Saturday, April 20, 2013

Canadians struggle with retirement planning

The following was written by TALBOT BOGGS / THE CANADIAN PRESS on MARCH 26, 2013.  It was published here

 -- The news about Canadians' preparedness - or should I say lack of it --for retirement just doesn't seem to be getting any better.

Almost every other day there seems to be another story indicating Canadians right along the demographic spectrum from young to old simply have not got their retirement act together, whether it's having enough money to see them through to the end of an ever-lengthening life span or getting a handle on what kind of lifestyle they want to live and then taking the necessary steps to get the financial resources to make it possible

Here's a little sampling of a couple of studies/reports that came out recently over a period of less than a month.

A CIBC poll found that nearly a third of Canadian retirees are worried they will run out of money over the long term. Some of the reasons cited for this angst were the current low interest rates on savings and the belief that a short-term financial crisis or shock could cause cash flow problems. Fifty four per cent said they would not be able to handle an unexpected extra payment of $500 a month given their current budget.
Another study by Investors Group found that 30 per cent of Canadians are not aware of how long their savings, pensions and investments will support their desired level of retirement income.
"The connection between how much you need and the lifestyle you live is a pretty obvious one for most Canadians," says Aureles Courcelles, director of tax and estate planning with Investors Group. "Those who have no idea of how long their savings, pensions and investments will sustain their desired retirement lifestyle could be in for some unpleasant surprises. They should get to work on developing a clearer idea of how they plan to live in retirement and if the lifestyle they have in mind is financially feasible."
Another survey from the tax people, H&R Block, suggests Canadians who are not yet retired may be relying too much on government support programs such as the Canada Pension Plan (CPP) and Old Age Security (OAS) and are not putting enough away in other retirement savings vehicles and plans.
Half of non-retired Canadians plan to retire by 65 and expect the CPP to fund part of their retirement but less than a third actually know how much they can expect from CPP every month. Payments depend on your contributions to CPP while you were working. The maximum monthly CPP benefit for 2013 is just over $1,000.
As well, the age at which Canadians receive the OAS and the Guaranteed Income Supplement (GIS) is going up to 67 from 65 between the years 2023 and 2029. The OAS pays $540 a month and is indexed annually with the cost of living. The GIS pays a maximum of $732.36 a month to lower income Canadians, depending on their level of income.
The same group of Canadians listed the CPP, Registered Retirement Savings Plan (RRSP) and OAS as the top three ways they plan to fund their retirement, but "Canadians who are not retired yet may be relying too much on CPP or OAS as part of their retirement plans," warns Cleo Hamel, senior tax analyst with H&R Block Canada another quote
The government of course is trying to do something and introduced the Tax Free Savings Account (TFSA) a few years ago and now is proposing the Pooled Retirement Pension Plan (PRPP) as further vehicles to help Canadians save for their retirement.
While RRSPs are still the preferred retirement savings vehicle by 65 per cent of non-retired Canadians, younger Canadians under the age of 35 are tending to invest in the TFSA over the RRSP.
"Before 2009, the RRSP account was really the only way to save for retirement," says Hamel. "But the TFSA also offers excellent tax sheltering benefits with more flexibility than an RRSP. If you are just starting your career or a family, there are reasons to be considering a TFSA where withdrawals are not taxable in case you need to access emergency funds."
So debate and study of the retirement landscape in Canada goes on but if ever there was a need for a retirement solution in this country, surely it is now.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.


  1. Are you a Canadian? Do you need ideas regarding retirement planning? Then, contact Rhonda Sherwood, a financial advisor planner in Vancouver.