Weekend Reading: The Third Rail Edition

Attempts to enhance the Canada Pension Plan (CPP) failed this week as Ottawa decided to kick the can down the road and wait for the economy to improve before making any changes to contributions and benefits.  Provinces are now looking into their own solutions, including a voluntary pension option.

The current average CPP payment to retirees is $7,234.32 a year and the maximum payment is $12,150.   Meanwhile, just one-quarter of Canadians made RRSP contributions last year, even though two-thirds don’t have a workplace pension plan.

RelatedLet’s play necessity Tetris: Retirement income edition

Confronting our pension failures.  That’s the premise of a new book titled, The Third Rail, written by Jim Leech, CEO of Ontario Teachers’ Pension Plan, and Jacquie McNish, a senior writer at the Globe and Mail.  The book showcases examples from Holland, New Brunswick, and Rhode Island, as places which have adopted pension reform to fix their broken pension programs.

The authors argue that, unless immediate action is taken to reform our inadequate pension system, retirees will find themselves in financial limbo and taxpayers on the hook for soaring elderly support payments.

I’m reading the book now, and it’s fascinating – as far as arguments about pension reform go.  A definite must-read for Canadians who care about workplace pensions and the long-term health of our pension system.

The book publisher sent me an extra copy to give away, so if you’d like a chance to win a copy of this book, just leave a comment at the end of the post.  I’ll close off the entries on Thursday December 26th at 5:00pm EST and announce the winner on December 27th.

Weekend Reading

Now let’s take a look at some interesting personal finance articles, videos, and podcasts from around the web this week:

1.  We recorded episode six of the Because Money video podcast this week, where we discussed small business finances and why it’s so hard to separate your business from your personal finances.  We also touched briefly on charitable giving and some reasons why Canadians are Scrooges when it comes to donating money.

2.  Mark Seed from My Own Advisor was on the More Money for Beer and Textbooks podcast last week talking about some of the mistakes he made when he first started investing, which included high MER mutual funds and investing in penny stocks.

3.  Speaking of My Own Advisor, Mark featured me in his investing series titled, What’s in your portfolio?  Check out what I had to say about my investing goals and strategy, as well as some advice for other investors using a similar approach to me.

4.  CBC’s Amanda Lang looked at ways the financial system is rigged against you in this video that aired on The National.

5.  Dollar cost averaging has long been touted as the best way to invest your money, but what if you have a large lump sum – like from a year-end bonus?  This article on Canadian Business says that the odds favour investing it all right away.

6.  The Globe and Mail’s Rob Carrick lists his nine favourite investing websites.  All solid resources that should be bookmarked on your computer.

7.  Canadian Couch Potato Dan Bortolotti says it’s the possibility of achieving market-beating returns that keeps investors away from a more sensible, passive approach.

8.  Why do academics always talk about risk-adjusted returns?  Mike Piper explains why risk-adjusted returns matter over on his Oblivious Investor blog.

9.  Another investing question answered – this time about whether stocks become more or less risky over time.  Michael James has your answer.

10.  Big Cajun Man argues against a claim that the government is losing money by allowing the TFSA program to continue.  What’s your take?

Christmas break

We’ll be taking a break from our regular Monday and Wednesday posts next week to enjoy the Christmas holidays.  We’d like to wish you all the best over the holiday season, and we’ll see you back here next Friday with some final thoughts on the year 2013.

Don’t forget to leave a comment for your chance to win a copy of The Third Rail.

Thanks for reading, and have a Merry Christmas!

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  1. My Own Advisor on December 20, 2013 at 5:42 am

    It was great to feature your portfolio Robb. Thanks for the mentions.

    I want to wish you a very Merry Christmas and Happy Holidays with family and friends. All the best in 2014!


  2. Tom on December 20, 2013 at 5:57 am

    Jim Leech is a star who, when he speaks, carries clout. That’s partly why he has been chosen to investigate the bonuses of the Ontario Power Corp. execs.

  3. Jan on December 20, 2013 at 7:10 am

    The current political climate wants to dismantle public service pensions. Jim Leech has lots to say of value on this topic.

  4. Nevin Orange on December 20, 2013 at 7:28 am

    Interesting post. Pension reform is an issue that is only going to grow in importance, unless the demographics suddenly and radically change – which is unlikely. I would love a copy of the book.

    Season’s Greetings and a prosperous new year to all!


  5. Tracey H on December 20, 2013 at 7:44 am

    I’m interested in anything about Canadian pensions. We don’t have any company pensions (like the vast majority of Canadians) and have saved very hard all of our lives and still won’t be as well off as we would if we had a company pension. I fear we’ll be paying higher taxes to help fulfill civil servant pensions in the future.

