Do Canadians save for retirement?

[August1991]

According to the 2008 Retirement Confidence Survey (RCS), many Americans will have gruesome retirements. In a separate survey, 31% of us said we'd rather scrub a bathroom than plan for retirement.

Rest assured: If you've been putting off planning for your retirement, you're not alone. (I can't speak for the scrubbing thing.)

Check out the numbers from the RCS. They reflect the total savings and investments (not including the value of the primary residence) of today's workers, by age group:

Retirement Savings .. All Ages .. 25-34 .. 35-44 .. 45-54 .. 55+

Less than $10,000 .... 36% ...... 49% .... 33% .... 29% .. 28%

$10,000-$24,999 ..... 13% ...... 18% .... 13% .... 11% .. 8%

$25,000-$49,999 ..... 12% ...... 14% .... 12% .... 13% .. 7%

$50,000-$99,999 ..... 12% ...... 13% .... 12% .... 10% .. 16%

$100,000-$249,999 .. 15% ...... 4% ...... 21% .... 18% .. 18%

$250,000 or more .... 12% ...... 2% ...... 8% ...... 20% .. 23%

Source: Retirement Confidence Survey, April 2008.

These statistics don't include Social Security payouts. Maybe there's a reason for that.

Link

These numbers surprise me. I wonder if Canadian numbers are different. (Keep in mind that the CPP/QPP is not as generous as the US Social Security.)

It appears that many Boomers are expecting others in society to take care of them, or they have chosen Plan 85.

Edited July 8, 2008 by August1991

[Fain]

Baby Boomers probably have built up alot of equity. You don't need alot of savings if you can sell your house for a huge chunk of change.

[madmax]

Baby Boomers probably have built up alot of equity. You don't need alot of savings if you can sell your house for a huge chunk of change.

Just because housing prices increased, doesn't mean that this is a retirement plan. Also those on the tail end of the boomers, have probably been caught in each major recession, and job loss. Regardless many of the retirement boomers today, do appear to have a pretty good nest egg and yes, possibly a home.

Don't forget, housing prices have collasped before, but don't expect this to happen again. Not like the 80s, and we certainly don't have those free market housing policies of the US. We have some pretty sane housing policies.

Just don't buy those garbage new homes

Regardless, the housing market has been pretty solid, but it is about to fall flat, and it is becoming a buyers market.

Housing depends upon which province you live in, and which city. Some people are definitely cashing in with pension like rewards.

In the meantime, with the wages falling in many Provinces, costs increasing, it won't surprise me if our next Generation puts away money for retirement like those in the US.

We started to emulate their policies some 20 years back, so I am not surprised we are sliding down the same pit with them.

I believe that the next generation will make less money then their parents, and better hope on getting some of that dough when the parents sell the home.

[Topaz]

One thing that some baby-boomers may fortunate to receive an inheritance, and I remember reading some years back that there was 1.2 trillion dollars. I don't know if that number is still the case because of the the ups and downs of the investment world. The 60's through to the 80's were money making times for the average Canadian and I don't think its that easy now as it was back then. There's also a person's home if it paid off, most seniors sell it and live on the profits. I don't think most baby-boomers kids are going to be able to have what their parents have/had. Its getting harder to buy a home and then the bills of owning one keeps getting more expensive. So some people that can save for retirement will but now days, some will find it impossible.

[jdobbin]

It appears that many Boomers are expecting others in society to take care of them, or they have chosen Plan 85.

I'm generally a big saver but often wonder what would be an adequate amount for retirement and what sort of vehicles of investment I should use to achieve that aim. I utilize a financial adviser but even then, it is a tough thing to get a clear answer on how much and where to invest it.

How much do you think you need to save?

[M.Dancer]

How much do you think you need to save?

Enough that the interest will be an adequate income. Usually 2 million.

Good luck

[msj]

Link

(Keep in mind that the CPP/QPP is not as generous as the US Social Security.)

Canada - CPP - average monthly payment - 2004 $458 which would be ~$500 in 2008.

OAS - average monthly payment (March 2008) $476.05.

Total - ~976

US - average monthly payment - $1,050.

In Canada one can get CPP starting at 60 (with a reduction in benefits) but has to wait to 65 to get OAS (and also GIS if the person has a low income).

In US one can get SS starting at 62.

In Canada one stops paying into CPP when one's earnings max out at ~$44,000. The rate is 4.95% plus the employer rate of 4.95% (self-employed pay 9.9%). [OAS is not self funded and is paid out of general revenue]

In US one stops paying into SS when one's earnings max out at ~$102,000. The rate is 6.2% plus the employer rate of 6.2% (self-employed pay 12.4%). [The SS is arguably funded through general revenue - or, rather, the SS surpluses of today fund general revenue but this will reverse itself by 2017]

In Canada the CPP is actuarially sound.

In US the SS isn't.

I certainly hope Americans enjoy their more "generous" benefits - while they last.

[Smallc]

Canada - CPP - average monthly payment - 2004 $458 which would be ~$500 in 2008.

OAS - average monthly payment (March 2008) $476.05.

Total - ~976

US - average monthly payment - $1,050.

In Canada one can get CPP starting at 60 (with a reduction in benefits) but has to wait to 65 to get OAS (and also GIS if the person has a low income).

In US one can get SS starting at 62.

