All posts by Jonathan Chevreau

5.8 million working Canadians will see 20% drop in income in Retirement

Posted By Jonathan Chevreau | June 2, 2015

Almost 6-million working Canadians risk losing the “retirement of their dreams,” according to a CIBC report getting lots of attention today at the Globe & Mail website. CIBC deputy chief economist Benjamin Tal (pictured) says some 5.8 million working-age Canadians will suffer at least a 20% drop in their standard of living once they leave the full-time work force.

The short article is listed as one of the most popular today on the site and has attracted dozens of comments and social media mentions.

Stop me if you think you’ve heard this before but it seems the bank believes the country’s retirement system needs to be reformed as quickly as possible. The most recent move in this direction came from an apparent about-face by the Conservative Government, whose apparent refusal to consider an expanded or “Big” CPP motivated the Ontario government to launch a new retirement system of its own, the ORPP or Ontario Retirement Pension Plan. Then last week, Finance Minister Joe Oliver floated a trial balloon for a “voluntary” expansion of the CPP, which the Hub reprised on the weekend.

Younger middle-income workers with no DB plans at risk

Mr. Tal told the Globe that “it’s not just CPP,” but expressed concern that Canadians still aren’t saving enough money. While many Canadians close to the traditional retirement age of 65 are “on a path to the retirement of their dreams,” Tal’s data also shows millions others, especially younger workers in the middle-income brackets, “are headed for a steep decline in living standards in the decades ahead.”

Weekly Wrap: Voluntary CPP expansion, Social Security fixes, Longevity Insurance, Tontine Annuities

Posted By Jonathan Chevreau | May 30, 2015

A lot of coverage this week for the Tories’ floating of a “voluntary” expansion of the Canada Pension Plan (CPP: Canada’s equivalent of Social Security, if you also include its Old Age Security program), especially when you consider the details were pretty scant.

Incidentally, the issue is quite similar with Social Security in the U.S. This week, Reuters ran a piece entitled How to use Social Security to fix Retirement Inequality. It makes the case for “expanding” Social Security benefits “to help people who need it most.”

The Hub ran two pieces on the proposed CPP expansion: an initial one that felt it looked promising, despite the lack of detail: Bring it on!, followed by a guest blog by Retirement Redux’s Sheryl Smolkin: Voluntary CPP contributions will favour high earners.

Time to bring back Tontine Annuities? Continue Reading…

The 6 stages of Financial Independence

Posted By Jonathan Chevreau | May 29, 2015

By Jonathan Chevreau

The Financial Independence Hub

I’ve been doing lots of reading lately about a new stage of life between MidLife and traditional Retirement. You can read the details in Marc Freedman’s The Big Shift, which confirmed what I’ve been slowly piecing together since my career change this time last year.

The Financial Independence Hub organizes blogs in six categories that are quite similar to the Ages & Stages that MoneySense has long espoused, both in its articles and in its Special Interest Publication, Guide to Retiring Wealthy. You can find these six blog categories in the horizontal grey band that appears below the horizontal blue band at the top of the Hub’s home page.

Ages & Stages: The Life Cycle approach to Investing

Tontine: Retirement Plan of the Future?

Posted By Jonathan Chevreau | May 27, 2015

Here’s my latest MoneySense blog, entitled Tontine: Retirement Plan of the Future, which describes a new book by retirement guru Moshe Milevsky entitled King William’s Tontine. We will follow with a guest blog by Moshe himself on Thursday elaborating on his vision of tontine-like structures as a 21st century fix for declining Defined Benefit plan coverage and rising longevity expectations. In some respects, the Tontine — all but banished in many countries — resembles life annuities. Movie goers may recall a movie where the tontine prominently features: The Wrong Box.

Given this week’s press coverage of the voluntary expansion of the Canada Pension Plan (CPP), Milevsky’s book is all the more timely, since it ’s all about longevity insurance and true pensions: that is, life annuities and true Defined Benefit pensions. (NOT Defined Contribution plans, RRSPs, TFSAs, etc., which are really capital accumulation plans that have no implicit guarantee of an income for life, no matter how long you live to.).

Bring it on! Tories to launch voluntary CPP expansion

Posted By Jonathan Chevreau | May 26, 2015

Details are still sketchy but both major daily newspapers are reporting a plan by the Conservative Government that would let Canadians boost their payouts from the Canada Pension Plan by letting them voluntarily contribute more.

You can find the Globe article here under the headline Tories propose voluntary Canada Pension Plan expansion, and the FP article (via Bloomberg) under the headline Ottawa to consider voluntary Canada Pension Plan expansion, Joe Oliver says.

Whether this constitutes enough federal action to get the much-criticized Ontario government proposal for an Ontario Retirement Pension Plan (ORPP) overhauled or aborted remains to be seen. All along, it seems, Ontario went out on a limb with ORPP out of frustration that the federal government seemed disinclined to expand the CPP. Certainly an involuntary expansion that would have forced businesses to take on higher payroll expenses would not have been an easy sell but a voluntary scheme is quite a different matter.

Consultations will be held in the summer to flesh out the details, Finance Minister Joe Oliver said in the House of Commons Tuesday. The Globe observes that labor groups and seniors advocates like CARP do not believe that voluntary savings vehicles work and that therefore a mandatory expansion of the CPP is needed to make sure Canadians save enough for retirement.

Oliver sees the voluntary expansion working in concert with the new improved TFSAs as well as Ottawa’s PRPPs (Pooled Registered Pension Plans).

Voluntary CPP expansion makes sense, especially for those who lack true DB pensions Continue Reading…