With the growing popularity of online and mobile banking, it stands to reason that branch banking hours should be on the decline. A decade ago, full service branches were being replaced by smaller satellite branches and ATM-only locations.
But banks are staying open longer to meet the needs of our busy lives, offering extended weekday hours and opening on weekends.
Related: Free Chequing Account Comparison
Sunday Banking
After opening their first Sunday branches in 2007, CIBC has ramped up their approach by doubling the number of branches open on Sundays – over 100 branches – and opening another 92 branches on Saturdays to give them more than 600 Saturday banking locations.
TD Canada Trust started Sunday banking two years ago as part of a national strategy and now has the most Sunday hours branches in Canada with over 400 locations.
Getting Face to Face Advice
While the majority of everyday banking can be done online, when it comes to making big financial decisions we’re still looking for face-to-face advice. For many of us, that means visiting the bank after work or on the weekend.
“Baby boomers, new immigrants are looking for advice, but it’s difficult for them to come in during the week,” said Larry Tomei, a senior vice-president at CIBC.
Related: Can you trust advice from your bank?
TD research shows that 62 per cent of Canadians find it hard to get errands done Monday to Friday. Four-in-ten run errands on weekends, so providing banking services to customers when it suits them is essential.
We’re also more comfortable performing certain banking activities like signing a mortgage, setting up a loan or buying investment products in person, rather than online or by phone.
In research released earlier this year from CIBC and Harris/Decima, only 49 per cent of Canadians had met with an advisor in the last 12 months.
“This speaks to the importance of advice and giving people greater access to having a conversation with an advisor”, said Tomei.
Related: Fee Only Financial Planner Vs. Commission Based Advisor
Offering full service banking, seven days a week comes at a price, and not all of the big banks are on-board with this approach. The only other major bank to operate on Sundays is Bank of Montreal, with 35 locations across Canada.
Tom Dyck, executive vice-president of branch banking at TD, said they’re not targeting any specific demographic, but being open on weekends and longer weekday hours is part of a national approach to offer customers more choice of when to do their banking.
“Weekends are a very important part of our business strategy,” said Dyck. “When we choose a Sunday branch location, we look at other businesses in the area that tend to be open on Saturdays and Sundays, which means there is traffic there and demand by our customers and that we should be open.”
Final Thoughts
I do most of my banking online, but I have taken advantage of extended banking hours recently when we bought our house and when we set up an RESP for our kids. I definitely appreciated being able to come in later in the evening after work or on the weekend.
Do you need to bank during the evening or on weekends?
When you walk out of your place of employment for the last time it can feel kind of scary financially. You’ll no longer be receiving the income you’re accustomed to. There’s also the fear of not having enough savings to last the rest of your life.
Where will your retirement income come from? Will you have enough to sustain your desired lifestyle, and will it last the rest of your life? Will there be enough left over for your beneficiaries to inherit or to donate to your favourite charity?
You’ve probably already decided on a retirement date, the lifestyle you want to pursue, where you want to live, and how much money you will need to live comfortably and, hopefully, you’ve paid off all your debts.
Related: Why Baby Boomers Aren’t Prepared For Retirement
According to a survey of household spending, middle class couples spend $40,000 – $70,000 a year with the average being about $54,000.
This seems to be on the high side for me, but I’m considered notoriously cheap – er, frugal – and I tend to be an under buyer, so the median of $39,000 would probably be right for me. However, every person is unique and each person’s financial situation and cash needs are different.
Now, instead of receiving income from only one source – your employer – you will now have to manage multiple streams of income.
Where will this income come from?
Fixed income sources
I call these fixed income sources because, even though there may be adjustments for inflation, you know how much you will receive monthly, and the income is paid to you for life. These sources include:
- CPP/QPP – check Service Canada for the amount you’ll receive
- Company pension(s) – check your benefits statements
- Pensions (government or otherwise) from other countries if you were employed overseas
Income dependent government programs (again, check with Service Canada):
- OAS
- GIS and Allowance (for low income seniors)
The closer you are to retirement, the more accurate the figures will be.
What about annuities? These will provide a cash flow for life in exchange for a lump sum.
Current low interest rates and optional features such as guaranteed fixed terms and joint or last survivor options will reduce your monthly payment. Because of the way they are structured, I probably wouldn’t consider an annuity until I was around 80 years old.
If this option appeals to you, make sure your agent runs through several scenarios to be better able to make a good choice.
Turn your savings into retirement income
To supplement your monthly cash flow you need to look at your own resources. You can structure your investments to provide a steady income stream. Depending on your own comfort zone you could invest in some combination of:
- Bonds – Government or Corporate (pay semi-annually)
- Dividend paying stocks (pay quarterly)
- Preferred shares (usually pay quarterly)
- Monthly income funds in mutual funds or ETFs
- Income trusts such as REITs and Utility trusts
While I wouldn’t advise buying an investment based solely on payout times, you could buy products so you receive a similar amount of income each month. Just remember to diversify.
If you own mutual funds you could set up a systematic withdrawal plan which will provide you with a specific payout amount, usually monthly, but can be any predetermined interval.
Related: Beat Inflation With Rising Dividends
TD Waterhouse offers an “Income Generation Account” or “Sweep Account” where interest and dividend income is automatically transferred from your non-registered account then transferred to a bank account of your choice twice a month. This may be of interest to some.
