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Why we need a lifetime retirement saving limit

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While the current system has faults, the lifetime limit addresses the needs of the few and likley only the wealthy.

The system created set a target of 70% at age 63 with indexing and with the J&LS having worked for 35 years. In an era where people are living longer and expecting to work longer, you have decided to reduce the retirement age to 60, seems opposite to what is seen throughout the world but beneficiail for a few who can afford to save and want tax relief.

The current system has a lifetime limit but was built on the “factor of 9” which was either the shoe size of the finance ministers involved or an actuarial calculation in the 80’s when interest rates were high.

Seems a great deal of effort was done to produce a paper which has no chance on going forward as it serves few, those who com into large chunks of money at various times in their lives who want to defer taxes.

A better approach may be to address the true shortcomings tied to the factor of 9, it should adjust as interest/annuity rates do.

There could be catch up contributions made for past as done in the US to address some of the shortcomings.

The final piece would then be a discussion of where the level of tax assisted savings should be set. A person conrtibuting at $24,000 a year for 35 years with some interest return might not be far of your level.

If not for the maximum transfer rules under DB pension plans and I am not yet 60 and lived through the rules as they existed, I would have accumulated roughly $1.2 million in retirement savings and have yet to make $150,000 a year.

Thursday, November 10 at 4:36 pm | Reply

Stephen Cheng:

It seems that this article has not been put through a spell check. If they ever talked to the Bank of Canada about their long-term monetary policy and inflation targets before drafting the current pension/tax legislation, they might have come up with bigger shoes for the finance ministers.

Thursday, November 10 at 7:11 pm | Reply


Your right, I should check my spelling, sending notes on my blackberry, I am all thumbs and riding in the backseat of a car on my way to a meeing was not the best way to respond.

Friday, November 11 at 5:45 pm

Notions of a Pensioner:

The target pension in most pension papers, including this one, seems to be based on maintaining one’s “standard of living” after retirement. Further, this standard is deemed to be related to one’s final annual salary. I believe this is the wrong approach.
Personal pension projections should be determined from 2 estimates: the general “cost of living” and the “cost of additional goods and services that a retiree may desire”.

The basic cost of living is dependent on several factors but they are all quantifiable. It will vary by region and by individual groups (e.g. those with homes fully paid for vs renters).
If you exclude any existing debt and the cost of accommodation, the basic cost of living for a couple is not a big number and, for those earning $150k at retirement, it is probably a very small number. This is the piece of pensions that everyone should be focused on. Many will be pleasantly surprised that it’s only 6 figures.

We should be encouraging Canadians to estimate all of their basic living expenses following retirement, including accomodation, to determine the bare minimum pension they will need. They can then determine the level of savings to provide this level of income.

The size of the second cost amount is variable, is totally subjective and can only be determined by the individual.
They need to cost out all the extras they want e.g. second car, annual vacation, dining out, entertainment, sports and leisure, nestegg for grandchildren, keeping 4 bedroom house in high tax area, saving, wardrobe etc. etc. and determine what amount they need to save by retirement to provide them.

Finally, I don’t think pensions need to be indexed. Any increases in the cost of living that affect retirees will be more than offset by their decreasing propensity to spend/consume as they age. Why don’t the actuaries recognize this and take it into account?
Perhaps pensions should even decrease after a certain age. This would also reduce pension costs.

Friday, November 11 at 2:03 am | Reply

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