Do you want to retire someday?
Most people will answer yes to that question. Hell, who wouldn’t? Unless you have one of the most amazing jobs in the world (booby inspector, chocolate taster, etc), you will get to the point where you will no longer want to work anymore. This is inevitable – as we age, we slow down and work generally becomes more difficult. Few wish to work until the day they die … though, as I state this, I realize that this is one of those “first world problem” things. True, in third world nations, the general tendency is to work until death, so this is a bit of an elitist mentality, but bear with me here.
Anyway, retirement. We all want to do it with few exceptions. Now, the problem of late with that idea has been with the composition of the population. There are more old people than there are young and that is causing a heavy drain on retirement resources. In Canada, this means a drain on the OAS and GIS. The OAS is the Old Age Security payment provided by the government to all individuals in the country over the age of 65. The GIS is the Guaranteed Income Supplement that provides an extra boost to income for those individuals on OAS that do not get enough money to make ends meet. Canada also has the CPP – the Canadian Pension Plan, but that is a contributions plan, requiring you to work and have paid in to get money out.
Anyway, recently, the Conservative Party (whom currently makes up the Government) has let it be known that there will need to be some changes to the OAS and GIS so that these payment programs can remain viable. One such plan is to increase the age that one gets these payments to 67 from 65. That one, I don’t have a big problem with as such. People are living longer and so forth so it does make some sense to do that. However, their other plan is to create a new type of retirement savings plan that people can contribute to, similar to the RSP that many large employers operate. Only with two key differences. The first is that these will be established by employers through third party organizations, as opposed to being employer run. The second is that there are no employer contributions to these plans. These are for the employee to fund and them alone. Funds will be placed into the hands of financial institutions that will invest the money in the market. All risks will be borne by the employee. If the market tanks and the fund manager had it in a retarded location, too bad. You’re retirement is gone.
What’s my problem with this plan? Let me see. The reliance on the market to accrue the value into the fund for the individual to retire. One shift of the market and you have nothing. Oh, what’s that? The markets are always going up? You’re … you’re right! How naive of me? How could I forget that it has increased over these years?! I have to go take a look at this bastion of gain right now …. Wait a minute. Why is this company trading for $100 a share that month and $5 the next? Why … if I didn’t know better, I’d say that the increase in the market is the average performance of all stocks over the indices over time. That average hides dizzying highs (that you cannot get a piece of) and terrible lows (that you somehow get caught holding the bag for). Strange that – the market is completely unstable. You’re better off betting it all on black at Vegas. At least they’re upfront about being there to rip you off.
So my first concern is that the market does not a retirement guarantee. What of bonds or financial instruments? Funny, we already have that in the RRSP, the Registered Retirement Savings Program. A program that allows you to invest money tax free when you are younger and paying higher tax and take it out when you are old and paying lower tax. That does the job well enough, though it must be taken back into income over time or you risk getting it dumped in and paying out the ass for it.
But my second concern is for that guy over there, the individual that makes a fairly low wage. You know, the one living cheque to cheque. The one without savings of any kind. The one that cannot afford to invest in any sort of retirement. The individual that relied on the Government program existing to, you know, survive when they retire. This program is not going to help them – quite the opposite. When the time comes, they will be the people either homeless or sitting at the mall all day to stay warm because they can’t afford to heat their place. You can make all the savings plans and investment plans and such that you like. If the money is not there to put into them, then when retirement comes, they’re shit out of luck.
The only humor to all that is that the old are the largest of all voting blocks. How long do you think putting them out to pasture with nothing will actually work, hmmm?