Canada Pension Plan

[Hicksey]

I've seen much debate over the future insolvency of the US social security system over the last 18 months.

Does anyone know if we have a plan to cover the CPP commitment to what is surely a very large baby boomer generation?

If not, why not? Is it wise to be starting new programs if we cannot pay for the ones we have?

[Riverwind]

Does anyone know if we have a plan to cover the CPP commitment to what is surely a very large baby boomer generation?

CPP was theoretically fixed about 10 years ago and is properly funded with higher contributions and lower benefits.

The US social security system could easily be fixed by hiking premiums in the same way, however, the Republican obession with tax cuts means they won't consider that as an option.

[shoop]

Yup, general agreement that CPP is in good shape. Not really an issue because of the changes Sparhawk mentioned.

CPP was theoretically fixed about 10 years ago and is properly funded with higher contributions and lower benefits.

The US social security system could easily be fixed by hiking premiums in the same way, however, the Republican obession with tax cuts means they won't consider the that as an option.

[August1991]

Does anyone know if we have a plan to cover the CPP commitment to what is surely a very large baby boomer generation?

CPP was theoretically fixed about 10 years ago and is properly funded with higher contributions and lower benefits.

The US social security system could easily be fixed by hiking premiums in the same way, however, the Republican obession with tax cuts means they won't consider that as an option.

Sparhawk, your answer is misleading and false. It is believable because it plays to an English-Canadian stereotype: Americans are profligate whereas Canadians are prudent.

Your reasoning is mistaken because you confuse the individual and the group. From an individual's perspective, it seems important to save enough money now to have a sufficient income at retirement. From a group perspective, the situation is considerably different. In this particular case, I think it is confusion about money that makes for a different group perspective than individual perspective.

[This confusion between individuals and groups is acute in modern society and seems to afflict both Left and Right. Since the Left suggests group solutions, the error is probably more serious among Leftists.]

I suggest reading the following article and then giving the whole question some serious thought:

Is Social Security headed for bankruptcy? Sure.

Should we care? Not a bit.

Save and Save and Save Some More

-----

You can read my thoughts on this issue here.

[geoffrey]

I know I'm not counting on CPP being around.

[Hicksey]

So what happened was basically that we now guarantee less and then made it advantageous to invest in your own retirement now?

That's Bush's program in a nutshell. And Democrats are screaming bloody murder over it.

[geoffrey]

So what happened was basically that we now guarantee less and then made it advantageous to invest in your own retirement now?

That's Bush's program in a nutshell. And Democrats are screaming bloody murder over it.

People should be saving for themselves anyways, CPP pays nothing for the investment you put in.

[Riverwind]

CPP was theoretically fixed about 10 years ago and is properly funded with higher contributions and lower benefits.

The US social security system could easily be fixed by hiking premiums in the same way, however, the Republican obession with tax cuts means they won't consider that as an option.

Sparhawk, your answer is misleading and false. It is believable because it plays to an English-Canadian stereotype: Americans are profligate whereas Canadians are prudent.

From an individual's perspective the CPP is a bad deal: $4000/year in contributions only provides about $8500/year in benefits. If the same $4000 was invested privately over 40 years with a 5% return, an individual would expect to get at least $30K per year in benefits.

However, consistently achieving a 5% return after inflation is a challenge for many people so the CPP is a useful safety net that should not be dismissed lightly. The Republican plan for private savings plans will simply excarebate the differences between the rich and the poor because it is the poor that will likely end up living on the street because they made bad choices in their 'private' plans. If the Republicans were honest they would just admit that they want to kill social security as a social program.

[August1991]

From an individual's perspective the CPP is a bad deal: $4000/year in contributions only provides about $8500/year in benefits. If the same $4000 was invested privately over 40 years with a 5% return, an individual would expect to get at least $30K per year in benefits.

