The future of Retirement programs

Yale Global Online has done some interesting research into retirement programs around the world and it draws some interesting and some would say disheartening conclusions.

Government-sponsored pensionable retirement programs are universally popular, and in the wealthiest economies are seen as a right of the worker. Retirement programs around the world are similar in purpose, yet differ considerably in scope, coverage, contributions, requirements, taxes, eligibility and benefits. Official retirement can range from 50 to 70 years, however, most are concentrated between 60 and 65 years. 

Longer lifespans mean that people spend more time living in retirement. This, in turn, puts increasing pressure and costs for governments, employers and individual retirees. Governments around the world have come up with a number of solutions which include, hiking retirement ages, reducing retirement benefits, increasing taxes, shifting from defined-benefit to defined-contribution plans, and promoting incentives among workers to save more and work longer. 

Around the world, there are many protests that form quickly when governments move to cut retirement benefits, and many workers worry that a comfortable retirement is not in their future.

So governments do not move fast when changing pensions, they move slowly. Governments have reduced pension retirement benefits by switching to less favourable indexation. The United States, for example, changed inflation measures for US social security payments in 2000 to cost-of-living allowances based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, reducing the buying power of the monthly benefits. In Canada, the government uses the Canadian Consumer Price Index rather than the more inclusive Federal Government’s Survey of Household Spending (SHS)even though SHS would be a better benchmark for adjusting CPP annually.

Another way that governments attack pensions is to increase taxes or redirect taxes from other government programs, this is the least popular approach. Politicians are short-term thinkers, they focus on the next election and will tend to postpone addressing costly long-term problems, such as retirement obligations. In economic terms, many of us have a short time horizon and politicians take advantage of this fact and rely on younger taxpayers who are reluctant to pay additional taxes for a far-off retirement that they may never receive to support their initiatives. 

Private-sector retirement plans have also changed markedly, in turn influencing public-sector practices. Defined benefit pension plans have declined in many countries. In the United States, for example, the proportion of private-sector workers with a defined-benefit pension declined from close to 90 percent in 1975 to around 30 percent today. 

Surveys of multinational corporations report that defined-benefit pensions are considered outdated. Less costly, less risky defined-contribution pension arrangements are the preferred alternative for companies. This is because the risk is not on the company but on the individual. Other factors that are having an influence on retirement programs are:

Inequality: Life expectancy can vary by years within one country among racial and ethnic groups, as is the case for whites, blacks and Hispanics in the United States (Source: US Center for Disease Control).

Long lifespans, insufficient personal savings and risky old-age pensions require many elderly to work past the age they had expected to retire. In Japan, New Zealand and South Korea, for example, a third or more of the men aged 65 years and older remain in the labour force.

Yale Global sums up their report by stating that inescapable demographic trends and financial realities coupled with the troubling state of government affairs pose significant consequences for retirement programs. Some of these are

·       Higher retirement age:  With the goal of reining in rising costs, official retirement ages, including early retirement ages, are gradually being raised. Many governments want men and women to delay retirement until their late 60s or older.

·       More taxes for retirement pensions: With population aging, increased longevity and fewer workers per retiree, many governments must increase taxes or redirect tax monies from other programs to pay for rising retirement costs.

·       Transition to defined-contribution pensions: Private- and public-sector employers are moving from traditional defined-benefit pension arrangements to defined-contribution pension plans, thereby shifting financial risks from employers to workers.

·       Insufficient savings: Despite repeated warnings, most older workers have not saved enough for retirement. The challenge grows with increasing longevity. In addition, most workers lack the financial skills to make informed decisions about investing limited savings for sustainable retirement income.

·       Reduced retirement benefits: Benefits are likely to be reduced by adjusting inflation indexes, income thresholds, work requirements, means testing, surtaxes or eligibility.

·       Working longer: Working longer is the likely future for many men and women, especially those with limited savings. Many workers will find themselves working well past the age they had expected to retire, some to stave off poverty.

The reality is that there will be many more changes for retirement programs, and nearly 50% of today’s workers and retirees worldwide expect workers to be worse off than those currently retired with some concluding they cannot afford to retire. Ongoing trends justify these disquieting assessments.

