.

By planning your purchases, you're effectively planning your expenses.  This will help eliminate the danger of impulse buying and unnecessary spending.  Try to look at the bigger picture when it comes to your basic needs.  

Plan for a week's worth of groceries, for example, so you'll have an idea of which items you truly need (and want) and which items you can do away with.  To make sure that you maximise your planning efforts, consider incorporating items on sale into your planning.  If there are foods on sale that week, for example, why not plan your week's menu using what's currently on slashed down prices?

Implement the 'B' word.

Budget, that is.  If you want to be able to save money during a recession, learn to discipline yourself and your family.  Using your plan as a reference, come up with a weekly or monthly budget and then stick to it.  If you must overshoot it, you should have a very good reason to do so.  Otherwise, don't spend.

Keep an eye out for bargains and discounts.

Learn to monitor stores for seasonal sales.  You'll save a lot of money by buying items on sale than in their regular prices.  During a recession, that's considered wise spending.  Check out store or newspaper ads and don't be shy about asking for cheaper alternatives, getting store rebates or using discount coupons.  Consider buying at discount stores as well.  Each dollar you don't pay is a dollar you save.

Buy in bulk.

If there are items in your house that are often in use (paper towels, canned beans, yoghurt, etc.), consider buying in bulk.  Many stores offer items in packs, which means you'll save money in the long run if you buy them instead of paying for individual items.  

Put off bigger purchases.

A good rule of thumb is, if you can't afford it, don't buy it.  If, for example, you have enough money for a downpayment on a new LCD TV but will have to borrow money off your credit card just to tide you over for the next few weeks, it would be really insane to make a purchase.  Wait until you can truly, comfortably afford something.  The worst you can do during a recession is not just failing to get money saved but also going into debt.

Practice prevention, not cure.

If you look closely, there are many things you do in your home that are syphoning precious dollars from your wallet.  Simple steps such as repairing and maintaining your home and appliances, using more efficient equipment and cutting down on unnecessary consumption can do wonders for your wallet and piggy bank.  And what better way to treat a recession than to be prudent?

Earn extra money.

If, after all, your efforts, the money you have saved is still not enough, don't let the recession get the better of you.  There are times when your efforts are just not sufficient – mostly because you don't earn enough.  Instead of asking for a raise that might never occur or waiting for a promotion to drop on your lap, consider finding other means with which to earn (and save) money.  

Consider getting a part-time job, work extra hours, do selling on the side or offer your skills as a freelancer.  The extra income you earn, along with your recession-powered money-saving plan, will help you make enough until after the tough times are over.

Every Day Ways to Save Money for an Emergency

When you think about it, there are a good many ways to save those precious pennies. Some ways will require some sacrifice, while others will require little before thought.

The point is to be forever mindful of saving those extra pennies and before you know it, you will have saved up a tidy sum. 

• Spend less money than you earn each week.
• Seek out a higher paying job.
• Keep your job skills sharp and up-to-date so that when a new opportunity comes up, you will be on your toes and first in line.
• Adjust your lifestyle to always spend a bit less.
• Create a firm financial budget to encourage saving.
• If you must use credit cards/cut up those you can do without.
• If you must use credit cards, pay them all down in full each month.
• If you have credit card debt at high rates, consolidate at once.
• Figure out a way to lower your student loan payments.
• Just say NO to spending money whenever possible.
• Lower your expenses, one by one.
• Stop purchasing items that you can do without.
• Forego purchasing non-essential items.
• Refinance your mortgage or debt at a much lower rate.
• Refinance your car loan at a much lower interest rate.
• Find cheaper insurance rates/then switch over.
• Use coupons to shop with.  Don’t purchase without a discount coupon.
• • Wait for things to first go on sale before buying. Take advantage of catalog saving certificates.
• • Don’t buy an item just because it is on sale.

Nature or Nurture, which determines how you save?

There is an interesting study by Henrik Cronqvist and Stephan Siegel that used data on identical and fraternal twins matched with data on their savings behaviour. The authors found that an individual's savings propensity is governed by both genetic predispositions, social transmission from parents to their children, and gene-environment interplay where certain environments moderate genetic influences.

