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Who’s Responsible for Making Sure You Have Enough to Retire?

Recently, the Institute for Research on Public Policy comprised a survey and found that over half of Canadians who are over 40 and have yearly gross incomes of $35,000 to $80,000 will lose about 25 per cent of the income they’re currently making once they enter retirement. After first hearing this, it may not come as quite a shock, or even be that worrisome. After all, doesn’t everyone experience a drop in their income once they stop working? Well yes, they do. But just how much of a drop, and who’s responsible for picking up the slack after that drop, are questions that still need to be answered.

The problem comes in when you start talking about all the different incomes retirees have, including something called “continuity of consumption.” More on that in a moment.

Canada currently has two programs to supply retirees with some form of income once they’re no longer working. Those are of course, the Canada Pension Plan (CPP) and Old Age Security (OAS.) For those that have struggled to keep themselves just above the poverty line during their working years (and sometimes not even achieving that,) these two forms of government aid may be enough. After all, both programs match up their numbers with the numbers Stats Canada provides that are “below the poverty line,” to ensure that no senior is forced out onto the street because they can no longer afford to live.

The problem is not with these lower-income Canadians. It’s with those who’s earnings are a bit higher, yet not high enough that they’ll never have to worry about money again. It’s those middle income earners who are enjoying a fairly nice life right now with a few luxuries, but are worried that those will disappear once retirement hits. And that may not be such an unsubstantiated fear.

The fact is that CPP and OAS provide enough income for seniors and retirees to live about the poverty line – but that’s about it. While the programs are there to ensure that seniors have what they need, they also need to be kept in check, supplying only what’s necessary, so that the country doesn’t completely tank simply because we’re looking after our seniors.

This is where continuity of consumption comes in. While the wealthy will undoubtedly still have enough in retirement to continue their consumption, and the low income earners haven’t consumed that much, so they’ll be able to continue on in standard fashion, where does this leave those middle-income earners? With few funds, yet now accustomed to a lifestyle that a government-funded retirement simply won’t support?

That’s just the question being put forward by the Winnipeg Free Press who believe that the government needs to do more to ensure that this continuity is continued for middle-income earners. They point to cases such as the 1982 green paper on pension reform, how CPP has not changed even with declining pension plans being seen from employers all around the country. They even give some pretty frightening facts, saying that as many as 50 per cent of Canadians will not be able to continue their consumption into retirement.

But is that such a big deal?

The Free Press did have some good points, mainly when it comes to how little help people have today with their retirement funding or retirement planning. But it’s not the government’s fault. And they certainly shouldn’t have to step in and pick up the slack.

The bottom line is, yes, it’s getting harder to plan for and fund retirement. But that’s why it’s so important to start socking money away now and to really get going on that plan for how you’re going to live in retirement. It can be a big shock to find that your retirement lifestyle is going to be vastly different from the one you’ve been living for the past several decades. But it’s also up to you to ensure that that doesn’t happen.

If CPP and OAS are keeping seniors from being kicked out onto the streets because they don’t have enough income, both of these programs are doing their jobs. They’re not there to ensure that every senior still has their expensive glass of wine every evening with dinner.

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