Canadian Pension Crisis spiraling out of control with no cure in sight

Editor: Vladimir Bajic 丨Tactical Investor

Pension Crisis

This article was rated as the article of the week (change it to month sometimes) by our readers. Let’s take a quick look at it before we move to the main story.

When the trend is positive (UP) train yourself to view strong pullbacks, corrections and other negative developments through a bullish lens. Anyone can panic in the face of trouble, but only the astute individual can stand still and direct their energy to spotting opportunities. Don’t do what the masses are trained to do, for, after all these years of panic, they have nothing to show for it. Market Update Sept 15, 2019

The human mindset thrives on misery; it’s hardwired towards negativity

And that is due to the brain’s “negativity bias”: Your brain is simply built with a greater sensitivity to unpleasant news. The bias is so automatic that it can be detected at the earliest stage of the brain’s information processing. Take, for example, the studies done by John Cacioppo, Ph.D., then at Ohio State University, now at the University of Chicago. Negative Thinking: How It Influences The Masses

Pension Crisis In Canada Appears to be spinning out of control

Most Canadians today are not financially prepared for retirement. According to recent polls, over two-thirds of us (68 per cent) don’t have a retirement plan, 30 per cent have paltry or no savings, and 62 per cent end up retiring earlier than they expected or wanted.

The Broadbent Institute, in a recent study, found that half of the Canadian couples between 55 and 64 have no employer-provided pensions. Fewer than 20 per cent of middle-income families have saved enough to adequately supplement the Canada Pension Plan (CPP) and Old Age Security (OAS).

“The vast majority of Canadians without a private pension have totally inadequate retirement savings,” says the Institute’s executive director, Rick Smith. “We have a retirement crisis that requires urgent and immediate government action.”

This action would ideally involve a substantial increase in the Canada Pension Plan. At present, the CPP pays a maximum of $12,780 a year, but many retirees don’t qualify for the maximum, so the average CPP amount for men is only $9,626, and for women $5,922. Full Story

Pension Crisis according to one Group of Experts

Defined benefit (DB) plans were the most common type of retirement plan through the 1980s, and although there has been some shifting to defined contribution (DC) plans since that time, the defined benefit obligations accumulated and coming due are significant. There are basically two ways to manage defined benefit pension liabilities. One is a pre-funded system, where the money is set aside and invested to pay future obligations; the other is a pay-as-you-go (PAYG) system, where the plan uses current contributions to pay current obligations. In general, state and local governments and corporations must operate funded plans, while federal governments can resort to unfunded PAYG schemes.

Our initial estimates suggest that the current funding shortfall could easily exceed US$100 trillion amongst the different federal governments, local governments, corporations and individuals globally. As a comparison, global GDP is approximately US$75 trillion while total debt outstanding is US$160 trillion. The chart below by the WEF depicts the size of the retirement savings gap of just eight countries: a US$70 trillion problem that will morph into half a quadrillion dollars by mid-century. Full Story

Pension Crisis

Pension Crisis In Canada Appears to be spinning out of control

Pension Crisis according to one Group of Experts

Other Related Articles