Retirees, lost pension plans, and returning home

elderly

elderly

“What we’re seeing here is they don’t have confidence in what they think of as the public safety net — a pension plan,” says Paul Taylor of the Pew Research Center. “So they are reverting to the age old private safety net, and that’s the family.” — MSNBC

We find it odd that many are blaming baby-boomers for the current state of affairs, when the reality is that the imbalance started when they were only children. In reality, it’s folks in my 70-something parents’ age group (save for the WWII, of course) that really lucked out. They didn’t have to kick into Social Security/Canada Pension Plan their whole working lives, yet they’re collecting from it (stats show that they in fact, collect everything they put in within a mere 4 years), and public health-care was introduced just when they started having their children, etc.

Doesn’t stop your multi-millionaire mom from complaining about clawbacks of ‘her’ money, mind you. Read David Foote’s ‘Boom, Bust, Echo’ – in it you’ll see that if you’re of that generation, you almost had to try to fail in order not to succeed financially.

Indeed, it is well documented that people born between 1935-1955 in western countries are the luckiest people to ever have lived. They have profited from low real estate prices, ample job opportunities, sustained high economic growth, political freedom, travel opportunities, etc. Now they are refusing to retire and are hogging some of the best jobs, accumulating more and more wealth while preventing younger generations from getting the work experience they need. This is happening at a time when creativity and energy is becoming more and more important in order to adapt to the global market, and younger people with the vision and energy to help do so are not being given enough opportunities to contribute. This is a shame and I hope people come to realize this.

Together again: More retirees moving in with children by CNBC (source below)

Joseph Jastrzebski, a 68-year-old manager at Home Depot, wants to retire soon. When he does, he and his wife, Valerie, plan to move in with extended family.

The Sayreville, N.J., couple already live part-time with their daughter, son-in-law and grandchildren. Once they sell the family home the Jastrzebskis will move in permanently.

“It will afford us an opportunity to save money and have something left for our children,” says Valerie, a 63-year-old secretary. “We are doing it because this is a situation that presented itself that is ideal for everyone.”

Valerie’s daughter, Sarah, mother of a five-month-old boy and step-mom to two teenagers, is working as an administrative assistant while studying for a master’s degree in holistic health studies. She agrees combining their households makes sense.

“A lot of times now with retirement we see someone ends up in a nursing home or other facility like that,” Sarah says. “I think staying with your family is the way to go.”


In economics (real economics that is), when after tax interest rates on savings is below inflation (as they are now), the economy is sick. It has been this way since 2007. It is a sign of wealth erosion and wage devaluation as support for the money is not there and will invariably show up as inflation; just like “Japans Lost Decade(s).” It is classic actually: stagnant wages, higher taxes, less wealth as inflation encroaches on wealth. It means less jobs too.

An old retired person with $500k in the the domestic bank is only getting $1000/year interest. At 5.5% they would have $25,500 more to spend and provide jobs. If they don’t spend, it will mean less jobs. People saving for retirement it is the same. If their nest egg grows at $30k/year they will see less need to save and spend more. The lack of spending shorts the job market.

Investors see real inflation at 5%, yet returns are 3% and taxable. Why invest? You lose value. You are better off with an ounce of gold or a foreign investment. Australia, China, India and Brazil all pay more that 5.0% to savers and accounts for better returns. In fact our government ponzi methods of currency and debt mismanagement have led to this entire depression.

Sadly, inflation almost always goes faster than minimum wage and pay increases, mostly because the “basket of goods” method of calculating inflation is seriously flawed as it has not really been changed in the last few decades. If we compare the cost of something twenty years ago with the value of the money at the time, as compared to the cost of that same thing with the value of money now, we can see where the problem lies.


Canada implements private pension plan to complement ponzi scheme

Finance Minister Jim Flaherty says he and his provincial and territorial counterparts have agreed on “implementation of a framework” to create a private pension plan for small businesses, employees and the self-employed.

“A private pooled approach could be one element in a total package, but if this is all the ministers get to, if it’s all they wrote, then it’s hopelessly inadequate to address the problem.”

Ken Lewenza, president of the Canadian Auto Workers union, said the federal government didn’t push hard enough to reach a CPP agreement.

“Enough provinces were in favour of improving the CPP for legislation to be passed to increase it — the real weakness came from the federal government,” he said in a release.

“Finance Minister Jim Flaherty is failing to appreciate that many Canadians do not have money to save, period,” said Lewenza. “How then will they have money to save in a pooled pension plan?

“We are once again setting ourselves up to fail and let down hundreds of thousands of Canadians who will not have enough to live on in retirement.” Sourced below


So Ralph Goodale thinks that “two-thirds of Canadians have not planned enough and are not well enough prepared for retirement”. They can afford luxury vehicles, fancy vacations, the latest electonic gadgets and unmanageable credit card debt but they cannot find enough money to save for retirement. Why is that the government;s problem?

Then the Canadians have Ken Lewenza, leader of one of the top labor unions in Canada, thinks that “many Canadians do not have money to save, period.” Well then from where will the money come for the savings? The government does not create money; they can either force the savings or they can re-distribute wealth (ie from businesses or other individuals). I am not sure which option he would propose but redistribution from the rightful owners is distasteful at best.

The bottom line is that, as a country, the only way we can continuously improve our standard of living is to improve our generation of wealth, and the only way to do this is to improve productivity — not by working longer hours but by getting the education, skills and work-ethic required to compete in the modern economy. Along with this is a requirement that we save, invest and spend efficiently.

People really need to get away from the notion that the government creates wealth or money. Government should only be the safety net of last resort for those who, through no fault of their own, fall through the cracks.

References:

1. http://today.msnbc.msn.com/id/40772471/ns/today-money/
2. http://www.cbc.ca/politics/story/2010/12/20/flaherty-pension-reform-talks.html

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