Canada’s pension system is simply not doing the job, authors say

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

Watch out for year-end fund distributions

With the stocks trading at multi-year lows, somebody must be thinking of getting back in. But, if you’re going the fund route rather than buying individual stocks, you may want to hold off just a bit longer. Fund companies will be making their year-end distributions over the next couple of weeks. And, if you’re not careful, you could get stung with an unexpected tax bill by buying in too soon. Remember, mutual funds are pass-through entities. Even though the fund’s value has likely declined this year, it may have realized capital gains on longer-term holdings it sold over the course of the year. If so, the fund company is required to pay those gains out to unitholders before the end of the year, who must then report them as income. And it doesn’t matter whether you’ve owned units of the fund for just a few days – you’re still looking at the same tax burden. While the tax you pay now will either offset the tax you owe when you sell your units w4l3XzY3 at a (ahem) gain in the future, paying taxes sooner rather than later is a bad idea. In a recent report, Dave Paterson, an independent fund analyst at Toronto-based Paterson & Associates, highlights CI Emerging Markets, AGF Canadian Balanced, and Trimark Canadian as just a few of the funds where unitholders face significant payouts. The largest, he estimates, is CI Global Opportunities, where the capital gains payout will likely be a whopping 27% of the fund’s net asset

So there really is no free lunch

Buried in this Canadian Press item about soaring fund redemptions, there’s a brief mention of the $1.4-billion in “involuntary” sales recently triggered by principal protected notes 27.09.2013 providers switching into survival mode. What this really means is that thousands of investors are only now realizing that there’s no chance of them realizing a cheap jerseys profit on the PPNs they bought, even if markets take off like a rocket in the coming years. Several vendors, including both Bank of Nova Scotia and Bank of Montreal, have recently triggered “protection events” on city various note products. Essentially these are stop loss orders, which are automatically set in motion when losses hit a certain level. The basic premise for these PPNs was that you could invest your money in cheap nfl jerseys various stocks, funds, or commodities for a set period and be guaranteed of doing no worse than breaking even in the process. The principal protection was created by investing a large chunk of the money in a strip bond which, when it matured, would cover the full face nowhere? value of the notes. The balance was in stocks. But, now that the stock portion has dwindled to nothing, there’s no longer cheap nfl jerseys any chance of ever generating positive returns. Talk about buying high and selling low. Even if the PIXELS markets bounce back in nine months, the only thing left is the underlying bond. Note holders are now out of the money permanently, despite Rock the fact that the notes don’t come due for years. The problem with all this is that it overlooks the erosion of their money’s value through inflation. Simply breaking even several years down the road really means losing money in real-world terms. Just ask anyone who’s been retired for awhile to estimate their purchasing power now rather than Video) when they got started. Didn’t like PPNs then, don’t like them