However, consistently achieving a 5% return after inflation is a challenge for many people so the CPP is a useful safety net that should not be dismissed lightly. The Republican plan for private savings plans will simply excarebate the differences between the rich and the poor because it is the poor that will likely end up living on the street because they made bad choices in their 'private' plans. If the Republicans were honest they would just admit that they wany to kill social security as a social program.

Sparhawk, you still seem to think that individuals make investment choices and then sit back and enjoy (or not) the fruits of those choices. That's not the way modern society works.

To look at this from a group perspective, the economy (we altogether) generates stuff during a year. At the same time, society (we altogether) gets various chits giving us a claim on all the stuff available. The CPP (for example) is merely one of many ways the Government re-arranging chits, taking chits from one person and giving them to someone else. (In this sense, it is meaningless to talk of the CPP's 'rate of return'.)

People should be saving for themselves anyways, CPP pays nothing for the investment you put in.

Geoff, if you think this will protect you from the government re-arranging chits and taking some of yours to give to someone else, then you are sadly mistaken. (You could try hiding your chits on a small island some place but that will probably be illegal and you'll risk losing them all.)

----

The real issue here is that by re-arranging chits between people, the government may dissuade people from working or holding chits at all. This is serious because then there will be less stuff in the future.

[Riverwind]

To look at this from a group perspective, the economy (we altogether) generates stuff during a year. At the same time, society (we altogether) gets various chits giving us a claim on all the stuff available.

I would argue that private investing in the stock market is no different since for each person who buys low and sells high there must be another person that sells low and buys high. I am not saying the stock market is a zero sum game because it is possible for most players to see their capital increase over time, however, the stock market is mostly a complex means to take 'chits' away from unsophisticated investors and place those 'chits' into the hands of the well connected and already wealthy.

[sideshow]

I dont think that CPP is meant to be a full retirement plan. I would think that it is meant to be a part of the persons retirement plan. If you add a company pension, cpp, and then your personal RRSP contributions to make your overall retirement investment, this should suffice.

The 5% that you lose off of your paycheck is really peanuts-you should contribute twice that to your savings anyways.

From what i understand, the CPP is solvent and is funded at a rate of 5 years in advance-meaning that if contributions were to cease today, then payments would be made for the next 5 years without worry. The old method was a 2 year buffer. I would think if anything happens (recession, etc.), this 5 year buffer would provide ample buffer to make adjustments to the plan.

The real adversion to the plan, is the forced group approach-taking away the individuals right to investment, and forcing employers to pay their portion. But death and taxes my friends.

[fixer1]

The CPP is supposed to be there to help people who at a time of old age want to retire and be able to do so if you are thrifty and not seeking a life of comforts. This would only cover you for the basics, if that. If you are a Canadian and want to have a good life when you retire, you will need to have between $250,000.00to $350,000.00 in RSP type investments. This is really not beyond the means of most Canadians, but yes there are many who will never be able to do that. If you could reasonably expect to get a 6% return on investments, you should be able to then have an income in your retirement of $40,000.00 per year. If your house and other debts are all gone, you will have a modest but good lifestyle.

there are many who are reverse mortaging their homes etc to get more to life on in retirement, but that does mean quite a bite less left for inheritence. Both the wife and myself worked all our lives and she is still working while I have retired, and it will be another 6 years before she is ready (her choice not mine ), but when all is said and done between the two of us we will be able to do the world travel but not the 5 star fashion we were used to before. I would love to have a horse farm in the foothills of the rockies and a home somewhere in South America, for winter living. It is not out of our grasp, but it takes some working to get it all. I may well decide to return to work for the next 6 years just to help make it all doable. When we are ready I will be 61 and my wife will be 60. If our health holds out we will get our plan done. The problems will be the high cost of health care outside of Canada. The wife works for CCHSA which does health care acreditation of hospitals and other health care services. They do this internationally, and Brazil and Argentina are not so far off the costs that we would have here in Canada. That is why I would rather winter there then the USA south. The costs of healthcare in the USA are just too crazy and while there are many well accredited hospitals, they also have many that lets just say would make third world like firstclass. But for the most part they are pretty good. Not what I would say it worth the costs they want, but service is good.

