CPP proposed increases and why you should care

[taylor192]

http://www.cbc.ca/canada/prince-edwa...nsion-584.html

There has been a lot of discussion about retirement and how many current Canadians, including boomers, may not be able to afford it.

Here are some interesting stats:
http://www.statcan.gc.ca/daily-quoti...61122f-eng.htm
86% of tax filers qualify for RRSP contributions
31% of tax filers contribute to a RRSP
7% of all RRSP contribution room is used

A "fact" tossed around is that 6 of 10 Canadians don't have a pension. Consider there's 2.9M government workers (15% of tax filers) and that there are still union jobs with pensions, and that seems about correct. Thus 40% + 31% == 71% of Canadians have some sort of retirement savings. Then consider 14% cannot contribute cause they don't make enough, and that only leaves 15% of Canadians with nothing for retirement.

I say 15% is fine, there's always going to be stupid people who don't plan ahead.

[taylor192]

More fuel for the fire:

http://www40.statcan.ca/l01/cst01/health26-eng.htm
The average lifespan when CPP was introduced was ~73yo.
The average lifespan today is ~80yo.

http://www4.hrsdc.gc.ca/.3ndic.1t.4r@-eng.jsp?iid=33
The percentage of the population over 65yo was < 8% when CPP was introduced.
The percentage of the population over 65yo is now 14% and growing.

http://en.wikipedia.org/wiki/Canada_Pension_Plan
CPP is supposed to be "stable", ie bringing in as much as it is paying out. Currently there are almost double the number of seniors from when CPP was introduced, and those seniors are living twice as long in retirement.

Something has to change to keep CPP "stable" and unfortunately its going to come out of our generation's pockets.

For all those who think I am picking on seniors, remember this: current and future retirees have lived through 3 of the biggest economic bubbles (80s financial, 90s tech, 00 housing). Even someone who is 40yo could have taken advantage of both the tech and housing bubble. Its is these people who are complaining they cannot save enough - when in reality they have lived through some of the best years to save.

Yes they need help, yet not from my pocketbook. They need to learn how to save.

[waddy41]

Can you explain how some tax filers do not qualify to contribute to RRSP.
I thought with you can contribute 18% of your previous year's incomem so the only people who don't qualify are those who are working for the first time.

Also, how do you get 40%+31%? People can have a pension AND contribute to RRSP.

Well, I don't want them to increase CPP contributions. That will be even more deductions taken from my income.

Maybe CPP contributions should be calculated on an individual basis and be based on several factors like annual income, RRSP contributions, RRSP contribution room, existing pensions, etc.

[taylor192]

Originally Posted by waddy41

Can you explain how some tax filers do not qualify to contribute to RRSP.
I thought with you can contribute 18% of your previous year's incomem so the only people who don't qualify are those who are working for the first time.

RRSP contribution room is only calculated on income, not other forms of profit such as capital gains. Thus it is possible to file a tax return and report no "income".

Originally Posted by waddy41

Also, how do you get 40%+31%? People can have a pension AND contribute to RRSP.

Yes I know my math here is very weak, I wish there was better stats. If I had a pension, I would not be contributing to RRSPs. Especially some of the government pensions that pay 2% per yrs of service - thus you work 30 year you get 60% of the 5 best years of salary. Plus CPP. Then your RRSP withdrawals are taxed ontop of that.

I'm going to assume most people with a pension are aware of this, and there's minimal overlap between pensioners and RRSPers.

Originally Posted by waddy41

Well, I don't want them to increase CPP contributions. That will be even more deductions taken from my income.

Me too!

Originally Posted by waddy41

Maybe CPP contributions should be calculated on an individual basis and be based on several factors like annual income, RRSP contributions, RRSP contribution room, existing pensions, etc.

If you mean being able to pay less into CPP based on how well you're saving for retirement (more savings == less CPP) - then you don't have a chance in hell of pushing that through government cause that doesn't address the problem of people retiring with no savings.

The banks have been suggesting raising RRSP limits, yet as you see above, only 7% of the contribution room is used - so raising the limits is only benefit a few who contribute the max - and these people are not the ones that need help.

I don't know what a good answer is other than to politely say "fuck'em", people need to learn how to save, and perhaps a few more stories of broke seniors will encourage my generation to stop buying $600 iPads while having $0 in their RRSP at 30yo.

[MoBettah]

Thank goodness I'm a contractor

[taylor192]

Originally Posted by mo_bettah

Thank goodness I'm a contractor

How do you figure? CPP is 9.9% of income, and an employer pays 1/2 - thus I only pay 4.95% up to about $2100.

You OTOH pay the full 9.9% since your employer pays none.

That is unless you have a company and are paying yourself via dividends - thus no CPP.

[MoBettah]

Originally Posted by taylor192

That is unless you have a company and are paying yourself via dividends - thus no CPP.

That's exactly what I'm doing

[waddy41]

Taylor...I wish I could thank you 10 times...

You're right..a lot of people don't have extra income to put in an RRSP...
A lot of people who take advantage use it as a tax shelter..
And some people (like me) are too lazy so I'm just postponing it...

It would be awesome if CPP rates are individualized...and more people will contribute if they know their CPP payments will be reduced

[taylor192]

Originally Posted by mo_bettah

That's exactly what I'm doing

Just to show others how much of a ripoff CPP is:

I have contributed the max CPP since I was 23yo. If I retire at 65yo that's 42 years of paying $2100/yr* to get a $12K/yr* income in retirement - how well does that workout for me?
*in today's dollars

Most pension plans use a 8% return, and inflation is around 2%. Assuming a $2100/yr contribution that increases with inflation, if I wasn't with CPP I'd get $23K/yr, not $12K!

That's just on my portion! If my employer gave me the additional 4.95% they contribute as income, I could invest this in my RRSP and have $46K/yr.

$46K vs $12K! I wish I could opt out of CPP. The effective ROI on the 9.9% CPP contributions is 3.1%! I could do as well putting my CPP contributions into a friggin bank account!

[johny]

Originally Posted by taylor192

http://www.cbc.ca/canada/prince-edwa...nsion-584.html


I say 15% is fine, there's always going to be stupid people who don't plan ahead.

there is probably lots of people who work with no pensions who don't put in, and will simply relay on there spouses pension / rrsp etc.


that being said. they should just get rid of cpp. it's not like someone can live off it.

[Conan O'Brien Sex Video]

i always max out my rrsp's and would love additional contribution room.
i don't want to pay additional cpp because other people don't have any financial sense.

which reminds me... the 'debt diet' series is on oprah... 5 episodes... each tuesday i believe. it's shocking how some people don't have any grasp about spending and saving.