I AM A SONIC BOOMER, NOT A SENIOR... In this blog, I am writing to and for those who believe that the Boomers will change what the word Senior means. I also believe that Boomers will change what retirement means in our society. The blog is also for those who are interested in what life after retirement may look like for them. In this blog I highlight and write about issues that I believe to be important both for Seniors and working Boomers.
Thursday, January 28, 2016
Are we saving enough for retirement? Canada
In Canada the answer appears to be YES
The vast majority of Canadians are saving enough for retirement to
ensure a standard of living similar to their pre
retirement lifestyle, according to a new large-scale survey of household
financial surveyof 12,000
households by consulting firm McKinsey & Co. shows 83 per cent of Canadians
are on track to maintain their standard of living after they stop working, even
though 60 per cent of those surveyed reported one of their largest financial
worries is not having enough money for retirement.
The findings suggest many
people are worrying needlessly because they don’t know how much income they
will have when they retire or don’t know how much they will likely spend.
Canada has a retirement strategy built on four pillars, which I have talked
about before in this blog. The four pillars are:
Pillar I Old Age Security and the Guaranteed Income Supplement
Pillar II: Mandatory public workplace coverage (Canada Pension Plan
(CPP) and Quebec Pension Plan)
·The 2015 maximum is $1,065 a
month, if you start at 65.
·Only 6 per cent of Canadians get
·The average is $537 a month.
·CPP pensions are reduced by 35
per cent if you start at 60 rather than 65.
·If wait until 70, you get 42 per
cent more than starting at 65
·On average, men get a third more
·The maximum contribution this
year is $2,480 matched by your employer.
Pillar III: Workplace and personal registered savings
(employer-sponsored plans whether defined benefit or defined contribution and
individual registered retirement savings plans)
Pillar IV: Additional non-registered savings (e.g., bank
deposits, brokerage accounts)
The four pillars are relatively balanced. While Pillars I and II
provide some level of retirement income universally, a high rate of defined
benefit (DB) penetration and individual registered savings contribute in
roughly equal parts to sizable Pillar III assets. Pillar IV is roughly
equivalent in assets to Pillar III.
While Pillar III is more important than Pillar IV for most
households, the wealthiest households rely more on Pillar IV assets due to the
absolute limit on Pillar III contributions
These pillars do not include home equity and other non-financial
assets. While some households consume a percentage of home equity and
nonfinancial assets in retirement, these assets have not been considered in the
retirement readiness assessment, in an effort to take a more conservative
It’s very hard for individuals, even when they get close to
retirement, to be able to say with certainty, I know how much I will have
annualy in retirement.
Those who have built a financial plan know, but those who were
surveyed who do not have a financial plan usually don’t know how much they will
have in retirement.
The survey, which included 9,000 working households and 3,000
retired households, has implications for the ongoing debate about reforming the
retirement savings system in Canada.
The findings suggest policy makers should aim for targeted reforms
rather than creating retirement programs that may not be necessary for most
people or could have negative unintended consequences, such as hampering
The group with the greatest savings gap are mid- to high-income
Canadians who do not have workplace pension plans, with just 63 per cent saving
enough on their own to maintain their same consumption patterns in retirement.
The survey demonstrates the merits of traditional defined benefit
(DB) pension plans, which pay a guaranteed level of income in retirement,
showing 91 per cent of mid- to high-income Canadians with a DB pension are on
track to maintain their lifestyles in retirement, the study says.
The survey shows 75 per cent of those with defined contribution
(DC) or group RRSP pension plans will have enough income to maintain the same
consumption patterns in retirement. DC pension plans do not pay a guaranteed
level of income in retirement, but instead provide income based on the
performance of the financial assets in the plan.