Boomertirement -- is this really a "crisis?"

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.

Re: Things Boomers Won't Say

Postby Bylo Selhi » 11 Nov 2011 12:25

Let me fix that for you:
Twenty-seven percent of people in their 50s saygave as their excuse that having children got in the way of saving for retirement, compared to 15% who blamedgave as their excuse buying a home and 19% who saidgave as their excuse that household bills were the obstacle, says a 2011 study by ING Direct.

Where there's a will, there's a way.
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Re: Things Boomers Won't Say

Postby AltaRed » 11 Nov 2011 14:42

Bylo Selhi wrote:Let me fix that for you:
Twenty-seven percent of people in their 50s saygave as their excuse that having children got in the way of saving for retirement, compared to 15% who blamedgave as their excuse buying a home and 19% who saidgave as their excuse that household bills were the obstacle, says a 2011 study by ING Direct.

Where there's a will, there's a way.

Particularly so when one feels a 3000 sq ft house is baseline, along with 2 newish vehicles, granite countertops, stainless steel appliances, Coach purses, designer clothes for children....... I could go on forever. I must admit some conversations have died suddenly when I point that out to someone complaining about having no money.
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Re: Things Boomers Won't Say

Postby brucecohen » 11 Nov 2011 14:49

Rickson9 wrote:Twenty-seven percent of people in their 50s say that having children got in the way of saving for retirement, compared to 15% who blamed buying a home and 19% who said that household bills were the obstacle, says a 2011 study by ING Direct.

Years ago actuary Malcolm Hamilton figured out that each child raised equals the purchase of one house.
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Re: Things Boomers Won't Say

Postby Rickson9 » 11 Nov 2011 16:50

brucecohen wrote:
Rickson9 wrote:Twenty-seven percent of people in their 50s say that having children got in the way of saving for retirement, compared to 15% who blamed buying a home and 19% who said that household bills were the obstacle, says a 2011 study by ING Direct.

Years ago actuary Malcolm Hamilton figured out that each child raised equals the purchase of one house.


I guess this implies that in general, for the 50 set, shelter > progeny.
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Re: Boomertirement -- is this really a "crisis?"

Postby steves » 11 Nov 2011 17:17

Years ago actuary Malcolm Hamilton figured out that each child raised equals the purchase of one house.
When you count the grandkids that follow, it is worth every penny IMHO.
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Re: Boomertirement -- is this really a "crisis?"

Postby ghariton » 11 Nov 2011 17:54

steves wrote:
Years ago actuary Malcolm Hamilton figured out that each child raised equals the purchase of one house.
When you count the grandkids that follow, it is worth every penny IMHO.

+1

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Re: Boomertirement -- is this really a "crisis?"

Postby ghariton » 17 Dec 2011 23:56

A supplement on retirement finances via The Atlantic.

Based on U.S. surveys, but still interesting to us.

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Re: Boomertirement -- is this really a "crisis?"

Postby ghariton » 22 Feb 2012 03:52

GM Canada pension plan still in trouble:

General Motors of Canada Ltd. still faces a massive shortfall in its unionized pension plan despite a $3.2-billion contribution taxpayers made to the fund when the auto maker’s parent company went into bankruptcy protection in 2009.

The shortfall stood at $2.2-billion as of Sept. 1, 2010 (the latest data available), which is a vast improvement on the $5.1-billion deficiency in the plan before the special payment was made. But it is still a significant amount for a plan that covers more than 30,000 retirees.

<snip>

About 30,000 unionized retirees drew pensions from GM Canada in 2010 – while the number of active workers stood at 6,168. That compared with 23,735 retirees and 15,223 working employees in 2006.

The situation at GM Canada is significantly worse than at Chrysler Canada Inc. and Ford Motor Co. of Canada Ltd. There were 2.6 retirees for every active worker at Ford in 2011, while Chrysler’s ratio was less than two to one.

