Budget makes late retirement the new normal
Kazi Slastna, CBC.ca
The news was not unexpected, and for those of Generation X age or younger, it was simply more confirmation of what they've been told most of their lives: expect to work longer and retire poorer than your parents.
Finance Minister Jim Flaherty announced in Thursday's federal budgetthat the government is raising the age of eligibility for Old Age Securityfrom 65 to 67. The government had already hinted it would do so earlier this year, but made it official in the budget, saying it will phase in the changes over six years starting in April 2023 and won't apply the new rules to anyone born before April 1,1958.
We spoke about the change with Frances Woolley, who teaches public finance and economics at Carleton University in Ottawa and earlier this year predicted the government would raise the Old Age Security eligibility age in 2023 in several commentaries she wrote.
How much of an impact will these changes have in terms of reducing the costs associated with an aging population?
When you look at things as a person who is concerned about the situation of government finances and the implications of population age going forward, it's not Old Age Security. It's things like long-term care needs — those are the really scary things that could bust the budget.
A lot of people plan on working at 65, 66, 67. The way the market is going right now, people aren't going to be expecting to retire anyway. I just think it's an easy one to do, so I think that's why they've done it.
Increasing the Old Age Security is one thing, but there's lots and lots of other age-related things, in the Income Tax Act, [for example].… There's all sorts of other benefits that are tied to age.
The Little Book of Scams
To help, the government of Canada through the Ministry of Industry, in cooperation with the Competition Bureau, has published The Little Book of Scams to help consumers avoid being taken in.
What are some simple rules to follow to avoid becoming the victim of a scam?
Included in the publication are some easy to remember Golden Rules to help you beat the scammers. These include:
- Never send money, or give credit card or online account details to anyone you do not know and trust.
- Do not hand over money or personal information, or sign anything until you have done your homework and checked the credentials of the company that you are dealing with.
- Do not agree to offers or deals right away. If you think you have spotted a great opportunity, insist on time to get independent advice before making a decision.
- Log directly on to a website that you are interested in rather than clicking on links provided in an email.
Scammers can approach people door to door, over the telephone, online, through regular mail or email. Common scams include Internet fraud, fake lotteries, get rich quick schemes and cheap energy providers. As the guide points out, scammers do not discriminate! They will target people of any age, or income level. Not all scams involve large sums of money; some scammers specialize in getting smaller amounts of money from larger groups of people.
What are some straightforward rules to help beat the scammers? Here are some other great tips from The Little Book of Scams to keep in mind:
- You cannot win a lottery that you have not entered. (You will not win a cruise randomly over the phone unless you have entered a contest to win one!)
- Legitimate lotteries do not require a winner to pay a fee or tax in order to collect their winnings.
- If someone requesting that you transfer money on his or her behalf has approached you, it is probably a scam!
- Be mindful of unsolicited or junk email. It is likely phishing – when the scammer mirrors legitimate companies (financial institutions for instance) in order to trick you into revealing personal or banking information – do not click on any links sent to you, even to “unsubscribe” from unknown email.
- Do not give out personal information or financial information to anyone who telephones or emails you that you have not solicited or requested.
If you spot a scam or have been scammed, help is available. Contact the Canadian Anti-Fraud Centre, www.antifraudcentre.ca 1-888-495-8501 or the Competition Bureau www.competitionbureau.gc.ca 1-800-348-5358 for assistance.
This is a great guide full of useful tips and information on how to protect yourself and avoid scams. You can download your own copy for free at:
Old age security: Feds aim pension message at young Canadians
Heather Scoffield, Toronto Star
OTTAWA—The federal government is refining its pitch to cut public pension benefits, now aiming its message at younger Canadians.
In a speech in Toronto today, Human Resources Minister Diane Finley confirmed that the coming federal budget will define major changes to old age security, the program that gives about $500 a month to 98 per cent of people over 65.
Unless the government acts now, younger Canadians would face impossible choices of higher taxes, higher deficits or fewer social programs, she said.
“We cannot allow ourselves to be pegged into a situation where we are faced with a choice between the country’s financial security, and our commitment to aging Canadians who have worked long and hard to build this great nation.”
While other countries have acted to increase the age of eligibility to keep in line with aging populations, Canada has stood still, she said.
“It’s ticking along as if things haven’t changed demographically in 50 years.
“We will need to ensure that our government has the fiscal room to meet the various needs of an aging population … without putting an undue tax burden on younger generations.”
At several points during the speech, she called out to young people to pay close attention — since the changes will affect them more than today’s seniors.
Indeed, she gave a personal guarantee that current retirees won’t be touched.
“I challenge you to walk away today and tell your older friends and family that I personally assure that there will be no changes for seniors currently collecting benefits. Nor will there be any impacts for anyone close to retirement,” she said.
Jack M. Mintz, Financial Post
Gradual changes to Old Age Security would make room to spend on health care and other funding priorities
The recent kerfuffle over Old Age Security costs have raised the angst that seniors’ benefits of up to $540 per month may be cut. Older Canadians should take a deep breath. Any changes to OAS will not affect current or soon-to-be retirees. In fact, federal budgets won’t be affected for years to come.
