Posted by Canadian Dream on June 25, 2009
Well this update is a touch early, but I likely won’t be near a computer to do this calculation later this month, so I took the values as of this morning and adjusted a few of them to reflect the end of the month. So I adjusted the mortgage value and then some expected contributions before month end.
Assets
House $312,800
RRSP $19,900
LIRA $9,100
TFSA $6,100
Pension $7,900
Wife’s RRSP $10,000
Wife’s Investment Account $4,800
Wife’s TFSA $5,600
My Investment Account $5,100
High Interest Savings Account $3,500
Debt
Mortgage $132,800
HELOC $0
Therefore my net worth now stands at $252,000 for the end of June 2009. That is an increase of $13,300 or 5.6% from my last update. Of that my investment net worth was $72,000 which was an increase of $11,000 or 18%.
So first off I didn’t touch my house value from last time. The market is still fairly slow here and values haven’t moved that much since last time. We also started paying down the mortgage so you will likely see the mortgage value continue drop a bit faster in the future.
The big news on this update was the jump in my investment net worth which came up 18%. Some of this was contributions, but it was bulkly an increasing market that has raised this value up. Obviously this value is very sensitive to markets so who knows if it will keep rising till the end of the year or not.
(Click for a larger image)
Posted by Canadian Dream on June 24, 2009
I amazed to some degree how this issue has been basically on the back burner for years until the boomers are finally close to retirement and are now getting pension envy for those civil servants that have defined benefit pension plans.
I suppose the issue only has recently come to a head after the market crash where those in defined contribution plans lost a lot while those in defined benefit will still have the exact same pension. Yet those same defined benefit plans also have a major issue: huge make up payments funded by the taxpayer.
This blog post does describe the situation fairly well and I have to agree that there is a longer term legacy cost issue here for all levels of government. In fact the true costs of these plans is why they have vanished from the private sector and perhaps it is time to do the same in governments as well. My own employer, a crown corporation, wised up to this issue decades ago and switched all the new employees over to the defined contribution plan to cut down the costs involved in running the company.
The reality is that despite the fact the payouts of defined benifit plans are generous, there is a price to be paid for them. They are really like golden handcuffs. You have to work for that employer for so many years in order to get the full pension amount. This is something I’m personally not interested in so in my mind I prefer the defined contribution plans, but I imagine there is a number of people looking at their retirement savings right now and who would be happy to put on some golden handcuffs.
So perhaps the key to this mess is two fold. Start closing down those defined benefit plans for civil servants and switch the new people over to defined contribution and then open up a voluntary extension to the Canada Pension Plan (CPP) which would allow people to choose to contribute more in order to double their payments from CPP. That way we could give people an option to have a more secure income for there retirement if they choose to do it. I disagree with making everyone do it, as I don’t feel the need to fund the boomers retirement any more than I already will be via taxes for the next few decades.
Just my thoughts. So do you have pension envy or are you happier in a defined contribution plan?
Posted by Canadian Dream on June 23, 2009
***Warning: Idle Speculation Ahead***
Is is me or is there a lot of older people around? There must be since the government is subtly changing the Canada Pension Plan (CPP) to help encourage people to work longer. After all it’s going to be very painful very quickly with a large number of higher income tax payers dropping off the tax rolls as the baby boomers retire. Not just because they are all paying less tax, but rather the costs associated with their health care as well.
So with all this future strain on the balance sheet of the federal government how long do you think it will take them to look at Old Age Security (OAS)? After all they already adjusted the rules about the CPP. This is where things will get interesting. Adjusting OAS is politically not very palatable and we are in a phase where majority governments at the federal level are turning into a endangered species. Hence I can see most politicians being very careful not to piss off all of the baby boomers in one go and pulling a Kyoto (if we ignore it perhaps the problem will go away?).
Which taken in a longer context would sort of work, only the problem will be a massive structural deficit for decades while the politicians wait for boomers to die off. So that is likely out in any practical sense. So that leaves four main options: raise taxes, cut other services, cut benefits to everyone on OAS or cut benefits to all the new people who will use OAS in the future. I’m guessing cutting benefits to everyone on OAS is going to be off the table very quickly leaving raise taxes (but not for seniors), cutting other services and cutting future OAS benefits.
So in the end, the younger generations will be picking up the tab for the boomers in one way or another. Of course I could be completely wrong, this is all just idle speculation. What do you think the federal government will do in the future to OAS?
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