The GM ratio is likely to deteriorate even further if it goes ahead with the scheduled closing of one of its two car-assembly plants in Oshawa, Ont., in 2013.

That closing will eliminate as many as 2,000 more GM Canada unionized jobs, said Chris Buckley, head of the CAW’s GM bargaining committee and local 222 in Oshawa.

Five retirees for every active worker, eh? Looks like GM Canada's main business is running a pension plan, with making cars a minor side business.

Ontario is doomed.

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Re: Boomertirement -- is this really a "crisis?"

Postby George$ » 22 Feb 2012 11:15

ghariton wrote: ....
Five retirees for every active worker, eh? Looks like GM Canada's main business is running a pension plan, with making cars a minor side business.

Ontario is doomed.

George


The Ontario Government did not oversee the pension plans in Ontario properly. By properly I mean that the five retirees should have fully funded their own pension promises while active workers - rather than assume future active workers will fund it for them later.

Another major issue. Conflict of interest. Allowing the employer to administer the pension plan of its employees is a prescription for an eventual pension disaster.
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Re: Boomertirement -- is this really a "crisis?"

Postby brucecohen » 22 Feb 2012 14:13

George$ wrote:
ghariton wrote: ....
Five retirees for every active worker, eh? Looks like GM Canada's main business is running a pension plan, with making cars a minor side business.

Ontario is doomed.

George


The Ontario Government did not oversee the pension plans in Ontario properly. By properly I mean that the five retirees should have fully funded their own pension promises while active workers - rather than assume future active workers will fund it for them later.

Based on what happened in the US as detailed in the book Retirement Heist, I'd check to what extent (if any) GM has included very generous executive plans in its headline pension liability. In her book, WSJ reporter Ellen Shultz says US DB plans for employees were properly funded at the time the companies cried poor -- the outsized liabilities were created by including exec plans that were totally unfunded. She points out that employee DB coverage was then reduced while the exec benefits remained untouched.
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Re: Boomertirement -- is this really a "crisis?"

Postby DenisD » 23 Feb 2012 02:06

Don't believe retirement doom and gloom
Actuary Malcolm Hamilton is exactly this person, but at age 61 he’s heading into retirement later this year. What have his 32 years of experience taught him about life after leaving the workforce?
.
.
.
I don’t have much of an RRSP because I’ve been in a defined benefit pension plan my whole life. I have real-return Canada bonds purchased when they were first issued in 1991 – they mature in 2021. That’s about half of it.
He bought his before I bought mine. :thumbsup:
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Re: Boomertirement -- is this really a "crisis?"

Postby ghariton » 23 Feb 2012 04:46

DenisD wrote:Don't believe retirement doom and gloom
Actuary Malcolm Hamilton

<snip>

I don’t have much of an RRSP because I’ve been in a defined benefit pension plan my whole life. I have real-return Canada bonds purchased when they were first issued in 1991 – they mature in 2021. That’s about half of it.

Are the RRBs half of Mr. Hamilton's total savings, or half of his small (if not tiny) RRSP? If the former, does that mean that Mr. Hamilton is holding RRBs in a non-registered plan?

Any which way you look at it, I should have purchased more of the suckers, and earlier, instead of chasing tech stocks. On the other hand, profit-taking on the tech stocks allowed me to buy some of my RRBs. And so the circle goes...

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Re: Boomertirement -- is this really a "crisis?"

Postby Bylo Selhi » 23 Feb 2012 10:02

DenisD wrote:He bought his before I bought mine. :thumbsup:
I doubt many people outside the financial community were even aware of what RRBs were when they were introduced back in 1991, let alone appreciated why they might be a good investment.

ghariton wrote:Any which way you look at it, I should have purchased more of the suckers, and earlier, instead of chasing tech stocks. On the other hand, profit-taking on the tech stocks allowed me to buy some of my RRBs.
Me too. But I sure am happy with what I have.

