Get out

 It is tough being in a lockdown and one day we will move back to normal. A vaccine is soon to be ready for us. The temptation once the vaccine is ready will be to get out, get out, get out even more!

The reason that we want to get out is not only because we are a social animal, but because there are people you've yet to meet, laughs you've yet to share, stories you've yet to live, and riches you've yet to tap, that will not find you under any other circumstances.

 While the temptation is high, we should be cautious, because even though the vaccine will be ready, many will not take it. There will be the anti-vaccers, those who don’t trust governments for other reasons, those who may be allergic to the vaccine and those who believe that they are immune to the effects of the disease. Whatever the reason, the temptation to get out, should be tempered by being cautious and common sense. The stories can still be told, the humour and the laughs can still happen but not in person until enough of us get the vaccine. So when the vaccine is available I will see you there so we can move toward herd immunity, faster rather than slower

Six ways to better working lives

 Work is important for us, and employers need to recognize that as we grow and age, we may need help to manage work, social and financial life. Here are some ideas from the Institute of Chartered Accountants in England and Wales:

1.  Stage: Growing up, studying, and requalifying - Support professional qualification students impacted by lockdown, mindful of gender gaps and equip staff with digital work skills, the young, returning mothers and older workers.

2.  Stage: Entering and re-entering the workplace - Ensure retention, re-employment, workforce restructuring, and job creation strategies are balanced and inclusive, paying attention to gender, ethnicity, and age-related pay gap data.

3.  Stage: Relationships: making and breaking up – Many people are unfamiliar with differences in marital and cohabitation financial rights, the importance of which has been spotlighted by wedding cancellations, rising break ups, and for some heightened domestic abuse. Workplace financial wellbeing best supports staff if it addresses both ‘your money and your life’, especially since many people don’t consider how their relationship and life circumstances impact their pensions plans, insurance and financial arrangements. 

4.  Stage: Parenthood and becoming a carer - Create an environment at work that supports ways of working for women and men managing family commitments, embedding approaches that also provide flexibility for older workers and domestic abuse survivors to thrive in the changing workplace.

5.  Stage: Later life, planning and entering retirement - Pensions wellbeing in the workplace will help those whose working arrangements, earnings and pensions have been impacted by Covid-19, to be better informed and to get their pensions back on track. Pension contribution gap analysis can help drive effective engagement strategies.

6.  Stage: Ill-health, infirmity and dying - Support staff whose wellbeing is impacted by Covid-19 health risks and prompt them to consider their future financial, protection and estate planning, and to keep their ‘wishes’ up to date. Where relevant, direct staff to employee benefits, or else to external sources of guidance.

CPP and OAS enhancements coming

 One of the crucial aspects of pensions in Canada is the Canada Pension Plan (CPP). For 2020, the maximum monthly amount a new recipient could receive starting at age 65 is $1,175.83. However, the average monthly amount (for June 2020) is only $710.41, which means the average retiree can expect to collect roughly $8,524.92 in yearly benefits.

With the fallout from and uncertainty created by COVID-19, the new CPP enhancement should matter to soon-to-be retirees. Most retirees will not receive the maximum benefits, but any increase in contribution would mean a higher CPP payout. The contributions resulting from the enhancement will be phased-in gradually over seven years in two phases.

Phase 1

The CPP contribution is gradually increasing from 2019 to 2023, but it will only affect those working and contributing as of 2019. Users should welcome higher contributions. The enhancements translate to increased CPP retirement pension and boost post-retirement benefit, disability pension, and survivor’s pension amounts.

In 2019, the employer /employee contribution rate already increased by 5.15%. Note that the self-employed rate is always double the employer/employee rate. The following are yearly increases: 2020 – 5.25%; 2021 – 5.45%; 2022 – 5.70%; and 2023 – 5.95%. The enhancement from 2019 to 2023 is only the first phase.

Phase 2

There will be a second higher limit starting in 2024. In the second phase, a user can invest an additional portion of earnings to the CPP. The new limit (second earnings limit) or the year’s additional maximum pensionable earnings is not replacing the first earnings ceiling. Thus, CPP subject a user’s earnings to two earnings limits.

