Canada’s finance ministers are worried about the financial health of its retiring boomers. Everyone agrees that this demographic faces an uncertain financial future. However, no one seems to agree on the solution.
Some want to increase CPP premiums being paid now so that we can benefit from higher payouts upon retirement. Others prefer voluntary programs and pooled registered pension plans.
Fact is neither solution is ideal.
Given a sky-high consumer debt and an overheated housing market, Finance Minister Jim Flaherty isn’t anxious to chip away at already strapped incomes. In fact, according to a poll conducted by CFIB,
if working Canadians are forced to pay higher premiums, 45% would be less able to spend on essentials like food, rent and mortgage.
In addition, the burden on employers could result in loss of hours, wages and jobs.
So what about voluntary plans? Well, as it stands, Statistics Canada reports that only a quarter of Canadians contribute to RRSPs, and of those, only a fraction put in the maximum allowed.
In other words, we’re choosing not to save as much as we can, so how would voluntary plans fare any better?
In my opinion (no surprise that I have one!), forcing people to save is a Band-Aid solution. It would be better to implement incentives that empower people to take action and save. I also believe that financial planning should be taught in our schools, so that children learn how to manage money early on and establish good habits from the start.
That’s my take on it. What’s your contribution?