Canadians need to save more for retirement according to the Bank of Canada. Former Bank of Canada governor David Dodge has just called for an expansion to the Canada Pension Plan to boost retirement savings, but says many Canadians also need access to new voluntary savings options like the proposed Pooled Registered Pension Plan program.
In a report prepared for the Ontario Finance Ministry, Mr. Dodge concluded Canadians are not saving enough for retirement, which is going to put an enormous burden on governments who will have to provide income support to more seniors in an aging population.
The report stated that, “an increase in future CPP pensions financed by an increase in actuarially appropriate CPP premiums starting in the near future would be an efficient measure to increase household saving and to provide for higher retirement incomes
An increase in CPP pensions would benefit many Canadians who do not stand to gain significantly from profitability of most corporate pension plans. Currently the CPP provides a maximum annual income of $12,500 to retired Canadians. According to the report, the higher premiums Canadians would be required to pay would be small relative to the longer run benefits of more adequate retirement income.
This boost in retirement incomes, however, can only do so much to prepare Canadians sufficiently for retirement. The report urges Canadians to begin increasing their retirement savings pool as well. Currently consumers close to the retirement age carry a great deal of debt. Many are living pay cheque to pay cheque with insufficient emergency savings funds. This common issue makes it increasingly difficult to find more funds to put towards retirement.
For more about investing in your debt before retirement, read “Putting your Debt ahead of Investing for Retirement”.
One has to wonder how Canadians close to retirement or retired carrying significant debt will be able to pay additional pension funds. Managing unresolved debt should be a priority for this group and there are ways in which to do this.
For Tips for Managing Debt for Canadians 50-plus click here
Mr. Dodge’s plan for an expansion to the Canada Pension Plan is a positive step in helping Canadians secure a more sufficient retirement. It can’t stop there. We agree that Canadians need to increase their savings as the report urges, but also to make a plan to resolve any debt as soon as possible. Retirement can be rewarding if you live debt free.
To read the news release from the Ontario province, go to http://news.ontario.ca/mof/en/2014/04/dodge-advises-canadians-must-save-more-now-for-retirement.html?utm_source=ondemand&utm_medium=email&utm_campaign=p.
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