Rules for Grandsons and sons

Thanks to my cousin for this post which was originally from The Good Men Project as well as from Tim Hoch

1.            Never shake a man’s hand who is sitting down.

2.            Don’t enter a pool by the stairs.

3.            The man at the BBQ Grill is the closest thing to a king.

4.            In a negotiation, never make the first offer.

5.            Request late check-out.

6.            When entrusted with a secret, keep it.

7.            Hold your heroes to a higher standard.

8.            Return a borrowed car with a full tank of gas.

9.            Play with passion or not at all…

10.      When shaking hands, grip firmly and look them in the eye.

11.      Don’t let a wishbone grow where a backbone should be.

12.      If you need music on the beach, you’re missing the point.

13.      Carry two handkerchiefs. The one in your back pocket is for you. The one in your breast pocket is for her.

14.      You marry the girl, you marry her family.

15.      Be like a duck. Remain calm on the surface and paddle like crazy underneath.

16.      Experience the serenity of travelling alone.

17.      Never be afraid to ask out the best-looking girl in the room.

18.      Never turn down a breath mint.

19.      A sport coat is worth 1000 words.

20.      Try writing your own eulogy. Never stop revising.

21.      Thank a veteran. Then make it up to him.

22.      Eat lunch with the new kid.

23.      After writing an angry email, read it carefully. Then delete it.

24.      Ask your mom to play. She won’t let you win.

25.      Manners maketh the man.

26.      Give credit. Take the blame.

27.      Stand up to Bullies. Protect those bullied.

28.      Write down your dreams.

29.      Always protect your siblings (and teammates).

30.      Be confident and humble at the same time.

31.      Call and visit your parents often. They miss you.

32.      The healthiest relationships are those where you’re a team; where you respect, protect, and stand up for each other.

33.      Take stock of where you’ve been but don’t dwell on it.

34.      Don’t let your past mistakes own you, but keep the scars from those mistakes close at hand. They’re part of you.

35.      Set goals and work like hell to accomplish them. But later you’ll realize the journey was a lot more enjoyable than the end result.

36.      Offer those less fortunate a helping hand even though some may not deserve it and most will never appreciate it.

37.      In business, it’s best to try and get along. But remember there are some people you will run across who don’t understand anything but a hard kick in the balls. Make sure your aim is good.

38.      Don’t ever assume that someone else is looking out for your best interests. Some people are. Most people are not. If you find someone who is, guard and treasure that relationship above all others.

39.      Be open to, and unashamed of, the possibility, however slight, that you might be wrong.

40.      Take a couple of backroad trips to California. Take a mix CD (heavy on Jerry Jeff Walker), a journal and a camera (on second thought, never mind the camera).

41.      Volunteer because you want to, not because you feel like you have to.

42.      Develop your spiritual side but do not be a slave to form or ritual. Cultivate your own relationship with God.

43.      Understand the importance of leverage. But, if it’s with recourse, don’t borrow more than you can afford to pay back.

44.      Doing good is just as important as doing well.

45.      Time is not just your most precious commodity, it is your only commodity. Don’t waste it. And don’t give it to people or projects that don’t respect it.

46.      Try new things.

47.      Be decisive.

48.      Do what you love but find a way to make money doing it or you won’t be able to do it very long.

49.      Don’t be an ideologue or a demagogue. The world has plenty of those.

50.      Don’t vote straight ticket. Think for yourself. If you think one political party has all of the answers, you’re not asking the right questions.

51.      Don’t buy into dogmatic bullshit. Opinions are not facts.

52.      Give people the benefit of the doubt, until you doubt the benefit. Then stop. You’ll know when that is.

53.      Most of your life should be spent running uphill. If you’re not, then you’re not challenging yourself.

54.      Don’t bring home stray kittens. Someone other than you is probably better equipped to take care of them.

55.      Most of your life your only company is yourself. Like yourself.

56.      If you want to get a tattoo, go to your closet and pick out your favorite shirt. Wear it every day and every night for 2 years. If you’re not tired of wearing it after 2 years, go get your tattoo.

57.      Don’t worry about trying to impress people with your knowledge or experience when you’re young. Just be interested, engaged and eager to learn.

58.      If you show up to class on time and sit in one of the first three rows, you will succeed.

59.      It’s often easier to effectuate change by working within the system rather than outside the system. When it’s not, be sure to find strong allies.

60.      If the police officer or the professor is talking, you’re listening.

61.      It’s not always chess; sometimes it’s just checkers.

62.      In things both big and small, always be someone upon whom others can rely. Help your friend move into his new apartment. Return phone calls. Keep your word. Follow through.

63.      Read leisurely for at least 30 minutes every day. This will broaden your point of view and increase your curiosity about the world.

64.      Kindness can be disarming.

65.      Stand up straight, look people square in the eye and be the first to offer a firm handshake.

66.      Have a toothbrush and toothpaste close at hand. A vigorous tooth brushing right before an important meeting is a confidence builder.

