There may be one more
pillar for the Canadian who is thinking of retirement argues a new report by
the C.D. Howe Institute (pdf file).This pillar is available to only 40% of Canadians, well the other pillars are available to more of us.
These fourth-pillar
assets – which include real estate, publicly traded securities, privately owned
business investments, insurance products and tax-free savings account
accumulations – significantly improve the outlook for Canadians’ retirement
readiness, according to the report.
Jeremy Kronick and
Alexandre Laurin, the authors of the report, focus on the group generally
thought to be most at risk of inadequate retirement savings: employed
35-to-64-year-old Canadians. After factoring wealth already accumulated from
all fourth-pillar assets, the authors found that 40 per cent of this group has
potentially already accumulated sufficient wealth to sustain themselves in
retirement.
Canadian households can
count on various sources of wealth in retirement, notes the report. Government
payments through the old-age security benefits and the guaranteed income
supplement program provide a basic income for all Canadian retirees. These
payments are complemented by the Canada/Quebec Pension Plan.
Combined, these
government programs provide a guaranteed annual income stream and form pillars
one and two of the Canadian retirement income system, according to the report.
For the third pillar, the report points to workplace pension arrangements such
as defined contribution and defined benefit pension plans, tax-deferred
retirement savings plans and individual registered plans.
“Much of the policy
debate in Canada around the adequacy of retirement saving has ignored the role
of fourth-pillar assets or has tended to acknowledge their potential role but
ultimately dismisses their importance,” states the report. “Despite this lack
of attention by policymakers, private wealth accumulated in assets other than
pension and retirement saving plans can provide a significant source of
retirement capital.”
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