Political issues deemed too important or sensitive to be tampered with are often referred to as the 'third rail' after the electrically-charged third rail in subway systems ... like Canada's pension system, for instance.
“Many Canadians will be surprised by how much they will need to save to fund their desired income in retirement and that their income is going to plummet,” says Jim Leech, co-author of The Third Rail: Confronting our Pension Failures.
“It’s clear that existing pension structures are not allowing people to reach their saving goals. Political leadership is urgently required to bring a more flexible approach to retirement planning, one that can withstand the pressures of more retirees and longer life expectancy.”
The easiest and most efficient way to close this shortfall is to enhance the Canada Pension Plan, he maintains. But that's not likely to happen anytime soon since most workers and their employers are simply too short sighted.
As employers and employees each contribute roughly 5% of their pay straight into the CPP, an increase in the rate would mean that employees would have to get a raise larger than the CPP hike to ensure their take-home doesn’t drop. They would, however, see an offset with a larger CPP pension down the road.
Many critics have voiced strong opposition to any boost in CPP contributions, however, labelling it another job-killing payroll tax on businesses. Nonetheless, Ontario is considering launching its own pension plan if it cannot obtain reforms to CPP.
Leech and co-author Jacquie McNish would also like to see some action taken to stem the decline of defined benefit plans -- the least expensive way to provide a pension to workers, they argue.
The authors cite Rhode Island and New Brunswick as examples of jurisdictions that have taken drastic measures to address pension shortfalls, including major cuts to municipal jobs and services. But both are cautionary tales.
And they will remain so as long as a government continues to ignore the root cause of the retirement meltdown, they maintain.
Record numbers of workers are retiring and living longer than anyone expected; pension funds have not built in sufficient surpluses to cope with market and demographic stresses, and employers are unwilling to shoulder these steadily increasing costs.
Failure to address these issues immediately will soon lead to disaster, the authors predict.
Would you like to set more money aside using the CPP? If you're lucky enough to have one, are you concerned about the stability of the plan you're involved
If you read the headlines, just about every urban boomer is leaving the suburbs behind and moving into condos or lofts in a trendy downtown area.
Yet there's little evidence that most Canadians are actually that open to the idea of moving into a smaller residence as they grow older.
A majority of Canadians aged 50 and over – 83 percent – said staying in their own homes and paying for home care is the most appealing option for them, according to Royal Bank research.
Even then, while the majority of us want to ''age-in-place'', this doesn't necessarily mean that we expect to stay in the same house. Most people are attached less to a particular pile of bricks and mortar than to a local area – to a network of friends, services and familiar places.
Among those who were already retired, a decision to move out of their home was most often due to a change in their health – 66 per cent – rather than to cash in on their home equity or get closer to restaurants.
Remaining in familiar surroundings – in a home of their own, in their current neighbourhood and close to family and friends – is definitely how Canadian Boomers wish to live when future health changes occur,” says RBC head of retirement and aging strategies Amalia Costa.
Then there's the emotional pain of scaling back. Many empty nesters find they lack the stomach or stamina to dismantle their lives. They'd rather hang on. They struggle with sorting through all those boxes in the basement or dread listening to adult children who want to keep the house where they grew up.And isn't always the financial bonanza they expect. With fewer square feet to heat, low and pay property taxes on, many downsizers assume they'll slash their monthly expenses. But unless you're willing to move to a part of the country with a lower cost of living, the savings may prove fairly modest.Do you plan on downsizing in the future or have you already made the move? How are things working out so
While adult children say they recognize the need to discuss inheritance and retirement planning issues, roughly half of them don’t feel they’ve done a very good job talking with their parents about these issues, according to a intra-generational study by Fidelity Investments.
But they do have a much more favorable view of their parents' handling of money than what parents think of their children’s financial acumen, according to a follow-up study.
Nearly half of adult children surveyed by Fidelity (47%) feel their parents actually haven't made any mistakes financially. Only one-quarter (24%) of adult children feel their folks didn't save for retirement soon enough and even fewer (22%) say mom and dad saved money in the wrong type of accounts.
Parents, on the other hand, were more than happy to point out the errors their children had made, including racking up credit card debt (42%), followed by not saving for retirement early enough (38%) and not building a large enough emergency fund (36%).
The parents surveyed -- to qualify for the study, they had to be at least 55 years of age, have children over 30 years of age, and have at least $100,000 in investable assets -- listed saving for retirement (38%) or for a grandchild’s education (28%) as their top priorities.
What's more, nearly a third (30%) say they have no financial issues.
Does this sound like your family? Do you think your parents have looked after things appropriately? Would they say the same about