Tuesday, February 7, 2012

Freedom 67

My colleague Priscilla Healy, pension law expert, offers the following observations about a universal concern - will I have enough money to retire when I want to retire?

We need to change our mind-set. We are going to have to work longer. Everyone who retires either voluntarily or involuntarily from the workforce and who still needs an income cannot set up in business for themselves. Jobs (paying) for those over age 60 or 65 need to be available.
Accordingly, our personal, social and workplace perspectives as to older workers are going to have to become much more positive.

Only a government with a majority and then only in the early years of its mandate could dare to
touch social benefits to seniors. That said, raising the age of eligibility for the Old Age Pension to
age 67 as proposed – or floated – may be inevitable. Clearly there will need to be a long phasing-in period, and a discussion as to the appropriate level for claw-backs. There also needs, of course, to be a discussion about Government spending priorities.

At $540.12 per month for two years, gently indexed for inflation, some or all of which may be clawedback, the loss may not seem like much to middle income earners. No problem, as long as we get enough notice. We will simply work longer, save more and/or make do with less income from our savings if we have to draw on them earlier.

We are indeed healthier and living longer. But is everyone, or at least almost everyone, really able to work longer than age 65? Forget about whether we want to. Could we even find a job? What about older, white collar workers who have lost their jobs through downsizing? Finding a comparable job in their field can be very difficult for older, white collar workers who are laid off. What about workers, both men and women, who are not physically able to work at their jobs much longer? What about people with physical and mental health issues that are not serious enough to receive disability benefits but which are impediments to employment?

There is currently a very long stretch already between involuntarily retirement, which could happen any time after age 55 or even 50, and age 65. Many Canadians do not have workplace pensions, and fewer have pensions that are not substantially reduced if they commence before age 65. The maximum CPP payment in 2012 is $986.67 per month, again gently indexed. CPP payments cannot be taken before age 60, and they are reduced by over 6% a year if taken before age 65. $540 a month can make a considerable difference if the only other income is a reduced CPP.

Financial planning? But how many people are able to save adequately for a retirement that
unexpectedly starts too early? What are older people who do still need an income and cannot get jobs to do? Set up a consulting business? Make a business out of a hobby or skill? Fine, if they have the energy and skills and can invest in start up costs. Work as a Walmart greeter or as a crossing guard? Perhaps. Drastically downsize lifestyle. Yes. Abandon recreational plans for retirement? Yes. Apply for income supplements through Gains or GIS? May or may not qualify. Apply for welfare? Probably won't qualify. Depend on adult children? An unfair generational cost shift.

The problems of the aging population were not created by the current government. Everyone needs to save for retirement. Everyone needs to recognize and provide for the possibility that they may not be able to work as long as they plan. Everyone needs to take care of their health. Depending on government programmes in the long run is risky.

There is however, good news. The boomers are beginning to retire. It will be interesting to see how society, and government programmes, adjust.

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