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In a financial emergency, it’s a Survival 101 tactic to cut back on retirement saving or dip into money you already put away.

Asked what has changed in their household budget since the pandemic began, 57 per cent of the 1,051 adults surveyed for the credit monitoring firm TransUnion Canada earlier this month listed reduced discretionary spending. The next biggest change: Cutting back on retirement saving.

A total 31 per cent of people in the survey said they’d done this, but the results varied a lot by demographic. Thirty-three per cent of baby boomers and 39 per cent of Gen Xers made this cutback, compared to 20 per cent for Gen Z and 26 per cent for millennials. More alarming is the finding that an overall 16 per cent of those in the survey have used some of their retirement saving in the pandemic, including a substantial 21 per cent of the boomer contingent and 18 per cent of Gen Xers.

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With a second wave of COVID-19 breaking over Canada and other parts of the world, worrying about a potential retirement savings crisis in the decades ahead seems an unnecessary distraction. But let’s not ignore the long-term repercussions. What you take away now from your retirement causes a two-part loss. One is the amount of savings you won’t have available later, and the other is the lost opportunity to earn investment income on this money over the years.

There’s no need to stress about this right now. But if you’re using tomorrow’s money to pay today’s expenses, make a mental note to recalibrate your retirement plan after the pandemic’s done and stability returns to your finances. You can try to backfill your missed saving or withdrawals from your retirement fund, or you can try to work longer. There are also lifestyle tweaks you can use to address your retirement shortfall. For example, maybe you stay in your current family home instead of moving to something larger and more costly in a few years.

It will take decades to identify the long-term effects of COVID on our health and finances. A more precarious retirement looks possible for some people, but there’s still time to fix that.


Subscribe to Carrick on Money

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.


Rob’s personal finance reading list

The new normal in stock market investing

Investors are cautioned that they need to become more comfortable with the kind of stock market volatility we’ve seen in 2020. Your alternative: Bonds paying almost no interest or cash that pays almost nothing.

Answers to the most embarrassing investing questions

GetSmarterAboutMoney.ca rounds up some basic questions and provides plain English answers. Never hesitate to ask what seems a simple question about money. Complexity has been weaponized by the investment industry. It keeps you reliant as an investor.

Five ways you’re using your dishwasher wrong

Making these mistakes will prevent you from getting the best value from your dishwasher.

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Surprising costs you can negotiate

A Reddit threat where people discuss negotiating better deals on severance packages and the purchase of mattresses, mortgages, flooring and more.


Ask Rob

Q: I find it difficult to find the rules around rate-reset preferred shares at reset time. If the issuer decides to redeem the shares, what price must they pay, the current market or the issue price? If the holder decides to exchange the shares for a variable rate issue share, how is the exchange value determined?

A: Rate reset preferred shares have their dividend re-adjusted every five years to provide a yield that offers a pre-set premium over the five-year Government of Canada bond. If these shares are redeemed, expect to receive the usual $25 issue price for preferreds and not market prices. On the second question, consult the prospectus for your preferred shares for the exchange value. It should be available via the investor relations area of the website for the company that issued these shares.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.


Today’s financial tool

My Rate Compass has introduced a tool for comparing rates on mortgages and home equity lines of credit.


The money-free zone

A song to play as you look ahead to the U.S. election in two weeks – I’m Gonna Tear Your Playhouse Down, by Ann Peebles. Her album, I Can’t Stand the Rain is 27 short minutes of soul music perfection.

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ICYMI

Here are some Globe and Mail personal finance-related stories

More Rob Carrick and money coverage

Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.

Even more coverage from Rob Carrick:

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

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