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Half of Canadian couples between 55 and 64 have no employer pension between them, and of those, less than 20 per cent of middle-income families have saved enough to adequately supplement government benefits and the Canada/Quebec Pension Plan, says the report. (Robert Byron/Getty Images/Hemera)
Half of Canadian couples between 55 and 64 have no employer pension between them, and of those, less than 20 per cent of middle-income families have saved enough to adequately supplement government benefits and the Canada/Quebec Pension Plan, says the report. (Robert Byron/Getty Images/Hemera)

ROB CARRICK

Planning your retirement requires ‘reliability’ from the government Add to ...

As a 53-year-old, I should be thanking the Liberal government for keeping the age of eligibility for Old Age Security at 65.

The previous Conservative government introduced a measure to gradually increase the age for starting OAS to 67 in the years ahead. I turn 65 in 2027, which means I would have been among the first to lose out on two full years of OAS. From the point of view of self-interest, I applaud the move in last week’s federal budget to keep the OAS age at 65. It could add roughly $17,500 to our household income in retirement over two years, if you adjust today’s monthly payment amount for inflation.

But on a policy level, I wonder if it’s smart to keep the OAS age of eligibility at 65. Canada’s population is aging in a way that will reduce future growth prospects for an economy that is already struggling to find momentum.

Is the OAS sustainable in a world in which more people are claiming it and government revenue is further stretched by the health care needs of an aging population?

What I’d like more than OAS at 65 is for governments to develop a national retirement strategy that creates a system based on actuarial analysis of lifespans, demographics and retirement-income needs. Take politics out of the process – stop changing things and then changing them back. Consistency and reliability are what we need to plan our retirements.

Here are three issues that a national retirement strategy must address:

What’s the retirement age?

Sixty-five is the traditional reference age, but Statistics Canada data show that 63.4 is the average. That’s a blend of an average 61.4 years for public service workers, 64.1 for the private sector and 66.7 for the self-employed.

The challenge of dealing with a population that’s living longer has already prompted the Social Security program in the United States to increase the age of retirement to 67 for people born after 1959. Other countries moving toward 67 include Denmark, France and Germany.

Using 67 make senses from an accounting point of view, but let’s recognize that we can’t decree a later retirement age and expect everyone to work two years longer. Some employees are laid off ahead of retirement, while others must stop working for health reasons. Getting OAS at 67 would penalize these people.

What will government provide?

It’s time for Ottawa to start sending out personalized retirement statements to people starting at age 50 to tell them how much to expect in Canada Pension Plan Benefits, OAS and Guaranteed Income Supplement based on their work history to date. Something like “Dear Rob: Here’s what you’re on track to get from us per month and per year when you retire at the age of 65 (or whenever). The rest of your retirement income is up to you. Vaya con Dios.”

The federal Office of the Chief Actuary keeps track of the health of OAS and the CPP. Personalized retirement statements would include a check mark beside OAS and CPP to indicate that they have been monitored. If OAS is affordable at 65 both now and into the future based on current demographics and projections of government revenue, then let’s have the Chief Actuary sign off on that.

How much forced saving do we want?

With company pension plans declining both in quantity and quality, we’re putting more responsibility on individuals to save for their own retirement. But a recent study by the Broadbent Institute found strikingly low levels of personal savings among low – and middle-income people without employer pensions.

Expanding the CPP can help. If workers and their employers contribute more, then the CPP becomes a more substantial foundation for retirement income. Let’s have an opt-out clause in an expanded CPP for people who prefer to invest for retirement on their own. It should be a very inconvenient opt-out process. Here’s an idea: Maybe outsource this to the customer service department at one of the big telecom companies.

Without a national retirement strategy to support it, moving the OAS age back to 65 for future retirees seems like politics, not policy. I’m happy to have the extra OAS money, but I’d sure like to know the government can handle it.

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Follow on Twitter: @rcarrick

Also on The Globe and Mail

Carrick Talks Money: Is it okay to have debt in retirement? (The Globe and Mail)

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