Canada’s pension is financially sustainable, a conclusion reached by the research I directed in 2009 for federal-provincial-territorial ministers of finance. But bigger issues are at play, as pointed out by the Prime Minister in his National Post interview last Saturday. The whole package of elderly support measures will be a significant drain on public finances in the future. We should examine the state’s role in supporting retirees who are now living much longer.
In the past, federal governments enhanced elderly benefits without taking sufficient care to examine the economic effects especially on labour markets. When OAS was introduced in 1952, retirement eligibility was 70 years of age while the average life expectancy was 68. Many would have passed away before receiving OAS.
During the years 1965-69, the eligibility age was moved down to 65, even though life expectancy was increasing. Now, with life expectancy above 80, most Canadians qualify for OAS for a very long time after 65. Other OAS changes included indexation of benefits (1973), spousal allowance (1975) and the end of universality for high-income seniors (1989). The OAS is clawed back at the rate of 15¢ for every dollar when individual income is above a threshold (for 2012, $69,562). It is fully clawed back when income reaches $112,772.
Given Canadian demographic changes, we know two things. First, labour shortages, already a complaint in many parts of Canada, will be exacerbated as post Second World-War Boomers retire. Second, low fertility rates, offset only in part by robust immigration policies, don’t compensate for the retirees. Thus, the relatively shrinking working population will pay most of the taxes needed to support an increasing number of retirees.
To read the full story: http://opinion.financialpost.com/2012/02/08/rethink-retirement/
70 should be the new 65 to ease pension crunch
Jered Stuffco, CTV.ca
Canada should consider upping the age when public pensions kick-in to help offset ballooning expenditures from an aging population, a new study suggests.
Currently, when Canadians turn 65 they become eligible to collect payments from the Canadian Pension Plan. But two economists from Hamilton's McMaster University say that the eligibility age should be raised to 70 because of longer life spans and a crunch in public money.
"The major factor is the aging of the baby boom generation," said study co-author Byron Spencer in a release.
According to statistical predictions, by 2035, there will be two workers for every person over the age of 65. Today, that ratio is four-to-one.
In the study, Spencer and his co-author Frank Denton suggest that Canada should gradually raise the pension age by five years, which could cut projected pension expenditures in half.
"There would be some resistance from the general public, but less so if the transition was done gradually," said Spencer.
The authors point to demographics and the extended life expectancy of Canadians as key indicators.
Since CPP was brought in back in 1966, the life spans of Canadian men and women have increased by 10 and eight years respectively, the authors said.
But that's not the only thing causing a cash crunch.
"Even though they're living longer, Canadians are retiring at younger ages and spending more of their lives in retirement," the authors said.To read the full story: http://www.ctv.ca/CTVNews/Canada/20120126/pension-age-should-rise-to-70-120126/#ixzz1ktdpk5Gi
Security, in your "golden years"
Don Cayo, Vancouver Sun
As long as public supports stay more or less as they are, the question isn’t whether you can afford to retire at age 65 or beyond. No elderly Canadian who manages money with any care at all is at risk of death from hunger or lack of necessities when the paycheques stop.
Mind you, if you’re single and you have no property or savings — or even just very modest savings and/or a home with a mortgage — your “golden years” might feel more like lead. You’ll probably be poor.
And if you’re married in the same circumstances — no money squirrelled away and no big property asset you can sell — you won’t fall below what’s generally considered the poverty line, but you may well find your spending choices uncomfortably constrained.
So the question probably isn’t whether you can ever afford to retire. Rather, it’s a matter of if or when you can afford to retire with something approaching the lifestyle you want.
Financial advisers are fond of telling us the amount we need to save for retirement depends on how much we plan to spend. This may be sound advice for those young enough, rich enough and prudent enough to be able to meet a well-thought-out retirement goal.
But for those getting close to retirement without much set aside, who don’t have much or any disposable income to spare, and who have spending habits that are hard to tame — it’s time to flip this advice around.
Some see merit in reverse mortgages
Vikram Barhat, Advisor.ca
A record number of reverse mortgages in Canada has sparked concern, with some in the financial industry expressing fears of homelessness. However, the more pragmatic in the industry are quick to offer reassurance that it’s not all gloom and doom.
“When you first read the report, it’s a little alarming,” says Laura Parsons, a BMO mortgage specialist. “[It suggests] we’re destitute and haven’t planned for our retirement at all, but there are lots of reasons why people take equity out of their home.”
Among the more responsible reasons are home renovations/repair, or paying increasing medical bills, she says. Of course, seniors could be using the money to fund vacations.
That said, seniors considering a reverse mortgage should consider all available options, she adds. A financial advisor plays a crucial role in helping retirees understand various options and their financial impositions.
They can do so by laying it out for their clients very clearly the cost of each product and its impact on their budget and home equity, says Parsons. “Everything’s a fit, and you choose the right thing for yourself in the end.”
Detractors of reverse mortgages argue that they saddled seniors with huge fees, uncompetitive interest rates and that they lack flexibility.
To read the full story: http://www.advisor.ca/news/industry-news/some-see-merit-in-reverse-mortgages-69660
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