    • Robert on December 20, 2013 at 11:08 am

      Unfortunately your fears are justified. Fortunately at least this week the civil servant unions failed in that quest.

    • Carol Pearce Meijerink on December 20, 2013 at 6:03 pm

      It’s time to realize that pensions plans like personal retirement savings can only cover what the funds left can cover. There such be no pension funds guarantees. I resent the comments we aren’t working hard enough to save and resent even more bailing out company pension funds. It’s time the have nots stop having to support the haves.

      • Carol on December 20, 2013 at 6:09 pm

        Correction. There should be no pension funds funds guarantees that the funds can’t support.

  6. Jill G on December 20, 2013 at 8:10 am

    Thanks for all of the weekend reading. Enjoy your holiday.

  7. Roman Haluszka on December 20, 2013 at 8:12 am

    What’s disappointing with most analyses of retirement issues is the lack of discussion about disposable income. Income inequality trends have led us to see a society where many in that 99% have little or no disposable income, so they can’t afford to invest in RRSPs or TFSAs. This is why enhancing the CPP is crucial to the future economy. Flaherty’s excuses are a pathetic joke.

  8. Jane B on December 20, 2013 at 8:29 am

    Thanks for the work you do to educate regular people on the importance of managing their financial health. I know people who have put nothing away for their retirement and worry their elder years will be very difficult.

    All the best for 2014.

  9. jim howard on December 20, 2013 at 8:29 am

    I reluctantly support an enhanced CPP. Canadians, unfortunately, have shown that they are not willing to
    fund their own pension (RRSP) diligently which will result in many having insufficient resources for a decent retirement.. hence the need for an expanded CPP.
    A hodge-podge of provincial pension plans seems a poor idea…

    Wishing you and all your loved ones a wonderful holiday season.

    Thank you for a year of enjoyable reading. Looking forward to more of the same next year.

  10. Dennis Seebach on December 20, 2013 at 8:41 am

    Great article, definitely bookmark Rob Carrick’s website lists, there are very helpful sources.

  11. Cathy on December 20, 2013 at 8:47 am

    Always enjoy your informative posts! Very pertinent topics that I often share with co-workers and clients.
    Merry Christmas and Best Wishes for continued success in the New Year!

  12. Kim on December 20, 2013 at 9:11 am

    Funding retirement is a very interesting topic, especially with respect to attempting to plan long term in a dynamic environment. Thanks for the chance at a book give away! Merry Christmas / Happy holidays all!

  13. Jason St-Hilaire on December 20, 2013 at 9:44 am

    Thanks for the weekend reading list, I had missed some of these posts! Merry Christmas to you and your loved ones.

  14. Keith on December 20, 2013 at 10:16 am

    CPP has low costs, good returns, and the opportunity for private investments. The average DIY investor has a terrible track record, so enhancing CPP is the right policy. Increasing the costs of all businesses with the same policy does not kill jobs, it’s the same for everyone. Shame on Flaherty for not showing the proper leadership on this issue.

  15. Big Cajun Man on December 20, 2013 at 10:25 am

    Can’t see where TFSA’s will bankrupt the government, but I am willing to listen to arguments that it might. Thanks for the inclusion and a Merry Christmas and Happy New Year to you, your Mother and your Family.

  16. Sean Cooper, Freelance Writer and Blogger on December 20, 2013 at 10:36 am

    The ageing demographics and the low interest environment has only sped up the shift from Defined Benefit to Defined Contribution. Canadians need to wake up and realize they need to take care of their own retirement through personal savings. It’s ok to spend today, but you need to put some money aside for tomorrow, otherwise you’re going to be in for a rude awakening when your standard of living drops considerably in retirement.

  17. Robert on December 20, 2013 at 11:04 am

    I really think Flaherty took the high road on this one.

    Jim Leech is as biased as they come on this topic. The push to expand the CPP is primarily the result of public sector pension fund lobbying. An expansion would be an incredibly large windfall to the Ontario Teachers pension system (Jim Leech’s employer), because of the way their payouts are integrated with CPP.

    For the average Joe/Mary who does not have a mega public sector pension ahead, the solution is to follow advice from blogs like this and do it yourself.

  18. Alan on December 20, 2013 at 12:10 pm

    I am not necessarily opposed to enhancements to the CPP, but in the meantime, unless we have minimal income, we should all be trying to maximize our RRSP contributions. I can’t remember the figures, but I read somewhere that most people have all kinds of contribution room. I would hate to think that the only we can save is by being forced to do so.