So yes you can retire in Canada and live a simple life not much higher then basic living on the CPP and Old Age pension. Burt if you want more then that, you need to start squirrelling away some money. RSP's are fine, but you should also try your hand at soem other investing, but do your home work. If I know back when I was twenty what I know now, I would have been much more careful in some of the things I did, but I think we all can say that same thing.

[August1991]

To look at this from a group perspective, the economy (we altogether) generates stuff during a year. At the same time, society (we altogether) gets various chits giving us a claim on all the stuff available.

I would argue that private investing in the stock market is no different since for each person who buys low and sells high there must be another person that sells low and buys high. I am not saying the stock market is a zero sum game because it is possible for most players to see their capital increase over time, however, the stock market is mostly a complex means to take 'chits' away from unsophisticated investors and place those 'chits' into the hands of the well connected and already wealthy.

Good example, Sparhawk.

The stock market is a secondary market - like the market in used cars. Once a share has been issued, its further trading in the stock market has no direct benefit to the issuer. (Of course, without a secondary market, there would be much smaller value in the initial offering.)

The pricing in the stock market offers information to an issuer who may want to raise more capital, and offers other benefits in reducing risk.

But you are right Sparhawk that a stock market is almost a zero-sum game in which chits concerning future claims are traded. For each "loser" who sells at a lower price, there is a "winner" who buys at the lower price.

Incidentally, your example of rising share value is not evidence of a positive sum game - except in that a stock market allows initial borrowing of capital.

----

This thread has an interesting subtext. What will happen when all these boomers retire and decide to cash in their chits and claim the goods they expect to receive? First, there will be fewer goods (particularly services) because there will be fewer people working to produce them. Second, many of the boomers consider their house (and maybe their cottage) as a major store of value. What happens when the boomers start dying?

The effects of demographic trends are almost imperceptible and are better observed in hindsight. Half of Canada's population growth comes from immigration.

[Spike22]

There will be a s long as we generate enough taxpayers to pay into the system. Now we just have to get more immigrants into the country to pay for it...

[Slavik44]

This thread has an interesting subtext. What will happen when all these boomers retire and decide to cash in their chits and claim the goods they expect to receive? First, there will be fewer goods (particularly services) because there will be fewer people working to produce them. Second, many of the boomers consider their house (and maybe their cottage) as a major store of value. What happens when the boomers start dying?

The effects of demographic trends are almost imperceptible and are better observed in hindsight. Half of Canada's population growth comes from immigration.

hmm...interesting question August, now allow me to give a somewhat non-main stream answer. The developed world in all its greatness is soon to be enterign a time when it will need to start exporting the next great commodity of the world, people. All around the world countries tend to be running out of space and resources to cover their population, they have an ecological foot print much larger then the territory they possess. On the flipside Canada could theoreticaly, sustainably, support a population of almost 150 million people. Now not only are countries looking to export people, but Canada is looking to import people and investments, as it sits on the sideline ready to become an honourary member of the middle east and in 20 years the president of the middle east, just hopefully with out the suicide bombers. What I am saying is that although blood is thicker then water, water and oil may be thicker then nationality. The question should be is Canada willing to make the transition from a branch plant economy to a Branch Plant country? Perhpas it is not the 20th century but the 21st century that belongs to Canada or what ever form it will take. So perhaps we may have to accept immigration as a not only a part but as the method for our countries succesfull future. Nurses marry a geologist and move to Canada. On the topic of consumer goods I was frantically looking around for one in my house made in Canada, but even my oh Canada pen says made in singapore. Generally speaking the walmart warehouses of the world do not always have the old age problem. I realize this is not a popular answer to the oncoming problems for Canada, actually I have never heard it before and I am sure there are problems with my arguement but I figure someone else can cover the routine answer for me.