Financial Literacy Month 2018

78% of Canadians believe they are financially literate, but the reality paints a much different picture. We've now become the most indebted nation in the world, with Canadian households taking on record consumer debt. Canadian households owed $174 for every $100 in disposable income through the first quarter of 2017 and rising interest rates continue to add extra pressure for Canadian families.

Experts have tied our debt-loading to people taking advantage of our past low interest rates (which was generally a good idea) without taking into account the actual cost of the debt (which was not such a good idea). Financial missteps like these can have a lasting impact. That's why when you're making a financial decision, making sure you understand basic financial principles at play and how they will impact you over the long-term is critical.

At OPB, we believe that retirement literacy is a vital element of overall financial literacy because managing your daily finances and making secure investments in your future, are both closely related. We understand that navigating financial decisions can be very stressful, which is why we're committed to helping our members navigate pension decisions and strengthen their financial planning skills.

So, to kick off Financial Literacy Month, we've put together some suggestions to help you strengthen your financial knowledge.

1. Build your knowledge. Read up on the topic. There are a lot of great books, blogs and articles out there that can help you better understand concepts and issues. Did you know OPB News features general financial planning articles in addition to updates about your pension? We also offer financial and retirement planning workshops with our Client Education Officers and in-house Certified Financial Planners.
2. Let your goals be your guide. Setting financial goals and tracking your progress will drive you to learn and persevere. This is why we offer our Retirement Planner tool which helps members create a customized, comprehensive snapshot of your overall retirement picture.
3. Know your current financial situation. Keep track of your spending by making a budget and make sure you understand key personal financial documents including your pay stubs, investment statements, annual pension statements, loans, Wills and Powers of Attorney.

Find out how financially savvy you are compared to your fellow Canadians here: https://itools-ioutils.fcac-acfc.gc.ca/FLSAT-OAELF/star-comm-eng.aspx.

As a member of the PSPP, you might be thinking “why do I need to focus on retirement when my pension’s got me covered?” While it’s true that you’re off to a great start with a secure lifetime pension, that doesn’t mean you can just forget about retirement planning.

As a PSPP member, effectively planning for your retirement requires more than just making contributions and looking at your annual statement. It means understanding your opportunities so you can maximize your pension, and setting your retirement goals so you know if you’re saving enough.

Understanding your pension opportunities

The more pension credit you have, the bigger your pension will be. So ask yourself, are you leaving money on the table?

Do you have employment you can buy back (such as a leave of absence, a period of optional membership like contract employment, or service with another registered plan you can purchase) or if you’re new to the Plan, service you can transfer in from another plan?

If you think you might have eligible service, give us a call and we can confirm if it’s purchasable and walk you through the process.

Tip: It’s a good idea to apply earlier to avoid rising costs!

Figuring out how much you’ll need

The first step is to think about how you want to spend your retirement (i.e. set your retirement goals) and the second step is to understand what that’s going to cost. Here are a few questions to get you started:

1. With the rising cost of housing, do you expect to have mortgage or rent payments in retirement?
2. Will you still be paying for your kids; college or university costs?
3. Will you be supporting elderly parents or other family members?
4. Do you plan to travel a lot or stay closer to home?

Depending on your goals and how much credit you expect to have in the PSPP when you retire, you may need to be putting extra money into other retirement vehicles. When it comes to savings, the earlier you start, the better off you are.

Not sure if you’re on track? We can help

1. Check out our on-line Retirement Planner (available in e-services). It helps you forecast your complete financial retirement picture, including your projected income and expenses, so you can determine if you are saving enough.
2. Attend one of our advisory workshops where we help you understand how your PSPP works and how it fits into your broader financial plan. Stay tuned for our 2019 dates.
3. Book a personal session with one of our in-house Client Service Advisors who are all Certified Financial Planners®. They’re available to meet with you 1-on-1 to review your pension and retirement plan.

At OPB we believe that our members must understand how their pension fits into their overall financial and life circumstances in order to make informed decisions, and we’re committed to providing the resources you need to achieve a secure retirement.

