Increasing Retirement Savings

[MarchHare]

Originally Posted by calumniate

I have a question with regards to CPP. Apparently the fund has been taking a hit of sorts, and my employer has been matching my contributions for 3 years.

My dad mentioned that it's actually a good thing to contribute to CPP in this downturn, as the 'units' or stock of CPP will be less expensive so technically I'm buying more stock right now then I would be otherwise? Are there any wheels to this argument? Honestly I haven't paid much attention to my CPP - sorry if this question isn't that clear.

I might be wrong, but I don't think you can control how much you contribute to CPP. It's a mandatory government program and money is automatically deducted from your pay cheque proportionate to your salary just like income tax and EI. Maybe you're confusing it with your employer's private pension fund?

[Edit]
If you are thinking of your employer's pension plan, it's always a good idea to contribute the maximum amount that the company will match. Don't neglect making personal RRSP and/or TFSA contributions just because you have a company pension, though.

[The Yen Man]

Originally Posted by Drury18

Lay in the bed. Especially if they were the type of parents that instilled fiscal responsibility in you from an early age and then have gone back on what they taught you. In my case, I started paying rent the day I graduated from high school, told to pay for my own post-secondary education and pretty much be financially independent since the day I stepped out of that high school classroom. If my parents were to come back to me when they retired and said they ran out of money because they blew it all on extravagant things I'd laugh at them and tell them it's their own fault.

Not that this would ever apply to me as my parents have worked very hard since immigrating here back when they were in their early 20s and have not taken a vacation to anywhere (besides the odd trip to Vancouver) for 20+ years....but if this were to hypothetically happen to me, I would still let them live with me at my house, I just wouldn't be giving them any money. One thing good about Canada. If you have a roof over your head, OAS will be enough to care for all your other basic needs when you're old.

[calumniate]

Originally Posted by MarchHare

I might be wrong, but I don't think you can control how much you contribute to CPP. It's a mandatory government program and money is automatically deducted from your pay cheque proportionate to your salary just like income tax and EI. Maybe you're confusing it with your employer's private pension fund?

[Edit]
If you are thinking of your employer's pension plan, it's always a good idea to contribute the maximum amount that the company will match. Don't neglect making personal RRSP and/or TFSA contributions just because you have a company pension, though.

Oh haha you're right that's my bad. I meant PSPP (public service pension plan). It's a pretty good matching system, which is most excellent because I'm an easy come easy go kind of guy

[WilsonFourTwo]

Originally Posted by Cowperson

Lots of Boomers are on the "Inheritance Retirement Plan."

The greatest transfer of wealth between generations in history is upon us in the next 20 or 30 years.

I know too many people on "The Inheritance Retirement Plan" and the parents they're depending upon.

Cowperson

The reality is that most Boomers have spent the last 40 years living the high life. They spent all of their money/credit, spent all of their kids money/credit and intend to retire on their inheritance.

I think they should be forced to live a simple, meager life as a way of trying to balance the scales. Simple homes, simple meals, simple entertainment. Want something extra......find your own cash.

/rant

(Sorry - this sh*t just infuriates me)

[The Yen Man]

Originally Posted by WilsonFourTwo

The reality is that most Boomers have spent the last 40 years living the high life. They spent all of their money/credit, spent all of their kids money/credit and intend to retire on their inheritance.

I think they should be forced to live a simple, meager life as a way of trying to balance the scales. Simple homes, simple meals, simple entertainment. Want something extra......find your own cash.

/rant

(Sorry - this sh*t just infuriates me)

I think you're generalizing too much here. Of all the baby boomers that I know of, none of them fit your description. If anything, they're the ones supporting their kids well into their 20s because their kids cannot afford to buy a house and are thus forced to live at home and save. Meanwhile, some of those kids have given up ever owning a home and are the ones buying expensive cars, iphones and ipads, and go on backpacking trips to Europe and Asia.

