Prime Minister Stephen Harper dropped a bombshell at the World Economic Forum in Davos about trimming back Canadian retirement benefits that has been the talk of Ottawa and around the kitchen table for a lot of Canadians ever since.
Specifically, he said that Canada’s retirement income system will see some necessary changes in the coming months, changes that now have Canadian seniors and those planning for retirement clutching at their purse strings.
Current Seniors Should be Unaffected
Harper did promise at Davos that the Canada Pension Plan would not be changed since it is fully funded. However, other programs that are not considered “fully funded” will be changed. Tony Clement has additionally stated that Old Age Security (OAS) currently being paid out to seniors will not be touched.
According to Harper’s office, by 2030 there will only be two taxpayers for each senior, where now there are four for every senior. The government has been quick to placate seniors currently in retirement, stating that their benefits won’t be touched. But all the talk is definitely making people nervous.
So What are They Cutting?
The people who should worry the most about their financial futures are those who have been relying on the security of a public sector pension. Both these pensions and the pensions of Members of Parliament have been named as potential targets for cuts.
Next Generation Will Pay the Bills
Canadians are used to reading between the lines of what the government is saying, and what it is clearly saying here is that those saving for retirement should start putting a bit more away. It is likely to be problematic for those looking to either retire early or retire within the next few years, whatever the changes end up being.
Alternative Methods of Saving for Retirement
RRSPs, TFSAs and other registered plans are great vehicles for building retirement savings. If you are considering building a retirement portfolio, or want to make changes to your existing plan, wait until the government rolls out their changes over the next few months before making any long-term investments or plans. Once they’ve been introduced, visit a financial planner to talk about your options.
Don’t count out a reverse mortgage as an option, particularly if you are approaching your retirement years and are concerned about ensuring that you have a financial cushion. Applications for reverse mortgages shot up by 45% in the last quarter of 2011, a sign that more Canadians are looking at them as a potential investment vehicle. And in the world of retirement savings, you want to use every tool in your kit. Contact Horizon Equity to find out more about reverse mortgages.