A similar situation existed in the early 1980s when GoC 30-year nominals were paying ~15%. In that case the reason they were unloved was that hyper-inflation was (supposedly) looming and few wanted to lock themselves in for 30 years for "only" 15% interest. But the brave few who, ahem, "bought low" and held, made off like bandits. I wonder what they're going to do with their principal repayments when those suckers mature this year and next.
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Re: Boomertirement -- is this really a "crisis?"

Postby zinfit » 23 Feb 2012 13:04

I think there was a period when 30 year bonds were yielding 19%. To bad I didn't have anything to invest in those days.
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Re: Boomertirement -- is this really a "crisis?"

Postby izzy » 23 Feb 2012 13:38

zinfit wrote:I think there was a period when 30 year bonds were yielding 19%. To bad I didn't have anything to invest in those days.

Exactly !
I had a mortgage instead,mind you it was a great incentive to pay it off as soon as possible!!
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Re: Boomertirement -- is this really a "crisis?"

Postby ghariton » 11 Sep 2013 17:48

From the 2011 National Household Survey:

Amongst those aged 65 years and over, private retirement pension income represented 29.9% of total income in 2010.
Private pensions were received by 59.2% of seniors and the median amount was $11,700.
There were relatively large numbers of people in the 55 to 59 (10.9%) and 60 to 64 (27.1%) age groups with private
retirement income as well. The median amounts of retirement income in these two age groups were very similar, at
about $25,500, significantly higher than that for the 65 years and over age group. Private retirement income
represented 6.2% of total income for those between 55 and 59, and 17.3% for those between 60 and 64.


So private pensions are not that big a component of retirement income now, and probably never were. Perhaps the disappearance of DB pension plans is not as harmful as the headlines tell us.

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Re: Boomertirement -- is this really a "crisis?"

Postby izzy » 11 Sep 2013 18:15

ghariton wrote:From the 2011 National Household Survey:

Amongst those aged 65 years and over, private retirement pension income represented 29.9% of total income in 2010.
Private pensions were received by 59.2% of seniors and the median amount was $11,700.
There were relatively large numbers of people in the 55 to 59 (10.9%) and 60 to 64 (27.1%) age groups with private
retirement income as well. The median amounts of retirement income in these two age groups were very similar, at
about $25,500, significantly higher than that for the 65 years and over age group. Private retirement income
represented 6.2% of total income for those between 55 and 59, and 17.3% for those between 60 and 64.


So private pensions are not that big a component of retirement income now, and probably never were. Perhaps the disappearance of DB pension plans is not as harmful as the headlines tell us.

George

I think the problem is that with increasing life expectancy people anticipate living many more years in retirement and thus they are much more conscious of the advantages of DB pension plans at the very time when precisely the same factors are reducing the number of employers willing to undertake such an open ended obligation to their employees.
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Re: Boomertirement -- is this really a "crisis?"

Postby brucecohen » 11 Sep 2013 19:21

ghariton wrote:From the 2011 National Household Survey:

Amongst those aged 65 years and over, private retirement pension income represented 29.9% of total income in 2010.
Private pensions were received by 59.2% of seniors and the median amount was $11,700.
There were relatively large numbers of people in the 55 to 59 (10.9%) and 60 to 64 (27.1%) age groups with private
retirement income as well. The median amounts of retirement income in these two age groups were very similar, at
about $25,500, significantly higher than that for the 65 years and over age group. Private retirement income
represented 6.2% of total income for those between 55 and 59, and 17.3% for those between 60 and 64.


So private pensions are not that big a component of retirement income now, and probably never were. Perhaps the disappearance of DB pension plans is not as harmful as the headlines tell us.

George

This is in addition to Izzy's valid point about increasing longevity risk.

What does the report say about the socio-economic dispersion of private retirement income? Every other year I edit a consulting firm's report on Canadian wealth and that report, using a variety of data sources, has consistently said that wealth is concentrated in the ranks of the upper middle-class and above (not their terminology). Historically, DB pensions
have been of greatest value to lower level workers who typically lack the education and means to invest on their own.