67.      Don’t talk about how much ass you kicked in high school when you’re in college. No one gives a damn.

68.      You’re always working for yourself, even when you’re working for someone else.

69.      Don’t assume that an obvious question has already been asked.

70.      When you review a proposal from someone else, don’t feel constrained by the parameters of their proposal.

71.      Embrace and celebrate the things that make you feel different from everyone else.

72.      Resist the insidious, slow progression toward cynicism.

73.      Don’t get frustrated just because your immediate needs are not the priority of others. They seldom will be.

74.      If you see someone who is alone, go out of your way to tell them hello.

75.      Buy a box of nice stationery and write lots of “thank you” and “thinking of you” notes.

76.      Look for beauty in the mundane.

77.      Always carry some cash.

78.      Wait at least 24 hours before sending a letter with the salutation “Dear Judge Dumb Ass.”

79.      Pay your fair share. Don’t be a moocher.

80.      Don’t major in the minors.

81.      Exercise regularly.

82.      No matter what is in front of you, walk toward it with confidence.

No puns resolved here, Tom determined

“I’ve struck oil,” Tom said, crudely.

“Give me some more macaroni and cheese, and I will tell you,” Tom said craftily

“I forgot what to buy,” Tom said listlessly

“I brought the dessert,” said Tom piously

“That’s the third time my teacher changed my grade,“ Tom remarked

“Parsley, sage rosemary,“ said Tom timelessly

“I nee a home run hitter,“ Tom said ruthlessly

“I need a pencil sharpener,” said Tom bluntly

I only get Newsweek, said Tom timelessly

The prisoner escaped by climbing down a rope,“ said Tom condescendingly

"This will help me catch the baseball," Mike admitted.

"I never said that!" Mike exclaimed.

"I'm dressed as an echidna," Mike pointed out.

"So, I told the stenographer to leave," Mike described.

"It's time to deal with this simple," Mike burst out.

"My girdle' s too tight," Mary snapped

"I've added the fabric softener," Mike affirmed.

"I only eat broccoli, beetroot and brussels sprouts," Mike began.

"They all survived," Mike nodded.

"You shouldn't skip exams," Mike protested.

"It keeps going to voicemail," Mike recalled.

"I can't maintain an erection," said Tom softly.

May I measure your inseam?" the tailor asked fittingly.

"Stop following me to school!" Mary bleated sheepishly.

Here come the ships!” Tom said fleetingly

“My feet hurt,” Tom said flatly.

What a large trout!", he said superficially.

“I'm waiting for Shake It Off to come on the radio", Tom said swiftly.

“My pencil won’t write,” Tom Said pointlessly.

“I've retired from being a mailman!' Tom expostulated.

“I keep walking since my car has no wheels,” Tom said tirelessly

“Do you have any Hugo?" asked Les miserably.

“Why is the rum gone?" asked a dispirited Jack.

Canada and US approaches to Retirement, the same but different

Back in 2012, the Society of Actuaries (SOA) completed a survey that looked at how Canadians and Americans prepared for their retirement. It was an interesting report. Canadian and U.S. respondents were asked to indicate their level of concern about eight post-retirement risks. Ranking these risks by the percentage of respondents saying they were very or somewhat concerned about each, shows strong similarities between retired and pre-retired respondents and between Canadian and U.S. respondents.

Specifically, Canadian retired and pre-retired respondents are most likely to say they are very or somewhat concerned about maintaining a reasonable standard of living for the rest of their lives, followed by:

•    Having enough money to pay for adequate health care

•    Depleting all of their savings

•    Having enough money to pay for long-term care expenses

•    Maintaining the same standard of living for their spouse/partner, if the respondent should die first (among those married or living with a partner)

•    Their financial ability to stay in their current home for the rest of their lives

Canadian respondents are less likely to identify two risks as very or somewhat important:

•    Leaving money to children or other heirs

•    Relying on children or other family members to provide assistance

In the United States, retired and pre-retired respondents are most likely to express high levels of concern about having enough money to pay for adequate health care, but their next four concerns are similar to Canadians:

•    Depleting all of their savings

•    Having enough money to pay for long-term care expenses

•    Maintaining a reasonable standard of living for the rest of their lives

•    Maintaining the same standard of living for their spouse/partner, if the respondent should die first (among those married or living with a partner)

U.S. respondents are less likely to identify three risks as very or somewhat important:

•    Their financial ability to stay in their current home for the rest of their lives

•    Leaving money to children or other heirs

•    Relying on children or other family members to provide assistance

Although the health care and long-term care systems in Canada are very different from those in the U.S., with the Canadian system generally being considered more supportive of those in need, it is somewhat surprising to note that Canadian retirees had more concerns than U.S. retirees.

The Canadian pre-retirees’ higher concern about maintaining a reasonable standard of living after retirement may be due to the lower level of social security benefits in Canada for workers above the average wage. Although the Canadian social security system is financed on a basis that is more sustainable in the long term than U.S. social security, many of the U.S. respondents may not be aware of the significant financial challenges to U.S. social security in the long term.

We here in Canada have many of the same concerns as our American neighbours, with health care being among the top concerns.