General

Today’s retirement reality

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MarieEngen
Marie Engen, Boomer & Echo

By Marie Engen, Boomer & Echo

Special to the Financial Independence Hub

We all like to compare ourselves with our peers to see how we measure up to everyone else.

Here are some retirement statistics from the most recent Canadian Census, Statistics Canada and various surveys.

Age statistics

  • In Canada in 2014 the average age was 58.
  • The baby boom demographic, representing those born between 1946 and 1966, represents 30% of the population.
  • Within 10 years, those age 55 and over will outnumber children.
  • One in seven Canadians are now elderly and two thirds of the very elderly are women.
  • Average life expectancy is 82.5 years for women and 77.7 years for men.

Retirement statistics

  • 7% of Canadians aged 55 and over had already retired once. Of this group, 17% returned to work.
  • 48% returned to some form of work for financial reasons. The others had new, interesting job offers.
  • 23% retired initially due to personal and family responsibilities or care giving.
  • 8% retired initially due to personal health concerns.
  • 6% retired because they qualified for full pension benefits.

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Where to Travel to Stretch Your Canadian Dollar the Farthest

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sean-cooper-experts
Sean Cooper

By Sean Cooper

Special to the Financial Independence Hub

After a second straight brutally cold winter, spring is finally here. February was the coldest month in Toronto history – what better way to celebrate than a summer getaway? Many Canadians on a budget choose to travel to our neighbours to the south, the U.S.

“With the Canadian dollar having lost 25% of its value over the last two years and the Canadian dollar below 80 cents, you’ll need to be more frugal with your money this year” says Rahim Madhavji, President of KnightsbridgeFX.com.

Here are some places to consider travelling to stretch your Canadian dollar the farthest in the U.S. and internationally:

USA

  1. Yosemite National Park

Cost: $30 per vehicle ($25 from November to March) for a seven-day pass Continue Reading…

A savings account that rewards inertia

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By Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

Canadians have few reasons to save these days. Cheap borrowing coupled with feeble returns on your savings deposits makes it hardly seem worthwhile to park your cash in a savings account. Some banks have decided to punish savers even further by charging fees just for moving your money around.

Gaining Momentum Through Inertia

But one bank has turned to the carrot rather than the stick approach to help its customers save. Scotiabank, which already boasts the best suite of rewards credit cards, in addition to its Moneyback chequing account, has raised the stakes with a new high-interest savings product called the Momentum Savings Account. Here’s how it works:

Using a unique incentive that rewards “inaction”, or our tendency to drift toward financial inertia, the Scotiabank Momentum Savings Account pays a bonus interest rate for customers who do not make a withdrawal in a 90-day period.

The account pays regular interest of 0.75 percent when you keep a balance of $5,000 or more. If you resist the temptation to withdraw from your account for 90-days, you’ll receive a 0.75 percent bonus, for a total interest rate of 1.5 percent.

Customers who open an account by June 15th, 2015 will get an additional 0.5 percent bonus, for a total of up to 2 percent until July 31st, 2015.

Momentum Savings also comes with an “Account Tracker” that customers can access online and through their mobile app. It provides a visual “countdown” to the extra interest payment, so you can see when you’ll receive the extra interest. With this tool, you can be strategic about when to withdraw from the account to ensure maximum savings.

Scotia Momentum Savings Account

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5.8 million working Canadians will see 20% drop in income in Retirement

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benjamin-tal
Benjamin Tal (CIBC)

Almost 6-million working Canadians risk losing the “retirement of their dreams,” according to a CIBC report getting lots of attention today at the Globe & Mail website. CIBC deputy chief economist Benjamin Tal (pictured) says some 5.8 million working-age Canadians will suffer at least a 20% drop in their standard of living once they leave the full-time work force.

The short article is listed as one of the most popular today on the site and has attracted dozens of comments and social media mentions.

Stop me if you think you’ve heard this before but it seems the bank believes the country’s retirement system needs to be reformed as quickly as possible. The most recent move in this direction came from an apparent about-face by the Conservative Government, whose apparent refusal to consider an expanded or “Big” CPP motivated the Ontario government to launch a new retirement system of its own, the ORPP or Ontario Retirement Pension Plan. Then last week, Finance Minister Joe Oliver floated a trial balloon for a “voluntary” expansion of the CPP, which the Hub reprised on the weekend.

Younger middle-income workers with no DB plans at risk

Mr. Tal told the Globe that “it’s not just CPP,” but expressed concern that Canadians still aren’t saving enough money. While many Canadians close to the traditional retirement age of 65 are “on a path to the retirement of their dreams,” Tal’s data also shows millions others, especially younger workers in the middle-income brackets, “are headed for a steep decline in living standards in the decades ahead.”

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Weekly Wrap: Voluntary CPP expansion, Social Security fixes, Longevity Insurance, Tontine Annuities

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View of Ottawa on the Grunge Canadian Flag

A lot of coverage this week for the Tories’ floating of a “voluntary” expansion of the Canada Pension Plan (CPP: Canada’s equivalent of Social Security, if you also include its Old Age Security program), especially when you consider the details were pretty scant.

Incidentally, the issue is quite similar with Social Security in the U.S. This week, Reuters ran a piece entitled How to use Social Security to fix Retirement Inequality. It makes the case for “expanding” Social Security benefits “to help people who need it most.”

The Hub ran two pieces on the proposed CPP expansion: an initial one that felt it looked promising, despite the lack of detail: Bring it on!, followed by a guest blog by Retirement Redux’s Sheryl Smolkin: Voluntary CPP contributions will favour high earners.

Time to bring back Tontine Annuities? Continue Reading…