Posted by Canadian Dream on February 1, 2012
Unless you have been ignoring the media for that last few days you are likely aware of the buzz going around the media about the federal government plan to reform the Old Age Security (OAS) program. While the details of the reform is outstanding the current thinking is they will likely go with an increase the age requirement from 65 to 67, but in reality they have other options too like increasing the claw back provisions.
First a little history, what is Old Age Security? Well despite being called a pension, it really isn’t one at all. First off there is no money saved for this program despite being around since 1952. It is paid for entirely out of the General Revenue Fund by the federal government in the current year. Thus our 2010 tax dollars paid out our 2010 OAS benefits that year. The programs needs an overhaul…badly. How so? Well there are a few interesting facts like the taxpayer to retiree ratio is currently 4 taxpayers to 1 retiree, which will decline to 2 taxpayers to 1 retiree by 2030. Add in the program is expected to cost $108 billion by 2030 up from $36.5 billion in 2010. So if you have three times the cost and half that taxpayers that means you need to increase taxes or cut service by six times today’s payments just to fund this program. I don’t know about you, but I’m not prepared to pay that much more tax just to keep the status quo.
The other thing people tend to forget is what is the program supposed to do? While some people do think of it as a pension plan I personally tend to think of it as a social safety net. It provides a basic income to seniors while some additional funds for low income people with the GIS or Allowance programs.
So what will changing the age requirement for OAS do? It delays the problem some what and reduces a little bit of the cost, but if you really want to have significant cost savings the government is going to have to do more. So what is a likely target, in my mind, if you want to be fair about it you start by increasing the claw back provisions. This way the basic function of the program can stay in place while we take the extra money out the hands of retirees that need it the least. By the way, the claw back starts when your income hits about $67,600 and by about $109,000 you have to pay all of it back. I don’t know about you, but if your making over $75,000 a year in retirement, I don’t really think you need the OAS.
So how would you deal with this huge cost increase to the OAS program? Raise the age, increase the claw back or something else? For US readers, the problem is similar for the Social Security program, so feel free to rant or make suggestions.
Posted by Dave on January 31, 2012
This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
I previously wrote about problems I was having with my back. At the time, I decided to go to a chiropractor and physiotherapist in order to attempt to rid myself of the back pain I was experiencing. I did this for a few months, and the outcome was somewhat unsatisfactory. Rather than continuing to spend money (well, my benefits provider’s money) I chose to go another route.
Starting about this time last year, I worked to get stronger and more flexible, rather than focus on having a chiropractor or physiotherapist work on little muscles. I have been able to almost triple the amount I can squat, approaching almost twice my body weight (along with increasing my strength in other ancillary exercises) – in the process, my back pain has essentially disappeared. I’m no doctor or anything, but I don’t think it has hurt me by getting stronger.
I plan on maintaining this level of strength as far into the future as possible in order to stay as mobile as possible for as long as I can. This, along with a healthy diet will hopefully give me a good chance of being mobile into my 80′s.
Similarly, I have attempted to build a strong core financially. I am repaying my only outstanding debt (my house) as quickly as possible, and I am going to invest as much as possible in order replace employment income with investment income. At the core of my financial plan though is the simplicity of keeping my expenses low.
Low expenses, as a part of my financial plan has provided me with more financial independence than anything else I have done. I make pretty good money right now, enough that I can keep my goal of retiring at 45 in my sights. If I decide that I don’t want to do the job I’m doing right now (or something like it), I could find a job that pays minimum wage and I’d be fine financially. Working a minimum wage job would limit my early retirement opportunities but it does provide a certain amount of security knowing that I won’t be on the street if my company decides they don’t like something I’m doing or I decide I don’t want to work there anymore.
Much like building my core muscles in my body, I constantly maintain the core of my financial plan by monitoring my spending. I don’t consider myself a miser or anything, I just ensure that if I’m going to spend my money on something, it’s not a waste.
What do you consider to be the core of your financial plan? How do you maintain your focus on this over time?
Posted by Robert on January 30, 2012
What makes a smooth transition to retirement? I personally didn’t have anything in mind. In the first week or two that I stopped going in to work every day, I had more naps than I’d care to admit. I’ve also read a lot, but too much of it has been internet news (or entertainment). Something that’s important to me is to spend my time doing things that are worthwhile. That’s why I’ve decided to spend more time volunteering at my children’s school and at the YMCA.
It seems that volunteering is a common theme among retired people. At the YMCA, I met a woman who explained that she’s currently transitioning into retirement. Without being rude, she is quite a bit older than me, probably nearing the normal retirement age. She worked for years as a psychologist, helping children (eg. with ADHD) adjust to their usual environments, such as school. She has decided that she wants a smooth transition to retirement. Her first step was to stop taking on new clients. Each client is a relatively short term project, measured in months, not years. This reduces her commitment (and income, I assume), without ending it all at once. It also gives her a modest amount of extra free time.
Most people, after working full time for the majority of their lives, crave a routine and a feeling that they are contributing to a cause larger than themselves. The woman I met has chosen to volunteer at the YMCA in order to be part of a group effort and to have a time commitment that builds into her routine. I’ve talked with other people who either worry what they would do with the spare time afforded by retirement. They seem to take literally the proverb “idle hands are the devil’s playthings”.
That may hold true for some people, but having the luxury of being able to choose where and how to spend my time gives me options that wouldn’t be available otherwise. My favourite things to spend my time on relate to my interest in public education. I regularly spend time in our school, volunteering in one or the other of my sons’ classes, or joining them on field trips. I also talk with other parents about their experiences with and expectations for our school. I have the luxury of being able to read news, scholarly articles and books related to the education issues that our school and our system are facing.
None of these activities were planned as a transition to help smooth me into retirement. But I think that a smooth transition is certainly worth the effort. I continue to try and sort my activities into a regular schedule that produces a routine. Fortunately, whenever I feel that I’m wasting my time, I can take my daughter (who’s not in school yet) and play with her. Nurturing my kids is time well spent.
Do you have plans to ease the transition from one stage of life to the next?