Come back next week to read our third article which provides tips on saving and effectively managing debt. Want to submit an article idea? Email us at feedback@opb.ca

In 2017, CIBC conducted a survey to determine how active Canadians were in creating and following financial plans. The results revealed that 46% of Canadians do not have a financial plan despite many being concerned about managing unexpected expenses and not having enough money when they retire. At OPB, we believe that financial planning is one of the most important steps you’ll ever take, and the success of your plan will have a direct impact on you, and your family’s financial well-being.

Many of us feel we don’t need to write our financial plan down but the reality is that an effective financial plan requires great attention and organization. By estimating the costs of your goals and then writing them down, you’re more likely to achieve them. Having a written plan allows you to share and evaluate it with your personal advisor and/or the people who mean the most to you.

Today, Canadians have a record-high $1.68 in household debt for every $1.00 of disposable income. So it’s no surprise that many of us are anxious about finances and lack a savings plan. It’s hard to imagine building wealth when you’re struggling to climb out of debt. But, it is possible. Here are some tips to get you started.

• Pay yourself first by taking your savings right off the top before you do anything else with your money.
• Automate your saving by setting up automatic deposits into your savings account(s) (now there are even apps, which allow for auto-saving).
• Keep track of your cash flow as it will put you firmly in control of your finances, giving you the opportunity to save for your goals.

Tips for paying down debt

Successful financial management also includes managing debt wisely. Here are some debt-reduction strategies:

• Create a savings and spending plan that shows your monthly income and expenses, as it will enable you to understand, and curb, some of your spending habits so you can allocate more to paying your debt.
• Pay off the most expensive debt first (i.e. paying extra on the card or debt with the highest interest first)
• Start setting aside money into an emergency fund so you can pay for any unplanned costs that arise without using your credit card and accumulating even more debt.
• Use lump sum payments, like bonuses or income tax refunds, to pay down your debt.
• Reduce the number of credit cards you use to help curb discretionary spending.

Your debt doesn’t have to be a dark cloud hanging over your head, and it definitely doesn’t have to hinder you from saving and planning. While being concerned about the lifestyle you envision for yourself in retirement is natural, we should all recognize that there are things we can do now to better prepare ourselves for the future.

Planning for retirement...

Retirement used to be simple. You’d work one job for your entire career and then you announced your retirement and went on to live happily with your employer sponsored pension.

The world is different today. The financial reality has changed (and continues to change) and we are also now living much longer. This means we need to plan ahead for retirement, even if we have a pension to rely on.

OPB has resources available to members and retirees to help with the financial component of retirement planning. The Retirement Planner allows for income and expenses to be recorded and “what if” scenarios to be explored. Client Service Advisors are also available to work with members and retirees to make financial decisions regarding retirement.

Here are three main questions to consider when planning the financial aspects of your retirement:

1. How much income will I receive? Retirees have three primary sources of income in retirement – pensions, government benefits (i.e. CPP) and Old Age Security (OAS) as well as personal savings.
2. How much money will I spend? You might spend less on clothes and commuting, but consider other ways you’re likely to spend in retirement – travelling, entertainment, hobbies, renovations, etc. Create a budget to project your anticipated spending.
3. How long will I live as a retiree? – planning for retirement means facing the uncertainty of how long you will be able to enjoy retirement. Consider the age at which you plan to retire, your family’s history of longevity and your current and future health status. Statistically, a 60-year-old couple today has a 50% chance that one of the members of the couple will live to age 94.

Transitioning into retirement can be incredibly emotional. Work is not only a big part of our lives but, for many of us, it’s also a large part of our identities. Retiring isn’t just finding out how you’ll fill the extra hours in the day, but rather discovering who you are and what you want to be. With that in mind, we have provided our top three recommendations for living a happy, healthy retirement:

1. Plan before your retirement what you’ll do after you retire. The first part of retirement might feel like an extended vacation, but once you’ve had a nice long break from working, you might need something to do.
2. Create a new daily schedule and new weekly, monthly, yearly goals. Once retirement becomes your new normal, you’ll ENJOY this phase of your life with purpose.
3. Develop new relationships and rearrange old ones. You’re never too old to make new, meaningful relationships and with extra time on your hands, you’re in the perfect position to spend more time with friends and family.

While it’s crucial to start planning for your financial future as early as you can, it’s important to also consider the more personal side of retirement. Canadians are now living between two and three decades past their normal retirement date which means you should start examining how you want all that time to be spent. Your work life may be ending, but living your life to its fullest is just starting.