[Cowperson]

Originally Posted by Russic

My Grandma is currently the last remaining of her generation and my parents, aunts and uncles stand to inherit a decent amount of money. She has hinted at the idea of just giving it to them now equally as there's "no need to postpone the inevitable". Some members of the family want that, but there is one issue ... she's becoming less and less easy to care for. She is increasingly frail and her mind is getting to the point that there's concern she won't be able to care for herself much longer. A home is one option, but those are fataing expensive. That impressive inheritance that some members of my family are hoping for could be burned up quite quick if she needs several thousand dollars worth of care each month.

While she is still lucid, your family might clarify with her what she expects of "standard of care" in her later years.

Some people do not trust their children - many with good reason - to give them the quality of care they deserve in their later years, instead choosing to put their parents in the discount bins of old folks homes so the inevitable inheritance will be larger in the end.

"He/she won't know the difference!!!," they might rationalize.

So, to protect themselves from their families, you do see people putting their expectations of standards of care in written, witnessed, signed documents.

In the end, this is your gramma's money, not that of the family, and if she wants to run it to zero before she dies she does have that right.

I do see the opposite of course, people deliberately living below their means because they want to send as much as possible to the next generation. That too is their right and choice.

None of my business, of course, but my opinion is the family should ask her what she might want, either to stay at home or in assisted living and, if the latter, what is the standard of care she is willing to pay for?

If the decision of the family is that they will collectively look after her as long as possible in her home - and that will eventually turn into a grind - then there might be some consideration of offering unequal portions of her estate to reward a daughter who is doing the bulk of the work versus a brother who doesn't care, as an example.

These are tough things to talk about, easy to put off to the next day, but its nevertheless best to have these frank conversations so everyone is on the same page.

Things to think about.

Cowperson

[Tinordi]

Originally Posted by The Yen Man

I think you're generalizing too much here. Of all the baby boomers that I know of, none of them fit your description. If anything, they're the ones supporting their kids well into their 20s because their kids cannot afford to buy a house and are thus forced to live at home and save. Meanwhile, some of those kids have given up ever owning a home and are the ones buying expensive cars, iphones and ipads, and go on backpacking trips to Europe and Asia.

The reason those kids can't afford a home is because of the excessive debt accumulation by the boomers driving up house prices. A serious day of reckoning is coming for the children of the boomers being forced to pay for their parents.

[Dion]

Originally Posted by The Yen Man

I think you're generalizing too much here. Of all the baby boomers that I know of, none of them fit your description. If anything, they're the ones supporting their kids well into their 20s because their kids cannot afford to buy a house and are thus forced to live at home and save. Meanwhile, some of those kids have given up ever owning a home and are the ones buying expensive cars, iphones and ipads, and go on backpacking trips to Europe and Asia.

Don't forget the boomerang generation....

http://fullcomment.nationalpost.com/...ty/#more-12968

In the current edition of The Atlantic magazine, Michael Kinsley writes that many Baby Boomers, having paid publicly and privately for their parents’ generation to retire in comfort, now wake up to find that they are also supporting their children, into their 20s and beyond. This week’s New Yorker has a man in a cartoon saying, “I never thought I’d have to move back in with my parents.” He’s in a graveyard, sitting on the stoop of the family tomb.

Stay-around offspring exasperate parents, and can humiliate all concerned. Those who comment on it in public often imply that if young people would only try harder they could work things out for themselves and avoid being a burden. But Marni Jackson’s lively and thoughtful book, Home Free: The Myth of The Empty Nest, published today, avoids the blaming and shaming that often erupts around this subject. Her great virtue is that she comes through this experience with both her sense of humour and her love for her now 27-year-old son intact.

Jackson sets out to write about how people in their 20s “are taking their time to grow up and leave home.” She calls it a “twilight stage,” when they move out, move back in, then leave again. Naturally, she worries about the results of parental support. Do parents playing the role of landlord undermine the independence of their adult children, or are they simply helping them tackle a much tougher world than the one they faced when starting out?

[Cowperson]

I can still remember my mother's declaration from the front seat of a smoke-filled sedan filled with gasping kids as we were driving to Red Deer one day: "When you turn 18, don't expect to be sucking on my tit anymore."

I was off to college at 17.

Cowperson

[Tinordi]

Boomers were at the right place at the right time. They enjoyed the crescendo of the manufacturing sector in the western world with being able to enjoy relatively high-paying jobs for low levels of skill. Coupled with this massive increase in economic activity from the war the also stepped into very high-paying jobs relative to total demand and were able to afford homes that were a much smaller fraction of income.