The 4% rule states that if you retire at age 65 you can theoretically withdraw 4% a year from your nest egg and it will last up to 30 years.
This assumes that you are invested in a balanced stock and bond portfolio.
Because we’re looking at a long span of time though, we can’t be certain of the effects of market volatility, actual returns or inflation.
Personally, I like to focus on receiving income. A portfolio of $100,000 invested in a well-designed portfolio of dividend paying stocks and income trusts could easily give you $400 or more a month without even touching your capital.
If you own your own home – mortgage-free – you can tap into your home equity with an equity secured line of credit or reverse mortgage but these are not for everyone. Many seniors finance the costs of moving to a retirement home from the proceeds of the sale of their residence.
Related: Should You Sell The Family Home?
Effects of taxation
The generally accepted principle of RRSPs is to contribute to the plan to reduce your marginal tax rate in your greater earning years, and then withdraw in retirement when your income will be much lower.
The advice is to use up your non-registered investments first and let your RRSPs grow on a tax deferred basis until you must start withdrawals at age 72.
This plan will not work for everyone. It’s conceivable that someone who receives a large company pension, CPP and OAS could easily exceed his or her previous employment income. Add to that the required minimum withdrawal of a large RRSP/RRIF account and they would be paying more tax than ever.
Related: Using Tax Free Savings Accounts In Retirement
In a case like this, to minimize taxes, it might be preferable to start withdrawing RRSP amounts earlier to reduce the balance and take pension amounts later.
When estimating your tax rate consider the following:
- Your RRSP withdrawal is considered income and will impact clawbacks of GIS, OAS and the age tax credit.
- Dividend income from non-registered accounts is grossed up which increases your net income for OAS purposes.
- Low-income seniors who collect GIS may have their benefit cut approximately 50 cents for every $1 received from an RRSP.
- By having dividend paying stocks in your TFSA you will lose the dividend tax credit, but withdrawal of the dividends will not be taxed.
Final thoughts
It might be difficult to find a financial advisor who will assess all your income sources to provide a sustainable, tax-efficient income. After all, most advisors make their living from contributions and/or the size of your portfolio.
Related: Fee Only Financial Planner Vs. Commission Based Advisor
Take some thought to create a written plan that will work for you. Couples can pool their resources. Budget carefully and be flexible.
To paraphrase Mr. Spock – “May you all live long and prosper!”
This year is shaping up to be a great one, financially speaking.
Our income is the highest it’s ever been, and we’ve managed to put about 25% of that away into savings and investments. We’ve also nearly doubled-up on our monthly mortgage payments and so we’re on track to pay off our house in 10 to 12 years.
Related: Our Fast Track To Financial Freedom
I know we’re making sacrifices today so we can have a better tomorrow, but while we continue the long and slow march towards financial independence, sometimes I wonder if the sacrifice will be worth the payoff in the end.
YOLO?
“You only live once” is the rally cry of today’s youth. Why sacrifice and save for tomorrow when you can live like the Kardashians today?
The savers believe it will all catch up with the spenders eventually and they’ll be forced to work for the rest of their lives to repay the debts they’ve built up in their youth. But that’s not always the case.
It’s not always fair
I heard a story the other day about two sisters, Tina and Cindy.
Tina and her husband live mortgage-free in the same home they bought 25 years ago. They work hard, live frugally and save a portion of their income every month. They’ve put their two kids through University, but at the expense of their own retirement, which has been pushed back a few years to 60.
Related: How To Choose Your Retirement Date
Cindy and her husband are spenders. They make a decent income but they spend much more than they earn and have racked up a huge amount of debt on their credit cards and line of credit.
But when Cindy gets in over her head, she asks her dad to bail her out. Over the past 10 years, Cindy has borrowed over $50,000 from her dad. The first $10,000 paid off her credit card, but Cindy quickly maxed it out again when she decided to upgrade her kitchen.
The next $25,000 was to buy a new vehicle because their gas-guzzling truck was costing too much to drive. But instead of selling the truck, they kept it so they could pull their trailer when they go camping in the summer.
Finally, Cindy asked her dad for another $15,000 so they could pay down their line of credit. A few months later they posted pictures of their recent Caribbean vacation on Facebook.
Tina is understandably upset about how Cindy is taking advantage of their dad. Is it fair that she sacrificed and saved for decades in order to retire comfortably and set her kids up for success while her sister spends like an investment banker and continues to get bailed out?
Related: Bailing Out Your Adult Children
Why Do We Save?
Perhaps a better rallying cry should be the one coined by Paula Pant at Afford Anything – “You can afford anything, but you can’t afford everything.”
We save because we want to become financially independent, and the sooner the better. We’ll be financially independent when we’re debt free, and when the income from our investments can cover our monthly expenses.
But saving is not about deprivation. It’s not about living like paupers today so we can live like kings tomorrow. It’s about finding a balance between saving, investing, and paying off debt while still having some fun.
Related: How Young Adults Can Still Thrive Financially
I can honestly say we’re not missing out on anything by saving a quarter of our income. If there’s something we really want to do, we’ll add it into our household budget or plan for it far in advance and pay for it in cash.
After all, you only live once – it shouldn’t be in constant debt, dependence or servitude.