Tag Archives: savings

retirement

75% of People Not on Track for Retirement

A new study shows that three in four Canadians are not on track for retirement. With the recent economic turmoil, many working Canadians are struggling to make ends meet as it is. The same survey indicated that half the population is living paycheck to paycheck, and very few have any emergency savings built up. Living in the moment means that they’re not focused on retirement goals, and many expect to be working several more years as a result.

Although workplace pensions, the Guaranteed Income Supplement (GIS), Old Age Security (OAS) and the Canada Pension Plan (CPP) can provide funds, it’s often not enough. Moreover, the higher your income is now, the less likely you are to have your future needs met by these types of programs. If you’re among the 75% who are not on track to retire, here are the changes you need to make now:

Take a Hard Look at the Money Coming In

You’ll need to set a budget, but long before you get to it you must have a full accounting of how much money is coming into the household. Then, you’ll need to deduct between 20% and 30% of the gross for emergency expenses and retirement. Focus on building emergency savings that will cover you for three to six months first.

Eliminate Bad Debts

Carrying a balance for a mortgage or vehicle isn’t usually a problem, but more and more Canadians are maxing out credit cards and racking up other smaller debts. These things should also be knocked out of the way first.

Say Goodbye to Luxury Spending

While the older population is much better at assessing value and affordability, the younger generation is geared toward luxury items. Expensive cars, lavish clothing and trending technology add to debt. If you aren’t on track for retirement, and you’re carrying unnecessary debts, you should get yourself back on track and only purchase essential and value-oriented products.

Reevaluate Your Investment Choices

Unfortunately, many investment firms take a chunk of payments, and they fail to deliver in returns. Do a cost-benefit analysis and see if you need to consider moving your money to another firm or program. Diversification, both on a local and international level, is essential, as it provides a kind of insurance in case the economy falters. Think beyond stocks, as well. Bonds, commodities and real estate holdings can provide extra layers of security.

Use a Budgeting Program

There are numerous options available, but they all serve the same essential function. Using software or an app to track expenses takes the brainwork out of it and enables you to stick to your budget without having to work so hard.

Incrementally Increase Retirement Savings

As you pay off your debts and eliminate your mortgage, and your children become self-sufficient, you’ll obviously have more money to spend on yourself. Many people jump into doing the things they’ve been holding off on, like vacations and home remodels, but this becomes a slippery slope. As you find yourself free of expenses and debts, it’s imperative to increase your retirement savings, as well. During your last decade or two of work, your goal should be buildings toward setting aside 60% of your income for retirement. Some of the cash should go into savings, but a fair amount should be invested into dividend-paying stocks, which will add a steady trickle of supplemental cash as your non-working days progress.

Reevaluate Your Goals and Get Expert Advice

Even though most people can benefit from visiting with a financial planner, very few people do. You don’t have to be wealthy to benefit from one, either. A financial planner can help you figure out ways to minimize debts and how to save and may be able to help you get lower interest rates on the debts you already carry. If you choose not to visit a financial planner, you should still reevaluate your budget and strategy on a regular basis. This way, you can find ways to increase your savings if you aren’t setting aside enough, or enjoy more of your income now, provided you’re on track for retirement.

There was a time when a person could outright retire at a certain age, but it’s not like that any more. Today’s workers have to contribute more on their own to be able to maintain the same standard of living, and they have to work longer to be prepared. It’s still possible to retire at about the age your parents and grandparents did, but it requires more planning on your part.

Will Policies Break Down Into Apps?

With the news that Uber is partnering with Metromile to offer Uber drivers “pay-per-mile” insurance, along with AirBnB announcing host protection insurance to supplement existing insurance policies on rooms and houses, we may be seeing the first cracks in the decades-old marketplace for all-encompassing insurance policies.

And really the change should not surprise us. After all, it was just a few years ago when an airline ticket bought you everything: the seat you wanted, free drinks and hot meals even in the economy cabin and transportation for your luggage. These days, your ticket buys you admittance to the inside of the airplane-and basically nothing else. Every other option is now on an a la carte menu-Wi-Fi, beverages, meals, bags, preferred seating, movies. The whole experience is an upsell by the airlines.

Now that the door has been cracked a bit, what might be next? Well, as seen with the awesome app MyFitnessPal being acquired by UnderArmour, in industry after industry the advantage is all about the apps and the data. And if apps in cars can now track how far we drive and how often we’re slamming on the brakes, to save us money on our auto insurance, might we also be able to save some money on our health insurance by providing our health data to our carriers as well?

Fitbit

After all, when I step on my Fitbit Aria scale, it knows my weight and body mass index (BMI). MyFitnessPal knows what I’m eating and drinking, and, if I’m lying, the scale will catch me. If I go paleo and lose 10 pounds or complete an hour of CrossFit every day, shouldn’t I be rewarded with a lower health premium? Previously, you’d have to take a blood test and tell the underwriter if you were a smoker. But what if my rates could vary based on how healthy a lifestyle I’m leading?

And once you drive your health through this gap, you can disaggregate any part of our lives into the proverbial Chinese menu of costs. Might I pay more for life insurance if I drive my family vs. flying, which is inherently less safe? What about feeding my travel itinerary into an app and getting personalized travel insurance based on what I do on vacation? And don’t get me started on the “Internet of Things.” We already provide our thermostat and carbon dioxide levels to Google through their Nest products-shouldn’t we get a rebate from our homeowner’s policy for keeping the house at a cool 68 degrees?
Digital Thermostat

What’s interesting about these scenarios is how easily they flow once you get started. Which is how the whole apps market works-you break down a process into pieces and start to handle the individual parts.

So why wouldn’t we want to do the same with our insurance?

As younger people continue to lead the movement toward the sharing economy, showing less propensity to care about exchanging data for cost savings, it’s an increasingly interesting question. In a recent survey by the National Association of Insurance Commissioners (NAIC), 43% of drivers between the ages of 18 and 29 said they would consider enrolling in a pay-per-mile insurance policy-and that’s with only a few carriers offering such programs. There’s no doubt that the world is moving to this model.

Of course, the $100,000 question is, “when is enough, enough?” Will altruistic motivation among younger people to lower greenhouse gases and pollution triumph? Will $200 a year less in health insurance premiums be worth the cost of sending your Fitbit data to your health insurer? Will I choose to let someone track my movements in my house in exchange for preferential rates on my homeowner’s policy?

While we can’t say for certain right now, it’s not a huge leap to expect that, at some point, we’ll all be asked to “name our price.”