Now in the new post-modern economy of services, retail and consumption the boomers children are not so lucky. Boomers still enjoy their high paying jobs, are able to pay off their homes and are leveraging further for second homes or remortgages keeping house prices high, meanwhile real income levels have stagnated for more than a decade and the prospect of a low-skill high-pay manufacturing job simply does not exist. Instead, students are forced to go to universities which are subsidized far less than in the boomers time to take on large tuition liabilities to educate in skills for jobs are replacement for slowly retiring boomers. Theres is no wild west of job creation like in the boomers time but an incremental snatch.

Furthermore, boomers now making more money than ever have also demanded through the political system to lower taxes on the middle class, this effect is unilaterally higher costs for services for younger people than what they previously had to pay. But of course it will continue to follow them.

Boomers will demand through the political system to not incur the costs of their social demands and therefore health care, retirement plans and other senior-friendly services will be paid out more by the people who don't use them at the expense of services that will be useful to future generations (education, infrastructure etc.)

[BloodFetish]

Originally Posted by calumniate

I have a question with regards to CPP. Apparently the fund has been taking a hit of sorts, and my employer has been matching my contributions for 3 years.

My dad mentioned that it's actually a good thing to contribute to CPP in this downturn, as the 'units' or stock of CPP will be less expensive so technically I'm buying more stock right now then I would be otherwise? Are there any wheels to this argument? Honestly I haven't paid much attention to my CPP - sorry if this question isn't that clear.

I assume CPP stands for Company Pension Plan, not Canada Pension Plan in your question?

The missing factor in your question is your time until retirement. A downturn in the unit price of your investments will result in you purchasing more units. Over time this will mean more money at retirement, so the younger you are the more time these extra units will have for compound interest to work it's magic. This is very good.

However if you're close to retirement age then a downturn can seriously affect your retirement income. It's because of this that people getting close to retirement age will start moving money into 'safer' investments, to minimize the effects of downturns.

I'm not a financial expert by any means. I know we have some experts at CP so please feel free to add corrections.

[1stLand]

Originally Posted by The Yen Man

I think you're generalizing too much here. Of all the baby boomers that I know of, none of them fit your description. If anything, they're the ones supporting their kids well into their 20s because their kids cannot afford to buy a house and are thus forced to live at home and save. Meanwhile, some of those kids have given up ever owning a home and are the ones buying expensive cars, iphones and ipads, and go on backpacking trips to Europe and Asia.

You hit the nail on the head Yen Man.

Many kids out of highschool or those that have just graduated from university feel they are entitled to go backpacking for 2 years travelling the world, all the while, they are still saddled with tens of thousands of student debt. Yet they magically can afford to hop on a plane and plan all of these exotic trips! Ha!
Then if and when they do get a decent job, their first major purchase is a brand new vehicle with all the bells and whistles.

Then they have the audacity to complain they can't afford a house because they are too expensive!

I just can't see how this generation is going to save for retirement let alone support themselves in their latter 20's and 30's.

I just hope I dont end up having to support them through higher taxes.

[V]

Sometimes I feel like I am the only person in an office of hundreds that doesn't take a trip down south every winter. And that includes all the young punks.

I don't think it's a generational thing anymore, and I think it's funny that the old resent the young as much as the young resent the old. We are all long gone, as a society. Our metric of reasonable spending has gone through the roof. And I honestly don't know how everyone does it. I'm an engineer, make a good wage, I drive a POS, I lived in the NE for 10 years and I don't have all that much for good lulz after everything's paid for. I'm sure three kids and only one income doesn't help, but still. I'm sure I make as much as a lot of people with dual incomes, especially after daycare is considered.

[MoneyGuy]

Originally Posted by calumniate

I have a question with regards to CPP. Apparently the fund has been taking a hit of sorts, and my employer has been matching my contributions for 3 years.

My dad mentioned that it's actually a good thing to contribute to CPP in this downturn, as the 'units' or stock of CPP will be less expensive so technically I'm buying more stock right now then I would be otherwise? Are there any wheels to this argument? Honestly I haven't paid much attention to my CPP - sorry if this question isn't that clear.

