Most Canadians understand the Canada Pension Plan (CPP) – we pay into it, as does our employer, and we can start collecting a lifetime pension from it as early as age 60. But what about the other “pillar” of the federal government’s retirement income program, Old Age Security (OAS)?

The federal government says OAS is available to any Canadian who has lived in our country for 40 years after reaching age 18. If you don’t meet those conditions, you may still qualify under complex “exception” rules.

Currently, the maximum OAS payment  is $613.53 per month, for life. It starts at age 65, but you can choose to defer it for up to 60 months after reaching that age – and if you do, you will receive a payment that is 36 per cent higher.

There is, of course, a big catch to this. If you make more than $75,910, the government will charge what they call an “OAS recovery tax,” or clawback. If you make more than $123,386, you have to pay back all of your OAS payments for the year.

The “conditional” yet “universal” benefit has prompted many to come up with ideas on how to fix it, particularly during the Stephen Harper years.

Back then, a Fraser Institute opinion column in the National Post explained one key problem with OAS. “Unlike the CPP, there is no dedicated fund to pay for OAS,” the column notes. “Benefits are funded with current tax revenues.” Put another way, everyone who pays taxes contributes to OAS, but not everyone gets it – and should higher income earners get it at all, the column asks.

The Fraser Institute recommended lowering the income at which OAS begins to be cut off to around $51,000, with the full clawback moving to $97,000. This, the article suggests, would save the government $730 million per year, since fewer people would receive the full amount.

Another solution – the one that the Conservatives planned to implement – was moving the starting age for OAS to 67 from 65. However, the current Liberal government reversed that decision in 2016, notes Jim Yih’s Retire Happy blog.

But in the intervening years, we have seen debt levels increase dramatically, preventing many of us from saving for retirement. So there are now some arguing for an expansion of the existing system, on the grounds that it doesn’t provide seniors with sufficient income. Indeed, the Liberals campaigned last year on a plan to increase old age security “by 10 per cent once a senior reaches age 75,” reports Global News.

Without getting political, it appears we have come full circle from talk of reforming the OAS and making it harder to get, to talk of increasing its payout for older seniors. Let’s hope governments take a longer-term view of the problem, and focus on ways to better fund OAS – perhaps creating an OAS investment fund similar to what CPP has, one that would make this benefit more sustainable and secure for those who rely on it.

If you are one of the many hardworking people who lack a workplace pension plan, there is a do-it-yourself option that you should be aware of. It’s the Saskatchewan Pension Plan (SPP). They’ll grow the money you contribute to the plan over time, and when it’s time to retire, can pay it out to you in the form of a “made-by-you” lifetime pension. The SPP also has options for your employer to use this plan as an employee benefit.  Check them out today.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Politicians all over the continent like to point to our low levels of unemployment as a sign that our economy is booming and recovering.  And perhaps it is. A recent Bloomberg article notes that the Canadian labour market has seen “a decade-low unemployment rate” and “some of the fastest job gains on record.”

That high level of employment, the article adds, boosted “the average weekly earnings for Canadian workers… 3.4 per cent in May from a year earlier, to $1,031.” There were a whopping 32,600 jobs added that month, Bloomberg reports, citing Statistic Canada figures.

Reading these positive numbers, one might include that things look great for our younger workers – low unemployment and a high level of job creation.

Not so fast, reports Livio Di Matteo of the Fraser Institute, writing in the National Post. Sure, the story notes, we can expect that “in coming years employment and the labour force in Canada will continue growing,” but it will be “at a diminished rate, with employment growing slightly faster than the labour force.”

And the reason why, Di Matteo explains, is that low unemployment rates are “due largely to our aging population and the expected decline in labour force participation rates. Overall labour force participation in Canada has declined over the past decade in Canada, but interestingly has grown among people aged 55 and older.” In plainer terms, there are more older people in the workforce than before, meaning those at or nearing retirement age are continuing to work.

Di Matteo suggests that there will be more opportunities for younger workers when boomers begin to fully retire. In 2016, “people aged 55 and over accounted for 36 per cent of Canada’s working age population,” Di Matteo notes, adding that this figure should rise to 40 per cent by 2026. When the boomer cohort finally begins to retire, Di Matteo predicts higher demand for younger workers in “healthcare, computer system design… support services for mining, oil and gas extraction, social assistance, legal, accounting… and entertainment,” among others.

It’s a similar story south of the border, reports Market Watch. There, unemployment is “at a half-century low,” but a reason why is that there aren’t as many new entrants in the job market, the report notes.

“The U.S. doesn’t need to create as many new jobs to absorb a slower growing population of working-age Americans. Economists figure the U.S. needs to add less than 80,000 new jobs a month to hold the unemployment rate near its remarkably low rate,” the article states.

Experts are split on whether boomers are working late into life because they want to or because they have to. Sure, many love the social contacts and engagement of working – or want to travel more now that they are semi-retired. But those still saving for retirement may not be hitting their savings targets.

A report from RBC, covered in Yahoo! Finance Canada, says those boomers with “investable assets” of $100,000 or more planned on saving $949,000 for retirement, and “are falling $275,000 short.” Those with less than $100,000 saved have lesser goals, but are much farther away from them, the report states.

