Saving for retirment

For Canadians the month of February is the silly savings season and it appears our concerns and insecurities about the future are showing up partly as a reluctance to save for retirement.  March 1 is deadline for putting money into Registered Retirement Savings Plans in which money is exempt from income tax.  Tax is charged when the money is withdrawn at which time one expects to have a lower income and thus pay a lower rate of tax.

I think it is a silly idea but many people will do anything to avoid paying taxes.  Some people have even  borrowed money in order to put it into an RRSP.  This plan is a  subsidy to the financial industry in that the federal government is giving up tax income to pay for marketing for the industry.

This year it appears fewer Canadians are going to take full advantage of this tax benefit.  Some are trying to balance their retirement with paying down a heavy debt load or with a need to help their children with education or to look after aging parents.

An online poll has found that Canadians were planning to save almost $10,000 this year, but 66 per cent say they’re tucking the money away for vacations, luxury items and entertainment.

the_family It could be some Canadians are becoming skeptical about the ability of the financial industry to look after our money in the long term.  Whatever the reason many  are worried about retirement.

I am one of the skeptics because there are two threats to savings.  One is that inflation could wipe out the value of savings and the other is that businesses  and governments in which savings have been placed may go bankrupt and be unable to repay the money.

Given the current economic outlook the best investment is a market garden.

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One Response

  1. This is a common problem around the worl in advanced countries. In the less advanced the probelm is solved – you are dependent on your children until you die, at a relatively early age. No children, you die even earlier.

    In advanced counties, what it boils down to is two requirements for a safe and healthy independent retirement:

    1. Save $10,000 a year for 30 years.
    2. Invest it in a totally risk free investment. Low yield maybe, but safe.

    The trouble is, the vast majority do neither. They either speculate, or expect the government to support them. It comes down to “I have paid my taxes all these years. I expect to be supported.” Fair enough, if conditions stay the same. But they will not. In most countries the ratio of the retired to the employed is increasing four times by 2050. I expect the fate of the old and poor by then will be very desperate indeed.

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