Prepare to save more, work longer: Poloz on retirement

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QUEBEC CITY (NEWS 1130) – If you haven’t started saving for your retirement, you might want to get on it. There’s a potentially concerning heads-up today from the Bank of Canada.

Bank of Canada Governor Stephen Poloz says it’s time to rethink retirement plans amid longer life spans and lower interest rates, and adds you should consider saving more and working longer than planned.

“Some of the forces leading to lower interest rates will persist for a long time,” Poloz notes. “So we need to prepare for lower, for longer.”

“Individuals need to plan for retirement with different assumptions about longevity, interest rates, and growth,” he adds.

As for our low interest rates, there are mixed feelings. Poloz says younger people, for example, are thankful: “And when I think about all the cumulative interest I have paid in my lifetime, it is no wonder that they are grateful. But I also hear from retirees who are unhappy because they’ve saved their whole lives and are getting very little income from those savings today.”

Poloz is also urging businesses to invest more to help the economy, but notes the current climate means they too must lower their expectations when it comes to rates of return on investments.

The bank’s benchmark interest rate has remained at a low level of 0.5 per cent for more than a year and it’s not expected to start climbing any time soon.

The central banker also said governments should cobble together a mix of policies to boost the country’s economic output, even if each opportunity on its own offers only a slight improvement.

He said policy-makers must continue to pursue new trade opportunities at home and abroad, invest more on infrastructure and tweak tax and immigration policies to help promote the growth of new firms.

“In a lower-for-longer world, these are opportunities we simply cannot afford to miss,” he said.

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