Baby boomers beware

The Advocate, Wednesday October 12, 1994

What does the year 2011 mean to you? If you are age 50 or older, you will be well into retirement by then. What about the majority of us who are in their 30's and 40's? The year 2011 is when the first wave of the baby boomers will turn 65.

They will begin to collect the retirement benefits they feel they honestly deserve. But will the money be there to collect?

According to Gordon Pape, author and personal finance columnist for the Globe and Mail "... the way the CPP is going, I'm not at all convinced it will be around a decade or two from now..." "Few Canadians are aware of it but the federal and provincial governments have in place a 25 year program of annual increases in percentage of your income that will go to pay for the CPP. By the year 2016 the figures will rise to 5.05 per cent and 10.1 per cent for a self employed person."

The reason for the huge increase is that what we consider to be the CPP as it was originally intended does not exist. There is no fund that the contributions go into. It has been badly mismanaged and dipped into to be used for other purposes. Over the years it has become part of the tax burden we all bear. If it had been left alone and earned even a conservative 6 per cent per annum, the contributions would not be increasing at a an alarming rate.

In the year 2011, a huge bubble of the population will begin leaving the work force and begin collecting their CPP.

But wait a minute, how can these large numbers collect when the tax (CPP contributions) base will shrink considerably? Today people 65 and older collecting CPP are being supported by the workforce. So far it's working because the huge work force that the boomers represent can pay for the smaller numbers of retirees. But what about the time when the numbers are reversed? That's what the year 2011 means. If the boomers are not realistically planning for the so-called "Golden Years," they most likely will not call them Golden.

As Mr. Pape concludes, "... don't count too heavily on the CPP in your retirement plans..."

I expect there will be a tax revolt in this country before that happens. We are starting to take care of ourselves. The government is failing us financially. Our huge deficit attests to that.

I have two articles on the subject. "Age Wars in 2011," and "Future Shock: the Soaring Cost of CPP." Contact me for your copies.

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