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Originally Posted by GGG
You hit the nail on the head. The reason everyone doesn’t have a similar pension to teachers is they are unwilling to save at the rate teachers do in good times and bad. Ignoring the matching component what % of people are even hitting 12.5% of their money post CPP.
Also if people want a teachers pension so badly why aren’t they advocating for CPP to be expanded to cover a greater portion of income? It’s forced savings, it’s employer matched, it runs on very similar actuarial rates.
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CPP is being expanded and you have a lot of people who think it's a tax grab. Clearly that's an uninformed view, but there you have it.
And again...the thing with the DB pension isn't just "increase your savings and you can do it". That's a chunk. But there's also an employer matched portion which is enormous in this equation and you can't just magically create that aside from your own money.
And critically, you have the government taking the longevity risk. That's not insignificant here, and an individual has very few options to match that. Basically, they can buy an annuity. In practice an annuity matches a DB pension, but that brings up the element people most dislike about them. There's nothing for your heirs. So, say you have a $2m RRSP account today and you're 65 years old. You buy an annuity and it's going to pay you for the rest of your life and your spouses life. Awesome, because there's no longevity risk and you can't outlive this. You've transferred that risk to the insurer. But, when the second person dies, that's it. People hate that...they saved for their entire working career and want that retirement income, and also want to leave it to their kids. I would suggest very few people are (A) going to save 20% of their income to match the pension contributions and (B) if they do save it are going to be comfortable with spending that on an annuity when they retire, for that very reason.
I haven't looked at data, and that's purely anecdotal from my practice. Of course, that's why people come to me...so they can try to have their cake and eat it to!