Consider the Ant!
Retirement planning has been an activity that people in the Western economies have embraced for centuries. The first known admonition to “save for the future” that I found was in the Old Testament portion in the Bible. The author, King Solomon, wrote in Proverbs 6:6-11,
6) “Go to the ant, you sluggard; consider its ways and be wise!
7) “It has no commander, no overseer or ruler,
8) yet it stores its provisions in summer and gathers its food for harvest.
9) How long will you lie there, you sluggard? When will you get up from your sleep?
10) A little sleep, a little slumber, a little folding of the hands to rest –
11) and poverty will come on you like a thief and scarcity like an armed man.”
From the tone of King Solomon’s words, it seems like he was quite frustrated with more than a few of his subjects! Why would he be calling his fellow Israelites “sluggards?” Regardless of why Solomon was calling his subjects lazy, he was dealing with an issue that has been a historical dilemma since before 970 B.C.
According to a course on the Canada Pension Plan that I just completed, Canada has an aging population. At age 60, average life expectancy for a male is 29 years and for a female it is 31 years. Other modern industrial countries like the United States, Britain, Israel, the European Union, and Japan share in this happy problem with us. This “problem” is the result of good diets, decent health care, quality education and modern tools that make our lives easy and comfortable.
In Canada, the retirement savings rates have not changed significantly over the past 30 years. This is because consumer spending and personal debt has risen at the expense of saving and investing. When one considers that most people enter the work force between age 18 and 26 and then retire after about 35 years, it is easy to see that most people will spend as many years in retirement as being employed.
Canada has had foundational plans for the benefit most low and middle-class Canadians since at least 1927. In 1952, Old Age Security was revamped and then in 1966, the modern Canada Pension Plan came into effect. Our Old Age Security plan is a universal social pension that is funded by our tax dollars whereas the Canada Pension Plan is funded by both Employer and Employee contributions through payroll deductions.
There are many moving parts to both plans which I will not get into due to space considerations. Suffice it to say, it is wise to consider the words of Solomon because the benefits from these two government plans will not keep middle class Canadians in the lifestyle to which they are accustomed. If you wish more details as to your own plan, check out your own details on the Service Canada website or send me a note. I will be happy to help you with a bit of education if you want to discuss this aspect of your retirement plan. The sooner you “go to the ant,” the better off you will be!
Al’s Nuggets
- While the maximum CPP benefit for the year 2021 was $1203.75/month, the actual average paid out was only $619.44/month! That is quite a gap and a real shock to many Canadians!
- To maximize your CPP benefits, get your income over the Yearly Maximum Pensionable Earnings. In 2022, the YMPE is 64,900, and the 2023 amount will be published shortly.
- Forewarned is forearmed!