Genetic variation explains about 35 percent of the variation in savings rates across individuals, and this genetic effect is stronger in less constraining, high socioeconomic status environments. Parent-child transmission influences savings for young individuals and those who grew up in a family environment with less competition for parental resources.

As an example, if you pulled two pairs of identical twins out of the population, you might find that Alice and Agnes saved 15% and 18% of their income, while Bob and Bubba saved 10% and 11%, respectively. About one-third of the difference in average savings (17.5% versus 10.5%) is due to genetic differences between the A girls and the B-boys. The A family presumably has alleles that code to more patience on the “savings gene”, while the B family has alleles that code to less patience.

Maybe as interesting as the 1/3 number is that the share attributed to common family experience is essentially zero. Their paper supports a “nature” over “nurture” view on savings behaviour.

 The authors argued in their article that people born impatient or lacking self-control might find that these traits have a consequence on their savings, and on some health issues. However, individual-specific life experiences is a very important explanation for behaviour in the savings domain, and strongest in urban communities. In a world progressing rapidly towards individual retirement savings autonomy, understanding the origins of individuals' savings behaviour are of key importance to economists as well as policy makers.

Regarding this article and some other research that indicates the influence of genes on savings behaviour, policy planners may have to reassess current public policies to see whether they are effective enough to encourage savings or to change savings behaviour.

Are you retiring in Canada this year, Pillar 3: Employer pension plans

Understanding your employer pension plan

The two main types of employer pension plans include: 

·         Defined benefit pension plan (DBP)

·         Defined contribution pension plan (DCP) 

The following table below compares the two. 

Characteristics	Defined contribution pension plan (DCP)	Defined benefit pension plan (DBP)
What is it?	·         DCPs are a form of savings for retirement where you and your employer contribute an established amount to your pension each year. ·         Your contribution is usually a percentage of your pay. ·         The value of the pension is based on the performance of the investments. ·         Amount of the pension is uncertain.	·         DBPs are an agreement where the employer promises to pay a certain amount of money each year after retirement. ·         Employees often but do not always make contributions in addition to their employer’s contribution. ·         How much you receive depends on a formula, generally based on your income and years worked.
How is it managed?	·         Generally, you have to choose how your contributions are invested. ·         Consider the level of risk and time frame when making investment choices.	·         Your contributions are pooled into a retirement fund and managed by your employer or pension plan administrator/sponsor. ·         Investment results affect the amount of the employer’s contributions.
Advantages	·         You have more control. ·         You can invest in a way that suits your goals and risk tolerance. A financial professional can help you understand the risks of various investments. ·         You have the possibility of benefiting from higher returns if your investments perform well.	·         The amount of your pension is set primarily on a set formula often based on your career earnings and years of service and is therefore generally less sensitive to annual returns in the stock market.  ·         Funds are professionally managed and you are not required to make any additional investment decisions. ·         Your investment risks are pooled across time and different individuals, so that investments have time to recover from really bad years and/or benefit from years with really good returns.
Disadvantages	·         The amount of retirement income is not guaranteed. If your investments do not perform well, you have to deal with it yourself. It could be affected by the ups and downs of the stock market. ·         Some people are not comfortable managing their own retirement fund or investments. ·         Because of the limited advice available, obtaining separate financial advice may involve additional costs. ·         You may not be able to invest exactly the way you want as the employer may offer only a limited number of investment options within the plan.	·         The risk that the fund is not managed properly or that your employer experiences financial troubles or even bankruptcy can affect the amount of your pension. ·         You are not able to directly benefit from high stock market returns. These are passed along to all members in various ways (often in terms of lower contributions or increased benefits).

Both DCPs and DBPs have advantages and disadvantages, but ultimately you won’t have a choice over which type of pension plan your employer has in place. What’s most important is that you fully understand how your pension plan works.