It doesn't have the effect that your dad is referring to, at least not like putting into an RRSP at depressed prices. It does help long-term solvency, which isn't in jeopardy anyway, but doesn't mean you're helping yourself as if you were buying shares of a stock or fund that is really worth $10 but you're buying it $7. .

Originally Posted by Russic

My Grandma is currently the last remaining of her generation and my parents, aunts and uncles stand to inherit a decent amount of money. She has hinted at the idea of just giving it to them now equally as there's "no need to postpone the inevitable". Some members of the family want that, but there is one issue ... she's becoming less and less easy to care for. She is increasingly frail and her mind is getting to the point that there's concern she won't be able to care for herself much longer. A home is one option, but those are fataing expensive. That impressive inheritance that some members of my family are hoping for could be burned up quite quick if she needs several thousand dollars worth of care each month.

I'd advise your grandmother not to give her money away. She may need it for her housing or care.

Originally Posted by MarchHare

I might be wrong, but I don't think you can control how much you contribute to CPP. It's a mandatory government program and money is automatically deducted from your pay cheque proportionate to your salary just like income tax and EI. Maybe you're confusing it with your employer's private pension fund?

You're correct. You have no control.

Originally Posted by WilsonFourTwo

The reality is that most Boomers have spent the last 40 years living the high life. They spent all of their money/credit, spent all of their kids money/credit and intend to retire on their inheritance.

I think they should be forced to live a simple, meager life as a way of trying to balance the scales. Simple homes, simple meals, simple entertainment. Want something extra......find your own cash.

/rant

(Sorry - this sh*t just infuriates me)

Please tell me you're kidding. I'm a boomer and you seem to be saying that I should curtail my lifestyle to provide for my kids. Sorry, ain't buying that. What I do with my money is none of my kids' business. We've given them money when we wanted to and we paid for a daughter's wedding, most of it anyway. They've been educated partly by me and we've supported them a lot, financially and otherwise. Your post made me laugh. Your point about credit is valid, but that's a personal decision and not for boomers' kids to dictate.

Originally Posted by BloodFetish

I assume CPP stands for Company Pension Plan, not Canada Pension Plan in your question?

The missing factor in your question is your time until retirement. A downturn in the unit price of your investments will result in you purchasing more units. Over time this will mean more money at retirement, so the younger you are the more time these extra units will have for compound interest to work it's magic. This is very good.

However if you're close to retirement age then a downturn can seriously affect your retirement income. It's because of this that people getting close to retirement age will start moving money into 'safer' investments, to minimize the effects of downturns.

I'm not a financial expert by any means. I know we have some experts at CP so please feel free to add corrections.

This is all correct, except the dollar-cost averaging doesn't apply to CPP the same as it does with your personal investments.

Originally Posted by V

Sometimes I feel like I am the only person in an office of hundreds that doesn't take a trip down south every winter. And that includes all the young punks.

I don't think it's a generational thing anymore, and I think it's funny that the old resent the young as much as the young resent the old. We are all long gone, as a society. Our metric of reasonable spending has gone through the roof. And I honestly don't know how everyone does it. I'm an engineer, make a good wage, I drive a POS, I lived in the NE for 10 years and I don't have all that much for good lulz after everything's paid for. I'm sure three kids and only one income doesn't help, but still. I'm sure I make as much as a lot of people with dual incomes, especially after daycare is considered.

ONe of my pet peeves. People spend money they don't have and are into instant gratification. You have the right idea, in my opinion.

[The Yen Man]

Originally Posted by V

Sometimes I feel like I am the only person in an office of hundreds that doesn't take a trip down south every winter. And that includes all the young punks.

I don't think it's a generational thing anymore, and I think it's funny that the old resent the young as much as the young resent the old. We are all long gone, as a society. Our metric of reasonable spending has gone through the roof. And I honestly don't know how everyone does it. I'm an engineer, make a good wage, I drive a POS, I lived in the NE for 10 years and I don't have all that much for good lulz after everything's paid for. I'm sure three kids and only one income doesn't help, but still. I'm sure I make as much as a lot of people with dual incomes, especially after daycare is considered.

