Pay down debt or top up your RRSP?

04. February 2013 · 7 comments · Categories: Debt, Investing, Retirement

Yup – it’s that time of year again – last minute RRSP contribution time! So – do pay down debt or try to put a bit more into your RRSP?  Here’s some tips to help you decide:

1. What kind of debt are you carrying?

If you’ve got high interest credit card debt, that should be your priority – 10, 15, or 20 percent in interest payments can do you in financially. Mortgage debt on the other hand – not so bad.

2. How much do you owe?

Carrying a big debt load is a heavy burden both financially and emotionally. If you’re struggling to make mortgage payments or have a ton of high interest debt (read: credit cards) then you might want to make debt repayment a bigger focus.

3. How old are you?

If you’re fairly close to retirement – you should really be focused on paying off debt. Making interest payments on a fixed income is no fun – especially if rates go up and you find yourself strapped for cash.

4. How much do you make?

The more you make – the more bang for your buck you get from your RRSP. If you’re earning in the top tax bracket, every 1,000 you contribute nets you a 400 tax break!

5. What kind of RRSP do you have?

If you have a group RRSP and your employer matches your contribution, then you should be taking advantage of it! That would be money lost, otherwise. Where I work, if I buy stock in my company in an RRSP, my employer will match it up to a certain amount.

6. What does the math say?

In the end, it’s a fine balance between what you’re paying on your debt and what you could be earning in your RRSP – do the math to see where you stand.  One option is to use down your refund to pay down debt – but you have to have the self discipline to actually do it!

What’s your top priority – RRSP or debt payment?

Why is it so difficult to save for retirement these days?

31. October 2012 · 10 comments · Categories: Retirement

Happy Halloween everyone! For most of us, I think it’s going to be a very soggy Halloween! Ah well – more candy for me. :) . And now I’m going to cover a scary topic – why it’s so hard to save for retirement!

There was a recent post on Everyday Money on this topic. According to the article, a lot of boomers are approaching their retirement years without a lot saved up. Is it because they’re living high on the hog? Or because they aren’t good with money? While these may be possibilities, apparently one of the biggest issues is that they’re too generous!

Here are the top 3 issues:

  • Spending for education (for their children, not themselves) has increased by 80 percent for 45 to 54 year olds, and 22 percent for 55-64 year olds.
  • Spending on adult children has jumped as well – with almost 60 percent of parents giving adult children who are not in school financial support
  • Spending on housing has gone up by 25 percent – due to house size and rising expenses (like, say – your kids moving back in!)

Wow. This is not a pretty picture. Most financial advice guru’s always say you should never sacrifice your retirement funds for your kid’s education. And yet, plenty of parents seem willing to do so!

I have to admit I’ve seen this is in my own extended family (ah, the joys of posting anonymously). My step-mother in law (yup, you read that right), has 3 children. At some point in time or other, all of her kids, and their spouses/significant others have moved back in with her and my father in law. Heck, my step-sister in law and her husband even got the master bedroom! And 2 of the 3 step in laws have moved back in with their own kids in tow. I can’t even imagine how much this has cost them over the years in terms of food, utilities etc! I’m pretty sure the moochers weren’t paying for much, if anything.  My husband moved out a year after college, and hasn’t taken a thing from them since – not that they have any extra to give out! :) . They’re lucky they both have good pensions waiting or they’d be up a creek.

Do you have anyone like this in your family? Are you concerned your kids will clean you out?

 

Born outside of Canada? The government may try to deny you OAS

15. August 2012 · 10 comments · Categories: Retirement · Tags: , , ,

There was an article recently on the Toronto Star Web site that outlined the plight of some Canadian immigrants trying to collect Old Age Security.  These folks are struggling to get by because the OAS they were counting on they can’t collect.

The government is demanding everything from landing papers (this is moderately reasonable, but not if you have to wait over 6 months to get it!) to old plane tickets from years past (not so reasonable).

The general take in the article seems to be that the government is trying to save cash – they’ve raised the eligibility rate from 65 to 67, and are now trying to deny people who do qualify for OAS their hard earned cash.

So, what can be learned from this situation?

  • Always have a cushion.  The retired nurse written about here seems to have worked hard all her life, but have very little to show for it- she’s living entirely off CPP and government assistance.  I’m not worried the entire social system will collapse, but I don’t want to be dependent on it either.
  • Start looking into the process early – at least 2 to 3 years before you expect to be able to collect OAS, CPP, etc.  Determine exactly what paperwork you’ll need to be able to qualify.  Start collecting it – some things can take months to obtain from the government or track down.
  • Research your resources – there may be community groups or other resources that can help point you to people in your situation, and help you determine how to cut through the red tape.

Unfortunately, you often have to fight for what is rightfully yours – whether it’s CPP or OAS, or reimbursement from your insurance company (add link).   By arming yourself with all the papers you need, and starting early, you give yourself a fighting chance.

Do you think you may end up in this situation or know anyone who has? Have you ever had to argue with the government for something you should be entitled to?

A little extra during retirement can make all the difference

07. August 2012 · 6 comments · Categories: Retirement · Tags: , , ,

There’s a lot of literature out there (and blog posts!) about making sure you save for your retirement. Sadly, a lot of people don’t, and just assume they’ll get by on whatever the government provides.  I may not have made the best choice in investments (well, they’re not terrible – I’m just paying higher fees than I need to), but I take some comfort in the fact that at least I am saving for my retirement.  And both my husband and I have defined benefit pension plans (his is much better than mine, though).

We recently visited my husband’s grandmother, who lives in a nursing home. The nursing home provides the basics (food, shelter, some activities), but anything extra she’s got to find the money for.  So, it’s nice that’s she got a little bit extra, and can buy the odd treat or go out.

We took her out to lunch and paid (she offered, but come on -that just wouldn’t be right :) ).  We then took her to the mall, where she bought a few sweaters – go Winners! In order to get to lunch and the mall (right by each other, fortunately), she had to take a wheelchair taxi, since she basically can’t get out of her wheel chair. So – that all costs. And while we certainly could have covered all of it for her, the fact she could pay for the taxi and the sweaters herself was very important. During our visit, she also mentioned she’d taken a boat cruise the home had organized earlier.  She thought 33 dollars was a lot for lunch and the cruise, but that’s actually fairly cheap!

So, this got me thinking. What can a little extra money buy you during retirement? To me, there are 2 main things it can help you buy:

  • Self-esteem. Living in a nursing home is no picnic, as anyone who has visited one can attest. You’ve often moved away from everything you had before, and your world become quite small. Being able to still afford to buy things for yourself can help you keep at least some sense of self. Yes, I know we bloggers try to discourage spending as a way to boost sense of self – but the odd day out or clothing item purchase can be a nice break from monotony.
  • Mobility/Freedom.  Family members may not be able to accommodate you in their vehicle, particularly if you are wheelchair bound. Being able to afford a wheelchair taxi means you can get out and about. I have a great aunt who is basically wheelchair bound, but she’s still been able to travel as she’s been able to afford to pay someone to come with her and assist her.

On a side note, if you’re looking to do something nice for an elderly friend or relative, see if your local library delivers books to shut ins. Grandma L likes to read, but said her eyes are so bad, she can only read large print now. I checked, and the local library delivers (and picks up) books.  Another free and fun thing!

Do you have elderly relatives with or without extra money? How do you think it affects their quality of life?

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