Canada Savings Bonds are still a thing? The legacy savings program that was built to fund the Second World War is now in its 70th year of sales and costs the federal government $60 million per year to run. But savings bonds that once paid double-digit interest rates now yield a paltry 0.5 percent in today’s low rate environment.
Is this a case of the federal government, and employers in turn who continue to offer CSBs to employees through automatic payroll deductions, simply doing the same thing year-after-year because that’s what they’ve always done?
It seems to me like Canada Savings Bonds should go the way of the penny. Accounting firm KPMG agrees, saying “there are no valid economic reasons to justify this program.”
Finance Minister Bill Morneau is taking a close look at that report and seriously considering ending the program in his next federal budget. Rob Carrick of The Globe and Mail says if it’s time to bury CSBs, pass him a shovel.
Rogers Media cuts
Print media is dying. Rogers announced a major overhaul to its media division this week. Disappearing from the newsstands are MoneySense, Canadian Business, Flare, and Sportsnet, while Macleans, a flagship weekly magazine since the 1970s, will now be published monthly.
It’s a sad reality for the industry as we continue to see major shutdowns of newspapers and magazines every year.
This Week(s) Recap:
Last Monday I wrote about doing what you love, on the side.
Last Wednesday Marie looked at traits of The Millionaire Next Door.
And last Friday I shared some advice to Millennials about how to start investing.
On Monday I explained the next tax bracket myth and how working overtime won’t mean taking home less pay.
On Wednesday Marie continued her financial planning for couples series with a look at protecting your assets.
And on Friday Marie opened up the mailbag and answered a question about retirement planning for single women.
Weekend Reading:
Here’s an interesting look at how children are taught financial literacy from coast-to-coast. How’s your province doing?
A Vancouver real estate developer who was at the centre of an investigative report into possible fraud and tax evasion wants to set the record straight.
Everyone thinks they’re middle-class, whether they make $22,000 or $200,000.
Investors Group is discontinuing the deferred sales charge (DSC) purchase option for its mutual funds as of January 1, 2017. It doesn’t appear this change will help investors who are currently stuck in a deferred sales charge schedule.
ModernAdvisor shared a portfolio review from an Investors Group client which included the understatement of the year:
“As we expected, the fees on his Investors Group funds were on the high side.”
Yes, shockingly high. As in, an average MER of 2.66%!
Dan Hallett explains how to make sense of your new CRM2 performance report.
Mark from My Own Advisor writes a thoughtful post about why his thinking around dividend investing hasn’t changed (to counter my post about why my thinking around dividend investing did change). Go for the article, stay for the comments.
Frugal Trader talks about investing for his kids.
Start a family or buy a home? The big compromise couples face amid soaring house prices.
Jamie Golombek does the Canada Child Benefit math for different income groups. It adds another complex calculation to your earnings and taxes.
Here’s how to get more pleasure out of retirement spending.
How much do you make? We’ve all heard the question before. How do you answer?
Sheryl Smolkin says you can work after 65, just don’t expect the same benefits.
Black market dealers reveal the secret to super cheap cellphone plans. And here are the provinces with the cheapest cellphone plans and why the rest of us don’t get them.
Sweet tooth rewards examines the Air Miles expiry debate.
Finally, LoyaltyOne Inc. CEO Bryan Pearson comes off as arrogant and out of touch when explaining how Air Miles changes were aimed at growing customer engagement. Yeah, right.
Have a great weekend, everyone!
Q. I am a single woman, by choice. So much financial advice is written for couples. How can I invest for my retirement when I have to cover all my living expenses by myself?
Women are already at a disadvantage when it comes to saving for retirement. They often face lifestyle and economic issues that require special consideration. Women tend to earn less money than men and take more time away from the workforce to care for family members giving up their income stream and losing out on raises and promotions. They are less likely to have access to retirement benefits at work, and live longer than men.
On top of that, women who are single face other retirement planning challenges, whether they’ve always been single, or are now divorced or widowed.
Single women can’t count on a spouse’s income to help shore up their retirement savings or take advantage of tax splitting and credits. Plus, they are shouldering all the costs of pre-retirement living themselves.
Related: Whatever you do, don’t retire alone (and other helpful advice)
They’re entirely on their own to make sure they are financially secure. It’s no wonder they’re worried.
This doesn’t mean you’ll never be able to retire. But it does mean you need extra planning for your financial future.
You need to take a realistic look at your financial resources. How long will you need to work? Should you change your job to generate more income? You’ll also need to determine whether you’ll need to pare down your discretionary spending or explore alternate living arrangements, either now or during your retirement years.
Investing in your future
Financial security is a high priority for women investors so they tend to take a more conservative approach. Being conservative has advantages and disadvantages. Being too conservative and shying away from the stock market altogether can leave you financially vulnerable.
If your money is in savings accounts, money market accounts or GICs because you’re afraid of stock market volatility, you’ll not have enough growth and inflation will quickly eat into that cash. It’s actually riskier in the long run. You’ll have less retirement assets and a higher risk of outliving your money.
But being risk-adverse can also be an advantage as women tend to understand that they can’t afford to sustain large losses. They can focus more on their progress toward financial goals rather than market swings and hot investment tips like many of their male counterparts.