I here ya V. I don't know how some people do it. And you are right that it's not a generational thing. I'm not going to generalize it's a baby boomer trend vs. a genX/Y as I don't think it has to do with age. I see friends and coworkers go on multiple trips to places like Cancun, or Las Vegas, without batting an eye. Some of these people make less than me, but they never seem to have a problem paying $300-$700 for the iphone 4 or for the ipads, or $100 dollar meals at a fancy restaurant. I don't know how they do it.

Having recently bought a house and being somewhat broke, I was still able to make sure I had at least 3 months worth of pay saved up in my bank account in case I get laid off tomorrow. I make sure to contribute regularly to my company's RRSP, plus I try to target saving $200-$500 a month for stocks as well.

That basically leaves me with no money to spend on things like trips, expensive clothes, and fancy dinners. I've been driving the same car for 4 years now and intend to keep it for at least another 6.

I'm not going to lie, sometimes I see people just spend spend spend and worry later, and I get a bit jealous wishing I could have that mentality and just buy whatever I want. But I guess that's the tradeoff for a little financial stability.

[mykalberta]

I have to agree with Money Guy, especially on the Grandmother early inheritance dispersment example. If her memory is failing she needs to legally appoint someone soon to oversee her affairs before she is legally unable to tend for herself. When people are living into their 90's and they might need 20+ years of care that can drain any savings very quickly.

My family had go through this with an Aunt (alzheimers) and and it was not a pleasant ordeal.

I can vouch for the number of my age bracket mouchers there are out there who are still living off their parents dime. If you are 24+ its a joke if you are still living with your parents. To see these guys buying Audis and yet living rent free in their parents basement is just odd. Other than summers durring Uni I havent lived with my parents since my last year of high school.

[amorak]

Originally Posted by MoneyGuy

Please don't encourage people to read Rich Dad Poor Dad.

Dear God - This 100x. People who read this are worse off than people who just spend all their money.

It's like telling someone to read Car and Driver and then go fix a Ferrari...

[Cowboy89]

I'm not really down with blaming and labeling entire generations as having money problems. It's rather a human nature problem. Most people don't have the discipline required to do what's necessary to retire comfortably, and of those who do, too many of them are too ignorant to execute it properly and end up stuffing all their money in ING Direct accounts or bank GICs that in effect lose economic value over time by the effects of inflation and taxation.

Personally I'm quite okay with people who neglected making their retirement savings having to work into their seventies or having to live a less than steller existance in their twilight years, becasue quite frankly having the state backstop a comfortable retirement for everyone is a pretty effective way to end up in the poorhouse like Greece and other European countries.

[bizaro86]

Originally Posted by 1stLand

I just can't see how this generation is going to save for retirement let alone support themselves in their latter 20's and 30's.

I just hope I dont end up having to support them through higher taxes.

I'm a member of Gen Y, who has a job, a house, a business, rental properties, and stock investments. The people I know who are my age work their tails off, save, invest, and are financially responsible.

I'm extremely concerned about the effect the Boomer's will have on our political system as they age. The elderly already get GIS, OAS, CPP, discounted services ($35/year for a transit pass, what the hell?!?), as well as using a disproportionate amount of health care. And don't tell me the elderly paid for their own CPP, that's BS. CPP wasn't paying for itself until a few years ago, so I get to pay for my CPP plus that of already retired people.

The burdens on the state due to the elderly are already huge, and the boomers have been getting free stuff from the gov't their whole lives. If they have the same effect on the programs for seniors, and the rest of us have to pay for it, my taxes will go up big time.

If that happens, I'll be selling out of Canada and moving offshore.

[The Yen Man]

What really burns my fried rice is hearing stories of people who abuse our system here in Canada. My uncle married a woman from China and so she sponsors her two parents to come over here. She doesn't work at all and just lives off my uncle. Her parents come over having never ever contributed to the tax system, live here for the minimum required years in order to become a citizen, and now they receive full OAS and all the perks of being a senior in Canada. Free health care and a multitude of tax breaks for my uncle for being his dependents.

Austrailia has it right. They don't accept immigrants past a certain age to avoid the situation I described above.