ageing canadians, implications

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/stephen-gordon/canadian-population-by-age-2010/article2039509/?from=2039511

Scary - we are just now seeing the tip of the iceberg, with early retirements.
In 15 years, the damage will largely be done.

And at a time when pensions were largely off the radar as election issues!

http://www.theglobeandmail.com/report-on-business/middle-class-retirement-outlook-takes-hit/article2002892/

A new study by the Montreal-based Institute for Research on Public Policy shows that about half of middle-income Canadians born between 1945 and 1970 are likely to face at least a 25-per-cent drop in their disposable incomes when they retire. Middle-income is defined as earning an average annual lifetime income of between $35,000 and $80,000.

D - I have 2 words. So. What.

The Mintz study concluded Canada’s pension system is “performing well” and said 80 per cent of households are saving enough to replace 90 per cent of their working income in retirement.

He said his analysis also found that several bold reform proposals that have been floated – including doubling the Canada Pension Plan and improving the Old Age Security system – would not significantly improve retirement incomes for baby boomers.

Under the various reform scenarios, middle-income earners would see their average after-retirement income compared to pre-retirement income improve between four to eight percentage points for people born from 1960 to 1965, for example.

the IRPP report concludes “more much ambitious reforms than the ones being considered will be required to improve the adequacy of retirement incomes.”

Mr. Wolfson argues Canadians should be willing to open a debate about granting improved Canada Pension Plan benefits to baby boomers even if they haven’t earned them, arguing there is plenty of historic precedent for speeding up eligibility.

D - I've already outlined how the Boomers have received a free - or heavily subsidized- lunch on pensions.
And keep in mind that the tax base will shrink exactly when age-related health costs and social program usage is spiking.
In that context, this proposal is indefensible.

I saw an article in the Record this week proposing we hike CPP pay-in rates by c. 1/2% per year to address middle class retirement income.
The only advantage of this is that it would at least ding retiring Boomers for 1-15 years for their own retirement costs.
Having said that, ensuring the long-term viability of the pension plan has yet to be addressed. First things first.

NDP want to double pension benefits

http://www.theglobeandmail.com/news/politics/layton-says-hell-be-driving-hard-to-strengthen-pensions/article2019108/

During the campaign, the NDP proposed doubling CPP benefits and pumping an extra $400-million annually into the Guaranteed Income Supplement for the poor. It said the GIS boost would be covered by higher corporate taxes.

D - thank heaven he does not have the clout of a minority government!

No explanation about where this money would come from.

When the long-term viability is already in doubt.

This amounts to icing on the cake for Boomers.
First, they pay artificially low rates for the 1st 1/2 of their work careers.
Then, last minute, they get an increase that amounts to what the "Great Generation" got, on top of that!

Wow. Just wow.

collge new post-U finishing school

http://www.theglobeandmail.com/news/national/education-levels-broken-down/article2016110/?from=2016162

Funny. I'm eying Excel and Access classes at the local college.
For a job on university campus.

D.

why teens are not activist when Boomers were?

http://www.theglobeandmail.com/news/arts/movies/regeneration-a-rallying-cry-for-apathetic-teens/article1970498/

D: student loans.

Why aren’t they as galvanized as the so-called great generation that fought the Second World War or the baby boomers protesting during the 1960s, the film asks?

A wealth of factors are cited by the talking heads, from parenting to media to education. They boil down to what Chomsky points to as an institutional system of control. Parents want their children to excel, so they shelter and coddle them. The media feeds them advertising at every turn. Then as they set out as young adults, huge student loans force young people to take company jobs to pay off their debt, and so the cycle continues, Chomsky and others argue.

state of pension plans

http://www.cga-canada.org/en-ca/ResearchAndAdvocacy/AreasofInterest/Pensions/Pages/_ca_pensions_index.aspx

Boomers to place enormous demands on retirement system

* Post retirement expectations and needs of the “boomer” generations will place enormous demands on the country’s health and social support systems.
* Long term demographic trends challenge the Canadian retirement system – the working age population will conceivably shrink further in the years to come and baby-boomers will progressively leave the workplace.
* Decline in the numbers of the working-age population will inflict constriction of funding into the retirement system.
* Unless this dual pressure on the system is otherwise relieved and counterbalanced by prudent regulatory and pecuniary policies, steady disintegration will befall Canada’s retirement system(s).