In Canada one stops paying into CPP when one's earnings max out at ~$44,000. The rate is 4.95% plus the employer rate of 4.95% (self-employed pay 9.9%). [OAS is not self funded and is paid out of general revenue]

In US one stops paying into SS when one's earnings max out at ~$102,000. The rate is 6.2% plus the employer rate of 6.2% (self-employed pay 12.4%). [The SS is arguably funded through general revenue - or, rather, the SS surpluses of today fund general revenue but this will reverse itself by 2017]

In Canada the CPP is actuarially sound.

In US the SS isn't.

I certainly hope Americans enjoy their more "generous" benefits - while they last.

Actually, a single Canadian gets approx 1050 from the govt after 65.

A coupe gets less than that each, so I guess that skews it.

Edited July 10, 2008 by Smallc

[White Doors]

Wow, I feel much better about y savings now. haha

the rule of thumb I heard was to have double your yearly income invested by the time you are 40.

[msj]

Actually, a single Canadian gets approx 1050 from the govt after 65.

A coupe gets less than that each, so I guess that skews it.

The numbers I have provided are averages based on an individual.

The OAS kicks in at age 65. People often apply for CPP a little bit early which likely skews the $458 average (from 2004) number I have provided above since the reduction in benefits is 0.5% point per month (30% reduction if you take CPP at age 60). The number is likely also skewed by CPP splitting.

Nothing personal but does anyone bother to check links or provide references rather than pick numbers from their @sses?

Edited July 10, 2008 by msj

[Smallc]

The numbers I have provided are averages based on an individual.

The OAS kicks in at age 65. People often apply for CPP a little bit early which likely skews the $458 average (from 2004) number I have provided above since the reduction in benefits is 0.5% point per month (30% reduction if you take CPP at age 60). The number is likely also skewed by CPP splitting.

Nothing personal but does anyone bother to check links or provide references rather than pick numbers from their @sses?

Nothing personal, but I know several people...in fat all people living alone from around here...they get 1047 and change. This amount was recently raised from 1016 or 26/ I did not pick a number out of the air. The reason that the average is where it is is the fact that when you live with another person, you get less, closer to $950.

Edit: I just learned that my number for individuals may be too low, I'll have to check on it. Your numbers are too low because they are from a few years past and the numbers have went up quite significantly a couple of times since then.

Edit 2: I also have found out that if you receive another pension or are wealthy you receive less. That also lowers the number I suppose.

Edited July 10, 2008 by Smallc

[segnosaur]

While people are comparing benefits that people get in the U.S. or Canada, remember that simply looking at total cash received may be misleading.

For example, you'll have different tax rates (including sales taxes), different costs of living, additional tax credits, etc.

Not sure which country is most generous myself, I just know it would be far too confusing to try to figure it out.

In Canada the CPP is actuarially sound.

In US the SS isn't.

I certainly hope Americans enjoy their more "generous" benefits - while they last.

Its true... the Liberals made the right decision a few years ago to reform or pension plan, instead of having current benefits paid from current income, they went to bascially a large investment plan.

The U.S. system is a little more risky... Bush tried to reform it a few years ago (by allowing people to invest part of their SS into certain investments), but his attempts failed.

http://www.cbsnews.com/stories/2005/02/01/...ain670710.shtml

http://www.ustreas.gov/press/releases/reports/post.pdf

[M.Dancer]

As far as my retirement goes I have never considered that I will get a CPP pension. I feel a little less anxious now.

[msj]

Nothing personal, but I know several people...in fat all people living alone from around here...they get 1047 and change. This amount was recently raised from 1016 or 26/ I did not pick a number out of the air. The reason that the average is where it is is the fact that when you live with another person, you get less, closer to $950.

Edit: I just learned that my number for individuals may be too low, I'll have to check on it. Your numbers are too low because they are from a few years past and the numbers have went up quite significantly a couple of times since then.

Edit 2: I also have found out that if you receive another pension or are wealthy you receive less. That also lowers the number I suppose.

Sure, my CPP number is low. Which is why I adjusted it by ~ 2% per year to take it from the actual 2004 average to an estimate of $500 for 2008.

Given that the CPP increases by inflation each year this is a reasonable estimate.

The OAS number is based on March 2008 so that number is accurate.

The point being, it is based on statistical evidence rather than anecdotal evidence.

I do hundreds of tax returns every year - I'm sure I could find lots of people who make more than the average and lots who get less. That's why it is called "average."

As for receiving less as a person earns more - that is true of OAS as it is clawed back. It is not true of CPP which is not clawed back.

It will be interesting, however, in a few years, to see what the stats are on the OAS since the pension splitting rules came into effect.

There are a lot of people who are now getting their full OAS because of this change.

[Smallc]

Sure, my CPP number is low. Which is why I adjusted it by ~ 2% per year to take it from the actual 2004 average to an estimate of $500 for 2008.

Given that the CPP increases by inflation each year this is a reasonable estimate.

The OAS number is based on March 2008 so that number is accurate.

The point being, it is based on statistical evidence rather than anecdotal evidence.

I do hundreds of tax returns every year - I'm sure I could find lots of people who make more than the average and lots who get less. That's why it is called "average."

As for receiving less as a person earns more - that is true of OAS as it is clawed back. It is not true of CPP which is not clawed back.

It will be interesting, however, in a few years, to see what the stats are on the OAS since the pension splitting rules came into effect.

There are a lot of people who are now getting their full OAS because of this change.

Well, I wasn't trying to start an argument, it just seemed that the number was a bit low from what I've observed, but if thats what the statistics say, they must be true.