Wait­ing for the great leap back­wards

Most work­ing Cana­di­ans are prob­a­bly more con­cerned with get­ting through the month than they are about plan­ning for re­tire­ment

Cape Breton Post - - Editorial - Rus­sell Wanger­sky Eastern Pas­sages Rus­sell Wanger­sky writes from St. John’s, and his column ap­pears in 29 SaltWire news­pa­pers and web­sites in At­lantic Canada. He can be reached at rwanger@thetele­gram.com — Twit­ter: @wanger­sky.

Al­fred Ten­nyson fa­mously said, “In the spring a young man’s fancy lightly turns to thoughts of love.”

Well, in the au­tumn of years, an older man’s fancy more heav­ily turns to thoughts of pen­sions – and the lack thereof. But all the think­ing in the world isn’t go­ing to slow the grow­ing se­niors’ poverty bump head­ing to­ward us.

On the av­er­age, most work­ing Cana­di­ans are prob­a­bly more con­cerned with get­ting through the month – pay­ing bills, plan­ning for their kids’ ed­u­ca­tion, pay­ing mort­gages on over­priced homes – than they are about plan­ning for re­tire­ment. Talk to a realty lawyer – I have – and you’ll find that, more and more of­ten, young fam­i­lies buy­ing houses have no cush­ion built into their house­hold ex­penses to han­dle ei­ther sud­den main­te­nance ex­penses or even the slight­est in­crease in mort­gage in­ter­est rates.

Sav­ing for re­tire­ment is more than a dis­tant thought — it’s a pipe dream. There just aren’t enough dol­lars to go around.

The num­bers bear that out: a Fe­bru­ary 2016 study by the Broad­bent In­sti­tute pointed out that, among mid­dle-in­come Cana­di­ans, only 15 to 20 per cent have saved enough to re­tire. Roughly half of those on the brink of re­tire­ment age and with­out an em­ployer-based pen­sion – aged 55 to 64 – have less than $3,000 saved for re­tire­ment.

Those num­bers point to not only loom­ing per­sonal fi­nan­cial catas­tro­phe, but to a huge is­sue for the coun­try.

Some of the other points from the in­sti­tute’s re­tire­ment study?

“Roughly half (47 per cent) of those aged 55–64 have no ac­crued em­ployer pen­sion ben­e­fits. The vast ma­jor­ity of th­ese Cana­di­ans re­tir­ing with­out an em­ployer pen­sion plan have to­tally in­ad­e­quate re­tire­ment sav­ings. … Only a small mi­nor­ity (roughly 15–20 per cent) of mid­dle-in­come Cana­di­ans re­tir­ing with­out an em­ployer pen­sion plan have saved any­where near enough for re­tire­ment.”

And even em­ployer pen­sion plans are no panacea: “About 46 per cent of paid em­ploy­ees had pen­sion plans in 1977, and only about 38 per cent had them in 2011. The ad­e­quacy and re­li­a­bil­ity of pen­sion plans is also de­clin­ing as em­ploy­ers (par­tic­u­larly in the pri­vate sec­tor) shift from de­fined ben­e­fit to de­fined con­tri­bu­tion pen­sion plans.”

Now, you might be tempted to say, “tough for those who didn’t plan bet­ter.”

And fair enough, but think of this: re­tired peo­ple with min­i­mal pen­sions will spend less, be­cause they’ll have less to spend. There will also be a sig­nif­i­cant seg­ment of so­ci­ety that won’t be able to re­tire and, helped by what lim­ited pen­sion money they may have, may opt to stay in what would have been en­try-level and part-time re­tail po­si­tions (we’re al­ready see­ing it now – just think of your last trip to the gro­cery or hard­ware store), lim­it­ing ac­cess for younger Cana­di­ans try­ing to start out and do things like fi­nance higher ed­u­ca­tion. It’s also tough to de­mand a pen­sion your em­ployer sim­ply isn’t will­ing to of­fer.

It means there’s go­ing to be a clear sep­a­ra­tion be­tween the haves and the have-nots. There will be those lucky enough to have worked in the pub­lic sec­tor or whose em­ploy­ers were late to the “let’s in­crease an­nual earn­ings by cut­ting back pen­sion ben­e­fits” dance, and all the rest of us.

And as more and more se­niors leave work and head into a world of di­min­ished ex­pec­ta­tions, a cru­cial chunk of our econ­omy will go with them. The poverty rate among se­niors has al­ready been steadily grow­ing for years. New se­niors, with­out the ben­e­fit en­joyed by the baby boom gen­er­a­tion, can only in­crease that rate.

This, as the pro­por­tion of re­tired Cana­di­ans in the pop­u­la­tion grows, and health ad­vances mean we’ll live longer, with less, as well.

A sober­ing thought for sure.

“The poverty rate among se­niors has al­ready been steadily grow­ing for years.”

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