Are the feds wrecking your plan?

With Old Age Security under fire, many people are wondering how to meet their retirement goals.



From the April/May 2012 issue of the magazine.


Diane Finley
The moment that many seniors have long feared is coming—the government is moving in on Canada’s retirement system. While details weren’t clear at press time, most observers expect the March 29 budget will take aim at Old Age Security (OAS), the federal program that sends monthly cheques of up to $540 to Canadians 65 and older. If the Harper government follows the lead of other countries, it could raise the age of eligibility to 67.

These changes are likely to meet with the ire of seniors’ groups, and they’re stressful for Canadians planning their retirement. But Warren MacKenzie, president of Weigh House Investor Services, says people with a solid financial plan should not be blown off course. First, he says, any changes will be phased in over time: folks who are in their 60s now aren’t likely to be affected. And losing two years of OAS shouldn’t be life-altering for younger Canadians. “If the government delays the age for starting OAS to 67, that means you would lose no more than $13,000—even less after taxes,” says MacKenzie. “If that’s going to make a noticeable difference in your retirement, then you’re cutting it too close.”

All of this is a useful lesson for anyone building a long-term financial plan. Every plan makes assumptions, and a lot can change between now and the day you retire. But as long as you develop good habits during your working years, you’ll be on solid ground. In your early and mid-career years, it’s simple: spend less than you earn and invest the rest wisely. As you approach retirement age, crunch the numbers once a year or so to see if you have enough money to last. If not, working for a few more years can make a huge difference. If you find yourself spending at unsustainable levels after you’ve already retired, MacKenzie says small reductions in monthly spending are usually enough to get you back on track.

While we’re likely to see more tinkering with government benefits, that doesn’t mean you should factor these programs out of your retirement plans. “In the years to come, people are going to have to depend more on their own resources, but it’s unnecessarily conservative to assume you’re going to get nothing,” says MacKenzie.

4.4% The poverty rate among Canadian seniors. Despite fears of a retirement crisis, this is one of lowest rates in the OECD.

6 comments on “Are the feds wrecking your plan?

  1. Warren MacKenzie is minimizing the impact. For a couple, its a loss of $13,000 per year which is a significant amount in almost anyone's retirement plans.


    • Unless I miss my math, that $13,000 would be for the two years.


  2. This won't correct the problem. The gov't says the cost will be $108B in 2030. This move just postpones that cost till 2032. The real savings supposedly is $3B each year going forward. If you make $67,700 right now, you begin to get clawed back until you get zero OAS at over $100,000+. This is where they need to make cuts. There should be an income level at which you stop getting OAS period. $60-70,000 would be a good start. This upper limit could be indexed like the OAS itself.
    Another way would be no OAS if in retirement you're gross earnings are the same or more than your last year at work.


    • Yeah, let's punish those who sacrifice during their working years to build up a nest egg at the expense of those who choose not to save anything. Cuts should be across the board for everyone, not just those who plan ahead.


      • Choose. That's the keyword. If you choose not to save, then that's on you. You chose to save less, so you should get less. It's only fair. What's the incentive for others to save when you can choose not to and get just as much?

        If you want more, save more. It's that simple.

        Want to save but can't? Highly doubtful. You can save but you just don't want to. Adjust your lifestyle. Live within your means.

        The only people who shouldn't bother saving (other than in a TFSA) are those at the very lowest incomes. They'll be just fine in retirement as OAS and CPP will match their working income and even surpass it in retirement.


  3. @ Scott It is easier to plan ahead when you are making twice as much as the average wage earner. The point is that some people don't need OAS. You have to think of it as 'insurance' to ensure you have a reasonable, comfortable life in your senior years. I'm all for a graduated clawback (where the income values are indexed), perhaps starting at $70,000 and working to getting no OAS at $100,000. I would be in that bracket and would have no problem "surviving" on my own $70-$100 K so that someone can have 24K instead of 20K.


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