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Warnings about a looming pension crisis are overblown, report claims

VANCOUVER (NEWS1130) – How are your retirement plans looking?

As Ottawa makes another move to reform pensions today while refusing to expand the CPP program, a new report suggests Canadians have never been better prepared for their golden years.

The report comes from the a right-wing policy group; it states most Canadians’ retirement income will serve them well.

Phillip Cross with the Fraser Institute says there is simply no looming pension crisis in Canada. “Retired Canadians have never lived longer, wealthier, more productive lives.”

The policy report suggests a number of reasons.

“People are working later in life now,” says Cross. “Over half of Canadians over 55 are still working. Over a quarter of Canadians between 65 and 69 are still working. Another variable people haven’t adjusted for is how much wealth Canadians hold outside of pension plans.”

He says that includes homes and Tax-Free Savings Accounts.

The report argues working longer means drawing upon retirement income over a shorter period of time.

Cross says our main retirement resource is our own good judgement and the models of pension crisis paint an inaccurate picture of retirees.

“As Canadians approach retirement, if their income’s going to be low, they don’t do anything. They’re just completely unresponsive. They’re, frankly, stupid.”

“I think the track record shows exactly the opposite,” he adds. “Canadians have demonstrated they’re very responsive and responsible about their retirement and therefore, we don’t need mandatory government programs to save us from ourselves.”

Meanwhile, at least one credit counsellor isn’t quite as optimistic. Jeffrey Schwartz says people are working longer, not because they want to but because they have to.

“That could be for a number of reasons. Perhaps going into retirement, they haven’t changed their spending behaviours or the retirement funding that they thought they had in place wasn’t quite enough or what they thought it would be. And perhaps they just haven’t saved enough going through life up until retirement, and as a result, they still have to work,” says Schwartz.

He says “Freedom 55” is probably more like “Freedom 70.”

Schwartz says he continues to see people carry debt into retirement, and that’s not a good thing because of the potential for interest rates to rise. He points out a lot of people will be on fixed incomes.

“So, if they’ve set up their spending behaviours and patterns at a certain level of income and then all of a sudden those expenses rise and they can’t do anything about those expenses — it’s out of their control — then this is going to create some sort of problems,” he tells us.

He adds as people live longer, they may need extra resources to manage their health, and along with the debt they’ve brought into retirement, they may not have accounted for the additional cost.