Recommendations
Design new pension system that is fair to all Canadians both now and in the future

* Design a pension system that is sustainable in the long term, fair to present and future generations, simple to administer, and cost effective.
* Recognize pension benefits as deferred compensation.
* Consider adaptations of the “Hybrid Model” (Cash Balance Plans) that can, going forward, substitute for current DB and DC plan models.
* Establish a common pension regulator to monitor the retirement system and adherence to the principle of “one law, one regulator”.
* Examine the prospect of introducing universal and compulsory coverage of all working Canadians.
* Consider consolidation of the oversight of private sector registered pension plans under the authority of the proposed common pension regulator for achieving efficiency and economy of scale.
* Harmonizing more fully the tax treatment of all pension plan transactions, including funding and payout irrespective of their origin and structure.
* Codify a set of guiding principles aimed at guarding the system against human error and external shocks.

D - in other words, there is an intergenerational crunch coming.
Right.

j

j

usa - unfunded social program liabilities, payroll tax

http://www.ncpa.org/pub/ba662

Future Payroll Tax Burdens. Currently, a 12.4 percent payroll tax on wages funds Social Se­curity and a 2.9 percent payroll tax funds Medicare Part A (Hospital Insurance). But if payroll tax rates rise to meet unfunded obligations:

* When today's college students reach retirement (about 2054), Social Security alone will require a 16.6 percent payroll tax, one-third greater than today's rate.
* When Medicare Part A is included, the payroll tax burden will rise to 25.7 percent - more than one of every four dollars workers will earn that year.
* If Medicare Part B (physician services) and Part D are included, the total Social Security/Medicare burden will climb to 37 percent of payroll by 2054 - one in three dollars of taxable payroll, and twice the size of today's payroll tax burden!

Thus, more than one-third of the wages workers earn in 2054 will need to be committed to pay benefits promised under current law. That is before any bridges or highways are built and before any teachers' or police officers' salaries are paid.

---
D - wow.
How do Canadian stats stack up?

How would you feel if the Canadian government sent you a letter suggesting you owe an extra $150,000?

No doubt few, if any, Canadians would welcome that news. But that's the situation facing Canadian taxpayers as each of us is on the hook for another $150,211 in liabilities that our governments have racked up in debt and unfunded program obligations.

Unless immediate action is taken to reduce Canada's liabilities, young Canadians will be hit with a significantly larger tax bill in the future.

D - debt needs to be understood to be an intergenerational issue.
The Boomers are on a date with Gen XYZ. They leave early after ordering the lobster and champagne. And leave the bill. We don't even get to grasp a knee under the table for it! (!)

http://www.canada.com/story_print.html?id=d254af34-6191-4989-8d36-54a3b23be2ce&sponsor=

Consider the Old Age Security (OAS) program, the "cornerstone" of Canada's retirement income system. Old Age Security pensions are available to all Canadian citizens and legal residents 65 years and older, providing they have lived in Canada for a minimum of 10 years of their adult lives.

The problem with Old Age Security benefits is they are paid for out of current federal tax revenue.

At their inception, programs like OAS were based on the assumption that the demographics prevailing in the 1960s would persist. It was considered favourable social and economic policy to transfer a small amount of money from a large group of younger workers to benefit a small group of relatively poor retirees.

D: we've known for a very long time this assumption is incorrect.
So why no reform?
Easy. Boomers wait to retire. Then leave nearly the entire bill to the younglings.

In 1956, only 7.7 per cent of Canadians were over 65 years old. That proportion increased to 13.3 per cent in 2006 and is expected to rise to 26.5 per cent by 2040.

Adding the unfunded liabilities of the Old Age Security program and Medicare to that of the Canada Pension Plan ($538 billion) puts total Canadian unfunded liabilities at $1.3 trillion.

Further, these unfunded liabilities have increased by more than 20 per cent over the most recent five years for which data are available (2000-2004).

Unfunded liabilities, coupled with the national debt, put Canadians on the hook for liabilities totalling $2.4 trillion or approximately $150,000 per taxpayer.