I was struck by the fact that we are much better off then we think, according to the report:
"Canada’s retirement income system is designed to ensure universal coverage and to protect the incomes of particularly vulnerable groups (for instance, individuals with interrupted labour force participation or those with low incomes) and performs well relative to those of its peers in this regard (Whitehouse, 2009). Characterizing the precise level of income adequacy in retirement is a complex empirical undertaking, but general indicators of retirement living standards show that, on average, Canada’s retirees are relatively secure (Mintz, 2009; Whitehouse, 2009; Baker and Milligan, 2009). Poverty rates among elderly Canadians are low relative to international standards. Over the period of 2000-2009, the rate of poverty among elderly Canadians was, at 4.4 per cent, approximately one-third of the OECD average and one-sixth of the comparable figure in the United States" Page 6 Retirement Preparedness and Individual Decision-Making Implications for Canada by Joanne Yoong, RAND Corporation,arch paper prepared f
"Using Canada Revenue Agency data from 2006, Horner (2009) estimated that, for almost 70 per cent of Canadian households, savings in retirement plans would be sufficient to fully maintain consumption levels in retirement, while almost 80 per cent would be able to achieve a 90 per cent replacement rate." Page 7 Retirement Preparedness and Individual Decision-Making Implications for Canada by Joanne Yoong, RAND Corporation,
What I found interesting is that in spite of the "strong safet net many of us are still nervous about retirement funding and some of us may have to sell our homes to meet ends meet in retirement. "... the proportion of retirement income from private sources is also among the highest in the OECD and is characterized by a relatively small but increasing share of defined-contribution plans (OECD, 2009). In the 2009 CFCS, over 80 per cent of labour force participants indicated that they expect to draw savings from RRSPs, while 26 per cent expected to do so from the sale of other financial holdings, and 16 per cent from other non-financial assets such as homes or other tangible assets (Schellenberg and Ostrovsky, 2010). The insolvency of several major defined-benefit plans, coupled with significant losses in the value of private pension funds overall, have intensified concerns with respect to moderate-income households about retirement savings adequacy; these concerns pre-date the financial crisis of 2008 (Mintz, 2009)". Page 8 Retirement Preparedness and Individual Decision-Making Implications for Canada by Joanne Yoong, RAND Corporation,
The question I have is how do we make the decisions about what we will sell or do to make ends meet in retirement. Morris Altman has some ideas in his report for the committee called: Behavioural Economics Perspectives. In his report Altman shows the different approaches to Economic Decision making that Economists believe people use. These ideas are important because they are used to shape government policies for the left and right of center parties. I have highlighted ideas I will talk about in upcoming blogs
Conventional economic theory
- Individuals make intelligent decisions, and they do not regret them. Their choices reveal informed and well-considered preferences
- An ideal decision-making environment is assumed.
- Education and training (referred to as human capital formation) are regarded as important means of enhancing productivity. But no clear theoretical mechanism is specified linking improvements in the quantity and quality of education and improvements in decision making. Human capital formation provides important theoretical space for explaining errors or less than ideal decisions, a space well-taken by behavioural economics.
- Financial decision-making is assumed to be best-practice unless distorted by government interventions in the market and in decision making