A US study by the Family Wealth Advisors Council showed women “don’t trust the financial services industry.” Many survey respondents reported experiencing disrespect and condescension as well as receiving poor advice.
The industry to some degree makes financial information overly complicated. With some basic education on how investing works and relating the process to their personal goals, women can increase their confidence and make excellent investment decisions. Learn as much as you can to make the best use of your financial and social resources.
You may find yourself becoming interested in researching individual stocks or other investments. You can simplify the investment decisions with regular contributions to such options as the Tangerine Balanced Portfolio or broad market ETFs.
On the other hand, if you want a totally hands off approach, robo-advisors such as ModernAdvisor or Wealthsimple are an ideal way to automate your decisions, diversify your portfolio and reduce time spent worrying about your investments.
Surround yourself with support
Finally, consider forming a money club. This differs from an investment club in that members discuss all financial concerns.
The purpose of a money club is to meet with a group of like-minded friends and/or family members that you trust to discuss your progress toward your financial goals, keep you motivated, provide support and accountability, share tips, and help one another out when things get off track.
Admitting your own money mistakes, and learning about those of your friends can actually make you feel less anxious about your own situation and creates an immediate bond. And, it’s rewarding to celebrate the progress your fellow money group members have made.
Insurance is one of those expenses we all hate to pay for, but we are very glad we have it if we ever have to make a claim. Auto insurance is a necessity for all drivers and if you have a mortgage on your house, home owner’s insurance is a requirement by your lender. All other types of insurance are optional, but now that you are a family – even if it’s only the two of you, it’s necessary to have a discussion about your protection.
Review your current insurance coverage
Review your policies – homeowner’s or renter’s, and auto for appropriate coverage and ensure you are not under-insured. Make sure you have enough coverage to protect your household goods, especially items that typically have limited coverage such as jewelry, collectibles and electronics. Save money by combining your policies and negotiate, negotiate, negotiate for the best rates.
If both of you work and are covered by insurance plans through your employer, co-ordinate your benefits and look for duplicate coverage. Which plan will be the most beneficial? Figure out if joining a spouse’s medical or dental plan offers better coverage and/or pricing. If one of you has a good policy with a deductible, the other may be able to choose a “top-up” plan through their employer.
Life insurance
Life insurance is used to replace lost income on the unfortunate death of a spouse. Replacing that lost income is crucial in helping to keep your financial house in order. Your family must be properly taken care of so as not to suffer financially. Furthermore, any debts, especially your mortgage, can be paid off.
If someone else is relying on your income you need protection in place. If a stay-at-home parent were to die there would still be financial challenges. You would need to pay someone to care for your young children and manage the house while you are working.
The key is to get the right kind of insurance. Start by doing a needs analysis with your insurance broker. Your priority is to get the right kind of insurance that will provide adequate coverage at a reasonable rate. For most young families this is term life, especially if you are young and healthy and willing to commit to a specified time frame.
Is your employer’s group life insurance plan the best for you? What happens if you switch jobs later on? There is the possibility you’ll have to pay higher premiums as you get older. It may be more cost effective to opt-out of your group plan and replace it with a 20-year term policy with fixed premiums.
Another option, permanent life insurance policies are designed to last the lifetime of the insured and eventually pay out a benefit. They have a savings component commonly known as cash value, but these policies are much more expensive.
How much coverage do you need? You want enough life insurance coverage to ensure that your family is taken care of. For a couple, a good rule of thumb if you are both working is to replace anywhere from 5-10 years’ worth of your respective salaries. If you are a sole income provider, life insurance should comprise at least 70-75% of the replacement value of your annual income for the number of years you plan to continue working.
Disability insurance
Your largest asset is your future income-producing ability. This makes disability insurance the most important coverage you can get when you have a family, but it is often overlooked because people simply don’t perceive the risk of becoming disabled.
If you work for a large company, long-term disability insurance is probably part of your benefits package. But if you work for a smaller company, or are self-employed, you should purchase this coverage on your own.
Coverage differs among plans. Typically, if you suffer from an accident or disease that prevents you from working, the plan will pay you a percentage of your monthly income until you return to work or reach age 65. You can be covered for either “any occupation” or (more desirable) “own occupation.” Make sure you fully understand the policy, renewal, waiting periods, and most important, its definition of a disability.
How much disability insurance do you need? Look for a policy that covers at least 60% of your pay.
Keep in mind that payments from a private plan are tax-free, but payments from most employer plans is taxable.
Estate planning
Yes, you do need a will – even if you are just starting to accumulate assets.
Consider these steps:
- Draw up a list of all your assets and liabilities.
- Decide on how you would like your assets to be distributed in the event of your death and do up a list. You and your spouse may want to do separate lists and then compare notes and come to an agreement.
- Select an executor or trustee (trust company) of your will.
- Decide on a guardian for your young children. This is obviously a very important decision and great care should be taken with the selection.
- Consult a lawyer to draw up your will.
- Review your will whenever you experience major changes in your life.
Be sure to review the beneficiary designations on your RRSP, TFSA and insurance policies. You can designate those assets in your will, but keeping beneficiary information up to date is the easiest way to ensure that those assets transition smoothly to your spouse.
Further reading in the Financial Planning for Couples series: