Retirement Planning & Seasonal Financial Disorder

Here we are closing February in Canada, the end of “RRSP season”, in the crunch as if it was the only season to be retirement planning, almost suffering from seasonal financial disorder. We could call it the silly season: motivated sellers of RRSP-eligible investments pursue possible sales “prospects”, many of whom are as confused about what they are doing, as deer caught in headlights on a country road.

The theory of RRSPs is that they will help those working people with no workplace pension plans who are motivated to save for their retirement. These workers will put aside funds in a tax-advantaged plan from which they will access an income in retirement. There are a few problems with this theory. The first is that not everyone needs an RRSP – some people have other assets or plans, which they’ll use to fund their future retirement.

RRSP’s & the acronym alphabet of disorder

0202gail.jpg.size.xxlarge.promoThe second problem is that not everyone wants to put money into an RRSP if it means that their other living expenses are curtailed because they do not have the cash flow to make regular (or irregular) RRSP contributions at a particular point in time. A third difficulty is that for some people, especially on low-income, an RRSP makes no sense. They have no tax liability; they live a simple existence and do not expect to need more in the future. In other words, the minimum payouts from CPP and OAS, plus the Guaranteed Income Supplement (GIS), will be sufficient in their retirement. However, they could augment their retirement income through the Tax Free Savings Account (TFSA) plan.

In what seems to be a new era for Nanny State programs, some governments, notably Ontario, feel that everyone must have a retirement savings plan. Despite the opinions of pension and economic experts – that government-mandated plans actually decrease individual saving for retirement and put a damper on small businesses, which would otherwise increase the number of employees – governments want to forge ahead with these feel-good policies.

For many Canadians, their best choice of financial acronyms may be the TFSA, which has the advantage of being a more flexible savings option. Financial security is the goal of good financial planning. The RRSP program may, or may not constitute good financial planning for some people. This brings us to the whole topic of financial literacy.

Advocating a financial literate consumer

The concept of financial literacy is that an individual consumer is able to rationally evaluate and make informed decisions about personal finances, including the purchase of financial products. Financially literate people can separate the sales “fluff” from hard facts. The key question is “Who benefits?” Is it the client or the advisor? Or is it a win-win?

The world of personal finance includes the sale (and the purchase by the consumer) of financial products, whether those products are mutual funds, savings vehicles, stocks or bonds, real estate or commodities, or various types of insurance. The risk to consumers at any age is that they can be sold inappropriate financial products – often at unreasonable cost.

As yet, a fiduciary standard has not been set for all Canadian personal financial planners, and this proposed consumer protection-oriented standard is being fought by the various industry groups concerned about a reduction in income for advisors and in the number of advisors. Financial services, such as financial products, should offer solutions to the needs of consumers.

Often, solutions offered by advisors are geared to how much money the advisor will make on any given transaction. The financial service companies, which develop financial products, devise marketing programs for these products or services. Sometimes, the advisors oversell particular products, to the detriment of the consumer.

Achieving a balance between making financial products or services available to the consumer and yet providing a fair return to advisors is still a problem in Canada. Other jurisdictions have eliminated commissions on financial products because of potential conflicts of interest between the advisor’s advice and the real needs of the consumer. It looks like such a standard is a long way off in this country, given that our closest neighbour, the U.S.A., is not contemplating such a policy change.

The old adage, “If something sounds too good to be true, it probably is” (that is, the something is not true!), is a good motto for careful consumers.

Marie Howes, PRP

Celebrating Maggie Kuhn

August 3rd was Maggie Kuhn’s birthday. This year we celebrate 109 years since her birth, and it is important to recognize this forward thinking American social activist for her work in the field of aging. Maggie is a champion of aging and the later years. In August 1970, she founded Gray Panthers.

“Learning and sex until rigor mortis.” ~Maggie Kuhn

Her work is notable not only because she was ahead of her time. She also broke stereotypes and at age 65, she embarked on the most important work of her life. In fact, rather than accept her employer and society pushing her into a quiet retirement, she chose to take action and work for the rights of older people.

After being forced into retirement from the Presbyterian Church, Maggie, along with her friends in similar circumstances, organized and founded the group that became the Gray Panthers. The organization focused on the issues of older people including pensions and pension rights, health care and age discrimination. Gray Panthers also addressed the larger social issues of the time such as the Vietnam War.

By the year 2020, the year of perfect vision, the old will outnumber the young.” ~Maggie Kuhn

Maggie was a charismatic and energetic leader. She advocated for older adults to have a voice and a position at the table for programs, practice and social policy and encouraged older adults to stay involved and take action on social issues. In doing so, she started a cultural revolution.

Maggie also believed in the power of intergenerational connection. One of her mantras was ‘Young and old together’. Under her guidance, Gray Panthers came to represent the possibility and power of later life. She herself demonstrated how older adults can be active in the world working for social issues that are important to them.

“There must be a goal at every stage of life! There must be a goal!” ~Maggie Kuhn

Until death at age 89, Maggie continued her work as an activist and advocate. She redefined aging and she is a role model to us all – women and men, young and old alike.


Suzanne Cook

The Third Rail: More Pension Dialogue

Examining our current construct around pensions is not unique to Canada. However recent federal and provincial conversations have heated up the debate about pension reform in this country and will likely become one of the top issues in elections upcoming in the next year or two.

In the Planet Longevity Blog Pension Tension (Feb.16),  Marie Howes offered her commentary and Book Review of The Third Rail by Jim Leech and Jacquie McNish (2013). How timely this is now we’re in the lead up to income tax season; and next to the Winter Olympics, everywhere we’ve turned in the last few weeks the advertising for financial planning products with the push for retirement savings contributions and debt management services has filled up media space.

The Third Rail is a must read for all Canadians. To stimulate your thinking on the subject of pensions and perhaps contribute to the dialogue read these links.

Mark Venning


Pension Tension

Commentary and Book Review of The Third Rail by Jim Leech and Jacquie McNish (2013).

Pension plans exist for three basic reasons.  Firstly, pensions ensure an on-going source of income  for people who no longer earn income from employment.  Secondly, pensions provide an income based on a person’s pre-retirement level of income. Thirdly, for those who have had very little income during their working lives, or who have been unable to work, pensions of various types sustain them for the rest of their lives. There is therefore an element of “fairness” in pensions.

Jim Leech, former CEO of the Ontario Teachers’ Pension Plan, and business journalist Jacquie McNish, have written “The Third Rail”, Confronting our Pension Failures.  It should be required reading for every Canadian (and Canadian politicians).  Given the pension disaster which looms for Canadians, younger citizens – the `spectator` generation in particular, should be reading this  book and becoming outraged activists.  If they don’t, they will be saddled with impossibly high taxes to sustain the unrealistic pension promises made to the huge Boomer Generation.  They will also see education and health services for their children undercut by Boomer demands.

The book examines three important case studies. The pension crises of New Brunswick, Rhode Island and The Netherlands, show why and how unsustainable pension plans MUST and CAN be re-worked. The achievable objective is to give pensioners reasonable financial security without bankrupting younger taxpayers.

Pensions are a battleground where private interests and the public interest intersect.

The private interest is essentially the business community which does not want to incur what it considers expensive, uncertain costs to doing business. Individual citizens may also object to giving a “free pass” to those who have saved nothing for their own retirement. 

The public interest is society’s desire to help by providing an underpinning of security for those who have worked all their lives. We also want to ensure that those less fortunate can age with dignity and a reasonable amount of disposable income to meet their expenses.

Next: Why pensions divide us…..and why that must change.

Marie Howes