A lot of Canadians don't save enough for retirement and many oppose any suggestion to increase CPP or set up new supplementary pension plans. Here are their reasons:
10. I plan to work 'til I drop!
That would be great if you stayed healthy and you always had a job. Canadians are certainly living longer, healthier lives but not everyone. 24 percent of seniors have multiple chronic conditions and take on average 5 different prescription meds.
Older workers who lost their jobs in the late 1990s had three times as much difficulty getting new ones as their younger counterparts and they either got jobs within the first two years or not at all . 30 per cent of Canadian retirees have had to return to work to pay off debts.
9. I can live on CPP and Old Age Security
Old Age Security pays a maximum of $6,618 a year, CPP $12,500 for maximum total of $19,000 - enough to live on while you're living your parents' basement but not when you're 65 and paying for the roof over your head plus other incidentals like food.
8. I expect a sizeable inheritance when my parents die
Great if they die healthy. Otherwise, long term care costs could eat into that inheritance to the tune of at least $20,000 a year and that's in a publicly funded nursing home. Private retirement residences charge upwards of $5,000 a month and home care is not entirely covered or even available.
Besides, your parents may feel they've sacrificed enough for you and go SKI-ing - "Spend the Kids Inheritance!" That's why it's never a good idea to plan your financial future around other people's money.
7. I have a house and nearly $100,000 in RRSPs
Very good. Only $800,000 more to go. BMO Harris Private Banking reports that most people think a minimum of $908,000 in liquid savings is needed if you plan on living off your investments. They're about right. If you earn $60,000 a year now and want to live on $40,000 (plus CPP and OAS) once you retire, then you need $1 million earning 4 per cent per year! Doable, but first you need the million dollars.
6. I can do better on my own
Could be true -- if you have been earning 8-10 per cent on your savings over the past several years as have the major pension funds like CPP, Ontario Teachers' Pension Plan or the Healthcare of Ontario Pension Plan or many private pension plans, all of which were hit in the market downturn but have since bounced back. Did you? Many retirees who were devastated in 2008 - 9 did not recover their savings, some have had to return to work.
But chances are that you won't match the record of the professional investment managers and more important, they can invest in super funds with high returns that you and I cannot access unless we're investing millions at a time.
5. I'm not giving the government any more of my money
Money you put into a supplementary pension plan does not go to the government, it is invested and returned to you with interest when you retire. A recent study reported that almost 80 percent of the pension cheque is actually investment income earned on your contributions.
In fact, it costs the government money because you can deduct the contributions and save on taxes - as you do with RRSP contributions. Do you make any RRSP contributions? Didn't think so. Most Canadians don't do that either.
4. Government should just lower my taxes and I will save on my own
Refer to #7 and # 6 above. Have you paid a million dollars in taxes?
3. Government says that the economy is too "soft" for people to divert money into savings
So we should do our patriotic duty and spend the economy out of recession as George W Bush exhorted Americans to do after the Wall Street crash? Sounds like advice from your local pusher: c'mon just one more!
2. The government will take care of me
With what? Besides OAS and CPP (see #2) there is nothing on the books to help people if they do not help themselves. And if you're like most Canadians, you'd rather stick pins in your eyes than go on welfare.
1. The number one dumb thing people say about pension: We need to cut down the gold-plated pension plans that MPs and civil servants have
And that helps you how? Reduce your taxes maybe (see #4). But the right answer is that all of us should be able to save affordably in a large well managed pension plan that help us get that "golden" retirement the travel ads keep telling us about.
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For a couple looking to live out their retirement in luxury, Monaco should be your destination of choice. Known as a “tax haven” for wealthy individuals (there are no income taxes), Monaco is a great way to enjoy all that money you’ve been saving for all those years. Saving is the key word, as Monaco’s cost of living is really only affordable for those who will be receiving a sufficient pension.
Sun. Sand. Beaches. This is the tropical destination for couples who spent most of their vacations enjoying the Caribbean islands and all they have to offer. What’s even better? Your grandkids will have no problems with the idea of spending their summers with you. When it comes to taxes, Turks & Caicos has no incomes taxes, property taxes or capital gains taxes. Photo Credit: James Willamor
Panama is quickly becoming known as the number one retirement destination in the world for retirees who want to leave their home countries. The country has even introduced a retiree visa to attract these individuals. Along with the visa comes a retiree benefits program that includes many discounts for items such as hydro, electricity, medical services, dental and eye exams, public transportation, as well as recreation and entertainment activities.
The Cayman Islands is well-known as a destination for financial investors. There are no personal incomes taxes, capital gains taxes or property taxes. If you’re looking to supplement your pension by working during your retirement, expatriates also receive employer-provided pensions if they’ve been working for a minimum period of nine months. That money will definitely help cover your living costs and make for a comfortable retirement setting on a beautiful Caribbean island.
Many Canadians looking to retire abroad opt for close options such as the United States or Caribbean destinations. For retirees looking for more of an exotic setting, or for those who really want to get away from North America, Thailand is a great option. This is also a destination where a retiree can stretch their dollar. The country offers long-term and retirement visas, and has introduced amenities such as golf courses in communities targeting expatriates.
Florida is a typical choice, but still a good choice. With a strong Canadian dollar, housing prices and cost of living in Florida have become very reasonable. There are also no income taxes in the state and retirees can expect lots of visitors as it’s a short four hour flight from Toronto.
Head just a little further south of Florida and you’ll find the Bahamas. This Caribbean destination has stayed close to its British ties and though it's not a low-cost option, its beauty cannot be denied. However, retiring in the Bahamas is something many retirees should begin to plan for early on in their careers. It will take advanced planning in order to be financially secure in a luxurious destination like this one. Photo Credit: Valéria Almeida
Costa Rica has a unique offering for individuals who also consider themselves environmentally-friendly. Apart from the country’s model public health system and stable government, the country has also introduced sustainable ecological policies and is also home to preserved tropical forests. For couples looking to live in a country that values eco-friendly policies, Costa Rica is a suitable choice. And let’s not forget the warm weather and enjoyable beaches. Photo Credit: Ryan Kozie
Arizona is a golfer’s paradise and that’s why many retirees choosed to settle there. With its desert location, Arizona does not see nearly as much rain throughout the year as states like Florida, so dry weather will always be reliable. Along with the weather comes the climate, which is favourable for Canadians with arthritic conditions. Not to mention it is only a short drive away from the Mexican border, so even though you will be retiring abroad, vacationing in Mexico will be a frequent possibility. Photo Credit: neepster
Arizona may have a great climate but if it is healthcare that you’re focused on, Ecuador may be the better option. Ecuador offers a low cost of living as well as great weather, but it also has a modern healthcare system that has made it a medical tourism destination. Top hospitals have come together to offer bundled programs for healthcare services at reasonable costs which has attracted many expatriates.