It will be interesting to see how the trend towards boomers hanging on to their jobs plays out, as it ultimately must.

For those of us who are still slogging away in the workforce, all these stats underline the importance of directing some of your income towards long-term savings for retirement. An excellent tool for this purpose is the Saskatchewan Pension Plan, which offers a flexible way for your savings to be invested, grown, and ultimately paid out to you as a lifetime pension in the future. It may be better to pay into your own retirement now, rather than having to work later in life to fund it.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

With the abolition of mandatory retirement in Canada, when you opt to actually leave the world of paid work for good is your own decision. There are financial milestones that may influence you  such as when you think you have saved enough to support yourself in retirement, but when you are ready to let go is also dependent on many more intangible factors.

After all, you not only need to retire from your job or your encore career, but you have must have something to retire to. For example, in the last several years I have joined a choir, been elected to the choir board and started taking classes at the Life Learning Institute at Ryerson in Toronto. Yet I’m still not quite prepared to give up my part-time business as a personal finance writer.

I was reminded of this conundrum reading a personal column by David Sheffield in the Globe and Mail recently. He wrote, “Turning to the wise oracle of our time, Google, I search: When do you know that it is time to retire? Most answers are financially focused: ‘When you have saved 25 times your anticipated annual expenditures.’ One site tackles how to be emotionally ready to quit work: ‘The ideal time to retire is when the unfinished business in your life begins to feel more important than the work you are doing.’”

The changing face of retirement by Julie Cazzin appeared in Macleans. She cites a 2014 survey by Philip Cross at the Fraser Institute. Based on the study, Cross believes Canadians are actually financially—and psychologically—preparing themselves to retire successfully, regardless of their vision of retirement.

“The perception that they are not doing so is encouraged by two common errors by analysts,” notes Cross. “The first is a failure to take proper account of the large amounts of saving being done by government and firms for future pensions …. And the second is an exclusive focus on the traditional ‘three pillars’ of the pension system, which include Old Age Security (OAS), the Canada and Quebec Pension plans (CPP/QPP), and voluntary pensions like RRSPs.”

He notes that the research frequently does not take into account the trillions of dollars of assets people hold outside of formal pension vehicles, most notably in home equity and non-taxable accounts. Also, he says the literature on the economics of retirement does not acknowledge the largely undocumented network of family and friends that lend physical, emotional and financial support to retirees.

Retire Happy’s Jim Yih addresses the question How do you know when it is the right time to retire?  After being in the retirement planning field for over 25 years, Yih believes sometimes readiness has more to do with instinct, feelings and lifestyle than with money. “I’ve seen people with good pensions and people who have saved a lot of money but are not really ready to retire.  Sometimes it’s because they love their jobs,” he says. “Others hate their jobs but don’t have a life to retire to.  Some people are on the fence.  They are ready to retire but worry about being bored or missing their friends from work.”

If you are still struggling with how to finance your retirement, take a look at Morneau Shepell partner Fred Vettese’s article in the March/April issue of Plans & Trusts. Vettese reports that few people are aware it can be financially advantageous to delay the start of CPP benefits. In fact, less than 1% of all workers wait until the age of 70 to start their CPP pension. However, doing so can increase its value by a guaranteed 8.4% a year, or 42% in total. And by deferring CPP, he notes that workers can transfer investment risk and longevity risk to the government.

Tim Stobbs, the long-time author of Canadian Dream Free at 45 attained financial independence and left his corporate position several months ago. In a recent blog he discusses how his focus has shifted from growing his net worth to managing his cash flow. His goal is to leave his capital untouched and live on dividend, interest and small business income from his wife’s home daycare. He explains how he simulates a pay cheque by setting up auto transfers twice a month to the main chequing account from his high interest savings account.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

By Sheryl Smolkin

Over the last year the blogs at savewithspp.com have focused on ways you can spend less and save more. By paying yourself first and allocating a fixed amount to savings each month, you can put your savings plan on autopilot. Here are some additional ideas from some of our favourite bloggers.

Before you start socking away your savings, most financial advisors will tell you to set aside a three to 12-month emergency fund. Tom Drake on Canadianfinanceblog.com discusses why an emergency fund really matters and how to build one.

In Where to find your savings Gail Vaz-Oxlade says nickel and dime-ing is really worth it. If you save $5 a day 20 days a month and put the money in your retirement plan earning 7% on average, in 20 years you will have $55,000. That’s got to be worth $5 a day, and a little time to find it!

Robb Engen on boomer& echo identifies lifestyle enhancers such as cable television, shopping at Costco, paying for a housecleaner and children’s activities as potential budget busters he is keeping a close eye on.

It’s fine to cut corners, but if you think the Fraser Institute got it wrong in a report that says you can raise a child for $3,000/year, you are not alone. Squawkfox blogger Kerry K. Taylor explains why daycare, accommodation and transportation costs have to be factored in to get a true picture.

Finally, Thanksgiving may be over for another year, but Canadians have much to be thankful for every day. Check out Kevin Press’ Brighter Life blog that summarizes findings of an OECD online report that outlines seven reasons to love living in this country.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.