Freedom 55 has become Freedom 85.
Instead of enjoying the sun in January on a beach in the Caribbean at age 60, I can get to enjoy my new snowblower on Victoria Avenue at age 65.
When I was considerably younger, my insurance agent prompted me to begin saving for my retirement. He presented me with a series of options, including information that the Canadian Pension Plan probably wouldn’t be around by the time I was old enough to claim it.
At the age of 25, with my insurance agent, we tried to determine how much money I would require to live on when I turned 65 and put in place a plan to reach that goal fully expecting the CPP would not be available to me at that age.
Eventually, the government got around to fully funding the Canadian Pension Plan so that today it can pay its expected amount of retirees.
About a decade later, I started to worry that the amount that had been planned for my retirement would not be sufficient, so I began building a retirement plan through the RRSP system.
It grew and stumbled several times, however the latest stumble has me worried. With the stock market meltdown, much of my savings have been lost. My plans for retirement will look considerably different.
And financial experts are predicting very little growth in the next decade for savings and investment returns.
To encourage people who did not have retirement pensions from their workplace, governments created Registered Retirement Savings Plans in which people could make contributions that would not be taxed. The investments would grow and people would retire on their investments.
Everything appeared rosy.
Many major companies, governments, and government agencies also began planning systems for the care of their employees upon retirement and created pension systems with a defined benefit on retirement. Employees in such plans could depend on a certain monthly income when they retired.
Other organizations created a system where they contributed a fixed amount of money towards an employee’s retirement. And based on how well that money was invested by the employee, that would be what the employee retired on.
General Motors, AbitibiBowater, and many other national companies now find their pension plans for their employees are under funded. They have turned to the province and the federal government to top up the pensions with funds so their employees can receive their full pensions.
Last week at a meeting of finance minister from across Canada, it became obvious to all governments that most Canadians now will not have the funds available to retire to a life that they had enjoyed while employed. Fully two-thirds of Canadians will not have enough savings to maintain their lifestyle in retirement.
The governments are not likely to top up RRSPs and with most Canadians not having any pension system, it is doubtful that they will top up defined pension plans of bankrupt corporations.
And that has got all governments attention. They had been banking on Canadians to save enough for retirement, but the “baby-boomers” will all be discovering shortly that they just can’t afford to retire.
And governments now are looking for alternative plans to make retire for future generations affordable.
A task force has been created to report back later this year. Would Canadians be ready to top up their CPP contributions by another $100-$150 monthly to have a better pension? Should it be compulsory or voluntary?
And should average Canadians have the right to expect pensions similar to those of their friends and family employed by government and government agencies?
The task force has its work cut out.
Freedom 55 has become Freedom 85.