Will new pooled pension plans boost retirement savings?
Despite the best of intentions, many people spend virtually all the money they have, says economist Richard Thaler, in his book Nudge.
Thaler believes that when faced with certain options, most people will consistently make the wrong choice.
Therefore, when it comes to something as important as retirement savings, all of us need to be coaxed into developing more self-control, willingness to battle procrastination and the ability to handle short-term sacrifices.
That’s tough to do. For most people, saving for a distant goal such as retirement is a challenge. Setting aside even a few dollars each month is difficult in the years of raising children and buying a home, when the need for cash is greatest.
As well, if saving requires effort, many people will simply avoid it. So, Thaler says, they have to have someone to do it for them — in this instance, their employers.
And that’s the thinking behind the government’s recent proposal to encourage small business owners to set up low-cost pension plans for their workers. And, if employees are lucky, put a bit of money towards the plan as well.
Here’s Thaler’s idea: Increase employee retirement savings by giving workers the option of committing to retirement plans now and then increasing their savings rate down the road, each time they get a raise.
If employees opt in, their contributions are increased beginning with the first paycheque following a raise until the contribution rate reaches a pre-set maximum.
Will you set up a new pension plan for your employees? If you're on the receiving end, will you stay with such a forced savings plan?
By Gordon Powers, MSN Money
Posted by: Canuckguy | Nov 22, 2021 8:36:37 PM
It should be no surprise people are resistant to contribute to RRSP's. For one thing, even if they don't understand the implications, it's not a good deal for the large mass of wage earners who are in the lowest tax bracket(taxable income less than $40,000). When a person is in a higher bracket, the tax refund is much more attractive so instant gratification. That person normally will retire and drop down to a lower tax bracket so it all makes financial sense since the RRSP income is now taxed at a lower rate. Not so much advantage for the bottom tier tax bracket earners.
Posted by: Jim | Nov 24, 2021 1:51:46 AM
Will new pooled pension plans boost retirement savings? No.
Will you set up a new pension plan for your employees? No.
Save your own money. Many people in finance have labelled themselves exactly what they hope for you: "Broker"
Posted by: Personalmoneynetwork | Nov 24, 2021 3:56:38 AM
At one time an American wage earner could put his or her earnings away for retirement in a financial institution CD and live off the interest. But with the cost living increasing quicker than interest rates, that is no longer feasible. But there are more investment methods that a working person can do to make that nest egg work for them. However, there are always dangers associated with investing. It is encouraged to seek out sound expert advice before spending on any type of investment. For the full article, go to: http://personalmoneynetwork.com/moneyblog/2011/11/21/increasing-nest-egg/
Posted by: ana | Nov 25, 2021 10:28:36 AM
How does anyone expect to save money for retirement with minimum wage at what it is?? All the good paying jobs are gone and so is mine!! Now I'm been looking for another job at 10.25 an hour or maybe 11.00 if I'm lucky. Try to pay all the bills with that and eat also, feed family with that and they expect all people to put money away for retirement?? Maybe they should of helped ALL companies that were in trouble instead of just curtain ones! Who's fault is it that this recession hit, I don't think it was mine. Now alot of people, not just me have to deal with 10.25 an hour to pay mortgage and house hold bills!
Posted by: Canuckguy | Nov 26, 2021 6:36:00 PM
At ANA
The government cannot bail out all companies that went under, that would cost too much and the deficit is too large as it is. Besides, supporting poorly oerforming companies isjust bad economics.
For your particular case, I presume you have a spouse who also is in the same wage bracket as you. If you are both working, it is possible to make a comfortable go of it as long as you budget smartly and you don't waste money on smokes and useless junk. Tougher to do in the big cities where the cost of lodgings is much higher than in the small towns. And as I said in my comment above, it makes no sense for low wage earners to put money in an RRSP. If you have extra cash, put it in a TFSA for a rainy day.
Posted by: Tricia | Nov 28, 2021 9:22:37 AM
Even if it is only $25/mth, how can today's working folk NOT save for retirement??? Can you really live on less than $1200/MTH when you are 65 years old??? I don't make much either, but the thought of not being able to afford food or chose where I can live when I am senior scares the crap out of me.
To anyone not participating in an employer sponsored retirement savings, why are you giving up free money????? Choices people.
Posted by: Canuckguy | Nov 28, 2021 8:53:58 PM
At Tricia:
If your pension income (excluding the OAS), say the CPP, is only $500/month, then you are entitled to a combined OAS+GIS = $967 so that is a total of $1567/month. So that is more than the $1200/month you are wondering about if it is enough.
Anyway, in the meanwhile, to plan ahead, find a man with more income than you.
Posted by: John | Nov 28, 2021 10:15:10 PM
I am a bit insulted by the statement "all of us need to be coaxed into developing more self-control". Do NOT include me in that "ALL". I manage to save $60,000 (sometimes more) of my net income per year for retirement. Most of the people I know do the same.