Boomertirement -- is this really a "crisis?"

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: Things Boomers Won't Say

Post by Bylo Selhi »

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.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Things Boomers Won't Say

Post by AltaRed »

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.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Things Boomers Won't Say

Post by brucecohen »

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.
User avatar
Rickson9
Contributor
Contributor
Posts: 669
Joined: 05 Apr 2011 00:00

Re: Things Boomers Won't Say

Post by Rickson9 »

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.
"We don't see things as they are, we see them as we are." - Anais Nin
steves
Veteran Contributor
Veteran Contributor
Posts: 3200
Joined: 01 Mar 2005 15:02
Location: Hornby Island BC
Contact:

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

Post by steves »

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.
Live Rich, Die Broke (but not too soon).
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

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

Post by ghariton »

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

George
The juice is worth the squeeze
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

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

Post by ghariton »

A supplement on retirement finances via The Atlantic.

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

George
The juice is worth the squeeze
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

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

Post by ghariton »

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.

George
The juice is worth the squeeze
George$
Veteran Contributor
Veteran Contributor
Posts: 2612
Joined: 18 Feb 2005 20:46
Location: Toronto

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

Post by George$ »

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.
“The search for truth is more precious than its possession.” Albert Einstein
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

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

Post by brucecohen »

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.
DenisD
Veteran Contributor
Veteran Contributor
Posts: 4081
Joined: 19 Feb 2005 01:24
Location: Calgary

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

Post by DenisD »

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:
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

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

Post by ghariton »

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...

George
The juice is worth the squeeze
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

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

Post by Bylo Selhi »

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.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
zinfit
Veteran Contributor
Veteran Contributor
Posts: 2517
Joined: 25 Apr 2009 20:24

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

Post by zinfit »

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.
izzy
Veteran Contributor
Veteran Contributor
Posts: 3019
Joined: 19 Feb 2005 19:06
Location: Winnipeg MB

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

Post by izzy »

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!!
"I disagree strongly with what you say, but I will defend to the death your right to say it."
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

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

Post by ghariton »

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
The juice is worth the squeeze
izzy
Veteran Contributor
Veteran Contributor
Posts: 3019
Joined: 19 Feb 2005 19:06
Location: Winnipeg MB

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

Post by izzy »

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.
"I disagree strongly with what you say, but I will defend to the death your right to say it."
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

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

Post by brucecohen »

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.
Last edited by brucecohen on 11 Sep 2013 19:51, edited 3 times in total.
User avatar
parvus
Veteran Contributor
Veteran Contributor
Posts: 10014
Joined: 20 Feb 2005 16:09
Location: Waiting for the real estate meltdown on Rua Açores.

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

Post by parvus »

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.
Wovon man nicht sprechen kann, darüber muß man schweigen — a wit
Imagefiniki, the Canadian financial wiki Your go-to guide for financial basics
Image
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

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

Post by brucecohen »

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.
83_gemini
Contributor
Contributor
Posts: 434
Joined: 30 Jun 2006 21:37

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

Post by 83_gemini »

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).
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

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

Post by brucecohen »

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.
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

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

Post by Bylo Selhi »

‘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.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

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

Post by ghariton »

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
The juice is worth the squeeze
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

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

Post by brucecohen »

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
Post Reply