That massive tidal wave of humanity known as the baby boomers have yet another problem facing them, and it’s not their health – it’s their retirement.
The nation’s business and financial experts, such as the National Post’s Deirdre McMurdy are abuzz with warnings of the critical financial issue facing Canadians looking to retire. It seems those Canadians want to retire, but have little or nothing to retire on.
Ontario Premier Kathleen Wynne said last month in Toronto, "People are not saving enough for retirement and if we let this go unchecked we're going to face a huge economic crisis."
The federal and provincial government have been playing tennis with the issue, passing back and forth ideas to help address the fact that Canadians, on average, do not have enough money in the bank to retire, or at least to retire in the lifestyle to which they’re accustomed.
According to McMurdy, work done by the Institute for Research on Public Policy shows that approximately one-half of Canadians who were born between 1945 and 1970 and have career-average earnings of between $35,000 and $80,000 are likely to experience a drop in income of at least 25 per cent once they reach retirement.
Not only are Canadians not saving money, they’re spending money they don’t have. While financial experts since the crash of 2008 have been encouraging Canadians to save more and spend less, personal debt continues to rise. In fact, this year Statistics Canada numbers show household debt in the country reached a new record high, amounting to $1.63 for every dollar of disposable income.
In all fairness, some of the debt was unavoidable or at least understandable. For instance, media outlets across the country were discussing the “bloated” Canadian real estate market that has exploded in the last 10 years. Sources in the Financial Post state the real estate market will correct itself downward 10 to 15 per cent at least to compensate for artificially-high prices and excess inventory. The federal government even brought in measures over the past few years to control Canadians’ spending on mortgages, as Canadians were spending beyond their means when it came to housing.
So talk of fixing the Canada Pension Plan, or other plans, has stalled. Some of the Maritime provinces are in favour of doubling CPP contributions and allowing clients to claim double as well, up to roughly $21,000 per year. Not everyone feels that way, though. The federal government in particular feels that increasing CPP contributions, which are 50-50 split between individuals and their employers, will slow down growth or even cost jobs. Canada’s growth is already slowing compared to its G7 peers.
It’s obvious that government, and Canadians, need to look at what they’re saving, and look closely. Otherwise, the baby boomers may have a major shock coming to them when they hope to ease into retirement, with younger generations left to pick up the pieces.
