Retirement Planning Canada: An Introduction
As the Baby Boomers of Canada begin their long awaited journey into retirement the pressure is mounting on the government pension system which, heretofore, has been considered among the very best in the world.
While it remains strong as compared to those of other countries the multi-level system of Canada, comprised of the CPP, the OAS, the GIS and the RRSPs faces a number of systemic issues that will only be magnified as the Boomer floodgates begin to open.
While pension reform has been on the table for several years, especially as it relates to CPP, polarizing political forces have prevented any serious measures from emerging that could alter its present course.
The fact that only a few hundred thousand elder citizens live below the poverty line may not provide the necessary motivation for action to be taken.
But, with hundreds of thousands of new retirees converging on the aging system, the call to action may grow much louder.
At issue is the fact that, only one-third of Canadians are covered by employer pension plans. Another third lack any kind of retirement fund at all.
As much as half will be heavily reliant upon CPP (QPP in Quebec) for their retirement income, yet it can only replace a quarter of the average workers income up to a maximum.
As many Canadian companies emerge from the aftermath of the recent global economic meltdown, many are considering plans to reduce their benefits or eliminate their defined benefit plans altogether.
Although the retirement savings rate as inched up in recent years, pre-retirees are trying to rebound from billions of dollars that were lost in the market turmoil of the last decade.
As the population continues to age, there will be fewer younger workers to fill the benefit pool to be paid out to the Baby Boomers.
If the current demographics projections hold true, younger Canadians will wind up paying more into the CPP while receiving less once they reach the retirement threshold.
While the system may not be anywhere near the brink of collapse, some fiscal prognosticators do see the sides beginning to split on what is quickly becoming an outdated infrastructure.
Most of the solutions point towards a greater role for RRSPs and other contributory plans, with some suggesting that individuals be allowed to contribute more to the CPP in order to generate a higher payout.
The message is clear for the Gen X, Gen Y and future Gens, and that is that self-reliance through deliberate retirement planning and self-funded vehicles will not only be encouraged, it is likely to be the only option for achieving a truly secure retirement future.
From Retirement Planning Canada to Canadian Retirement Planning