The resulting range of earnings covered by the Plan will start at the first earnings ceiling (estimated to be $69,700 in 2025). It then rises by 14% in 2025 in the second earnings ceiling (about $79,400). Both earnings ceiling increase annually to reflect wage growth.

Supplementing your CPP pensions is important because even with the enhancements, your CPP replaces only one-third of your average work earnings.

The bottom line is it is important to build savings so you can enhance your retirement security. As your earnings grow, you will contribute more toward your CPP benefits for the future. Some Canadians have no qualms about retiring at 60 because there’s an option to take Canada Pension Plan (CPP) early. Wait five years more and you can claim the Old Age Security (OAS) at 65.

Current retirees know that the income from CPP and OAS in retirement is not enough. The combined pensions come out to less than 50% of the average pre-retirement income. If you desire comfortable living in retirement, aim to save so that you have income other than your CPP and OAS, because CPP and OAS are by themselves not a retirement plan. In Canada, you’re responsible for saving money and planning for retirement.

A retired couple receiving the average CPP pension and qualifying for the maximum OAS would have difficulty coping with the rising cost of living and healthcare as you age. Soon-to-be retirees still need to have savings and investments to ensure you cover all expenses, including travel and leisure activities.

No one should plan for retirement at the last-minute. You have financial priorities like most, but you’ll have to find ways to save for retirement. The important thing is that you start the process sooner than later.

Here are some suggestions you can follow to have a sizeable retirement fund when the time comes:

·        Prepare a realistic budget and work around it.

·        Cut down on useless spending to free up more cash for savings.

·        Liquidate or pay down debts to reduce interest costs.

·        Set aside a specific amount every month to build a seed capital.

·        Invest in income-producing assets to build a nest egg.

A safe retirement should be a top priority of serious retirement planners. Your CPP could be a secondary income source, not the primary.

Thinking of Retirement, consider the following:

"A goal without a plan is just a wish,” Antoine de Saint-Exupery. As you approach your retirement you should consider your situation and ask if it changed due to marriage, divorce, children or career? If so, and even if not, this is a good time to examine your progress and your goals, and perhaps to set new goals.

Consider the following information as you plan, in 1935, the average 65-year-old could expect to live 12 more years. Today, the Social Security Administration says the average person at age 65 can expect to live around two more decades. Living that long without working takes a lot more money. Have you saved enough to see you through? Probably not because we can’t shake recent tough times

The Great Recession of 2008 that ended a decade ago, which was one of about 8 that hit us while we were working, robbed workers of earning power. It hit men and women in their 50s and early 60s especially hard. Home values and investment savings also plummeted.

Some of us are still digging out from that hole. And even those who were fortunate enough to pop their heads back above ground now face health and financial headwinds because of the Coronavirus Pandemic.

As they say, we cannot get a break to save our souls.

Some of us look to Social Security to help us out. Guess what? Social Security is still under pressure. Unless Congress acts, Social Security Trust Fund reserves are expected to run out in 2034, according to the Social Security Administration. Costs are outpacing revenues due to a rapidly ageing population. Even if lawmakers address the broader issues, the amount you receive might depend in part on when you start claiming it.

So those of you who were lucky enough to save what you thought was enough money need to earn money on that investment and you are looking for higher interest rates. Retirees in previous generations earned higher interest on their savings and low-risk investments. But interest rates now are near historic lows. That means many of us must take on riskier investments to generate income.

Earlier generations endeavoured to enter retirement with a paid-off home and no debts. That’s harder to do today as we have used the leverage we have in our homes and in our jobs to help our kids out, and they may not be in a position to pay us back when we need them to pay us back.

I have many friends who are working or are counting on working until their mid 70’s. But poor health, a job loss, or the need to care for loved ones can force people to retire before then and as we age, we get ill faster and take longer to heal.

Finally, about 12 million adults age 65 and older live alone, according to a 2016 study from the Pew Research Center. Many find freedom in being single, but it can be difficult for one person to support a household financially. So, many of the boomers may have difficult retirements.