Your pension will likely be a cornerstone of your retirement income, so if you don’t know how your pension works, be sure to speak to your human resources staff member, union representative or pension plan manager to find out.

Group Registered Retirement Savings Plan (Group RRSP)

A Group RRSP is an employer-sponsored retirement savings plan, similar to an individual RRSP, but administered as a group by your employer. Your contributions are made through regular pay-roll deductions on a pre-tax basis.

While Group RRSPs function similar to individual RRSPs, the details of the plan often vary by the employer. For more detailed information on your Group RRSP, consult your human resources, union, or pension plan representative.

Pooled Registered Pension Plan (PRPP)

Pooled registered pension plans (PRPPs) are a new type of pension plan to help Canadians save for retirement. PRPPs are designed mainly for people who do not have access to a workplace pension, such as employees of small-sized and medium-sized businesses, and self-employed individuals.

The federal Pooled Registered Pension Plans Act (the federal PRPP Act) and the Pooled Registered Pension Plans Regulations (the Regulations) came into force on December 14, 2012. 

How do PRPPs work? 

PRPPs are defined contribution (DC) pension plans. In a DC plan, you and your employer contribute a certain amount to your pension each year. In the case of PRPPs, employer contributions are optional. DC plans do not guarantee how much you will receive when you retire. Your pension income depends on how well the investments held in your DC plan perform.

Employer participation in PRPPs is voluntary. To set up a PRPP, an employer must enter into a contract with a PRPP administrator. PRPPs are administered by licensed third parties such as banks or insurance companies, not employers.

Once an employer enters into a contract, employees are automatically be enrolled as members unless an employee chooses to opt out. Members’ contributions to the pension plan will be made through deductions from their pay.

Who can join a PRPP under the federal PRPP Act and Regulations?  

You can join a PRPP offered by your employer if: 

·         you are employed in a federally regulated business or industry (such as banks, telecommunications companies, interprovincial transportation sectors, etc.) anywhere in Canada and your employer offers PRPPs

·         you are employed in any type of work in the Yukon, the Northwest Territories or Nunavut. 

You can join a PRPP on your own if: 

·         you are employed in any type of work in the Yukon, the Northwest Territories or Nunavut and your employer does not offer PRPPs

·         you are self-employed in the Yukon, the Northwest Territories or Nunavut. 

Note: The availability of PRPPs for provincially regulated employers, employees and self-employed individuals will depend on provincial government decisions on whether to put in place similar provincial legislation. 

Provinces  

Quebec: Voluntary Retirement Savings Plans

In 2013 the Quebec Government introduced the Voluntary Retirement Savings Plans Act for employers with businesses in Quebec – Voluntary Retirement Savings Plans (VRSPs) are Quebec’s version of PRPPs.

VRSPs and PRPPs are similar in many ways.  However, one of the main differences is that employers with businesses in Quebec with more than five employees must offer their employees a VRSP, a Tax-Free Savings Account, or another retirement savings plan, however, employees have the right to opt-out. 

For more information on VRSPs visit the VRSP section of the Régie des rentes du Québec website and for more detailed information on eligibility see section 45 of the Voluntary Retirement Savings Plan Act. 

More key facts about PRPPs 

·         PRPPs must be low-cost. This means that the costs charged to plan members must be at or below those charged to members of defined contribution pension plans that provide investment options to groups of 500 or more members.

·         Costs include all fees, levies or other charges that reduce a member’s return on investment, other than those triggered by the actions of a member, such as requesting copies of documents.

·         Under the federal PRPP Act, the Office of the Superintendent of Financial Institutions issues licenses for administrators to offer PRPPs.

A few things to keep in mind about employer pension plans 

If you have a defined contribution pension plan, contributing at least the amount your employer will match will enable you to fully benefit from your employer’s contributions. 

Many people switch jobs and careers throughout their working lives, which means many people might have two or more smaller pensions from different employers. 

If this is the case for you, be sure to investigate what’s best for you. Are you able to transfer your old pension to your new plan? Talk to a financial professional or your human resource advisor to better understand your options.