Also, I question your statement that private pensions "are not big a component." ISTM that 29.9% of total income is a pretty big chunk of change. Especially when that chunk is immunized against both market and longevity risk and, for some/many, inflation-indexed to some extent.
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Re: Boomertirement -- is this really a "crisis?"

Postby parvus » 11 Sep 2013 19:28

Looks to me that private pension income is mostly civil servant DB plans, though I didn't see the breakout in the report. But we already know that DB coverage in the private sector is very, very low.
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Re: Boomertirement -- is this really a "crisis?"

Postby brucecohen » 11 Sep 2013 19:50

parvus wrote:But we already know that DB coverage in the private sector is very, very low.

That's true for today's workers but not necessarily true for today's retirees. There are many DB pensioners who worked for old economy companies and retailers that no longer have DB plans or might not even be in business any more.
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Re: Boomertirement -- is this really a "crisis?"

Postby 83_gemini » 12 Sep 2013 08:06

And even some future retirees (who are old). I start a job at Ontario's dental regulator Monday (motto: "No, we won't fix your teeth"). After a waiting period I will be enrolled into a DC plan. A number of lucky folks senior to me have a DB plan, paid for courtesy of those looking at your teeth (I haven't looked into when entrance into the plan was stopped). I assume the constituents decided the price on maintaining a DB plan was too steep, even for dentists (and to be fair, dentists don't have a DB retirement plan).
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Re: Boomertirement -- is this really a "crisis?"

Postby brucecohen » 31 Oct 2013 09:02

From Benefits & Pension Monitor:
Only 26 per cent of Canadians think they are saving enough to meet their future retirement needs, says a survey from Angus Reid conducted in conjunction with the release of ‘The Third Rail: Confronting our Pension Failures,’ a book co-authored by Jim Leech, president and CEO of the Ontario Teachers' Pension Plan and business reporter Jacquie McNish. Specifically, those surveyed with a household income of less than $50,000 save on average seven per cent of their income towards retirement, while household incomes of $50,000 to $99,000 save nine per cent. Of greatest concern, the survey exposed that 15 per cent of Canadians are not making any retirement savings. When it comes to retirement age, the survey results show that most Canadians still hope to retire at age 65; however expectations change as people get older. Those aged 18 to 34 feel they will be able to retire at 63, while among those aged 55+ it's 67.
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Re: Boomertirement -- is this really a "crisis?"

Postby Bylo Selhi » 31 Oct 2013 09:07

‘The Third Rail: Confronting our Pension Failures,’ a book co-authored by Jim Leech, president and CEO of the Ontario Teachers' Pension Plan and business reporter Jacquie McNish

More about the book here.
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Re: Boomertirement -- is this really a "crisis?"

Postby ghariton » 31 Oct 2013 10:59

brucecohen wrote:
those surveyed with a household income of less than $50,000 save on average seven per cent of their income towards retirement, while household incomes of $50,000 to $99,000 save nine per cent.

That's what the respondents say they are saving. I wonder how accurate their perception is.

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Re: Boomertirement -- is this really a "crisis?"

Postby brucecohen » 31 Oct 2013 12:52

ghariton wrote:
brucecohen wrote:
those surveyed with a household income of less than $50,000 save on average seven per cent of their income towards retirement, while household incomes of $50,000 to $99,000 save nine per cent.

That's what the respondents say they are saving. I wonder how accurate their perception is.

George

I'll guess that it's not that far off because:
1. It's half the 18% RRSP limit. (18% is what Finance reckoned in the early '80s that a person had to save over his/her career to be able to self-fund retirement income comparable to the pension for a federal employee.)
2. Many are likely members of DC pension plans or group RRSPs in which they contribute 3-5% of pay and the employer matches that
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