  19. Roman H on December 20, 2013 at 12:20 pm

    Again, people are missing the issue of “disposable income”. This means money left over after taxes and necessities have been paid for. Due to income stagnation for the 99% since the early 1980’s, disposable income has been shrinking as inflation grew. Many people lack the ability to save as a result of this factor. This government has found an ability to afford subsidies and income tax cuts for profitable corporations, yet claims there is no money for social programs which include CPP. This is not a union issue. It is an issue that should concern everyone.

  20. David W on December 20, 2013 at 12:28 pm

    I am all in favour of the CPP increase as TOOOO many of the INSTANT GRATIFICATION younger generation spend now and worry later and figure it is a right that others look after them. AND if they haven’t got the money when they retire, no doubt it will be somebody else’s fault. Make them pay now and come the future they will not be sipping off the public teat.
    My wife and I have not had a holiday for the past 20 years, or $5 lattes 3 times a day and drive old cars. Invested whatever we could and speculated a bit BUT having retired we are DEBT FREE !!!! AND LOVING IT !!
    If these people can’t do it themselves, well Nanny State will have to do it for them.

  21. Koala on December 20, 2013 at 12:31 pm

    Merry Christmas!

  22. Ginette Holland on December 20, 2013 at 12:41 pm

    There are quite a few comments stating folks should be responsible for saving for their retirement. Unfortunately, financial management for some (many?) seems to be on an emotional basis rather than intellectual. Smart folks still do not necessarily make smart financial decisions. This is where a mandatory program like CPP helps ensure an income during retirement. Even then there is an outstanding challenge in ensuring not too much debt is taken on. Debt by the elderly is a new(?) growing phenomena.

  23. Marilyn on December 20, 2013 at 12:58 pm

    I’d be interested in reading Third Rail. All the discussion on CPP thus far has not been encouraging.

  24. Billybob on December 20, 2013 at 1:27 pm

    Thanks for all the valuable information this past year. Merry Christmas to you all!

  25. Denis on December 20, 2013 at 1:32 pm

    Well, I need a job to be paying into CPP to start with. I am supposed to retire in 13-15 years (65-67 age) but can’t see being able to afford it. I have a pension but that pension only pays my rent and food. Nothing else. That is at today’s prices. When things get more expensive I will be stuck between having shelter or food. Not looking forward to retirement.

    • Tom on December 20, 2013 at 2:51 pm

      Unfortunately, you aren’t alone.
      I know it’s tough out there.
      A trade apprenticeship seems to be the way to go at this time and sprinkler systems is in the greatest demand, in Ontario, at least.

  26. Sandi on December 20, 2013 at 1:47 pm

    Um. I’d like a copy, please. It’s on my Christmas wish list, but folks always think I’m joking for some reason…

  27. Ashley on December 20, 2013 at 1:47 pm

    I’m undecided on the issue of pension reform and will be watching with great interest to see how it shakes out. With a wife with a government pension we don’t have a ton to worry about, but the “bonuses” of life will come from the CPP/OAS portion of our portfolios. Great site, thoroughly enjoy coming to see what’s new!

  28. Rajib on December 20, 2013 at 2:41 pm

    Fascinating topic, as always. Would love to read a copy of the book. Merry Christmas!

  29. Peter on December 20, 2013 at 3:02 pm

    The Third Rail sounds like a must read. Seasons Greetings to all.

  30. Roman H on December 20, 2013 at 6:26 pm

    One legal measure that would not cost taxpayers anything while greatly influencing the security and viability of pension funds would be to require that executive plans not be segregated, instead to be part of the same fund that employees hold.

  31. Maria on December 20, 2013 at 10:16 pm

    intersting article- thanks!

  32. Be'en on December 21, 2013 at 2:30 am

    The book has been mentioned by several bloggers and seems to be an interesting read.

    Thanks for all the information you’ve provided through past few years — merry Christmas and a prosperous new year to you and your family..

  33. Jennifer on December 21, 2013 at 3:18 am

    Instead of rushing to change the CPP to “fix” the lack of sufficient retirement savings for many, why don’t we invest in creating a mandatory high school course on basic personal finance and savings? Let people without pensions (such as myself) save on their own, but teach it in our school systems! I can’t imagine why we’ve made it this far with so many identified problems in our savings that it hasn’t been added to standard curriculum. A little knowledge goes a long way! Just my 2 cents.

    Have a great holiday break!

  34. Patricia on December 21, 2013 at 4:58 am

    Would love to read this book sounds very interesting. Hope you enjoy the holidays, always enjoy the information you provide.

  35. Deborah McLaughlin on December 21, 2013 at 11:02 am

    Please throw my name into the hat for the free copy of The Third Rail. Thoroughly enjoy reading your weekly and weekend updates. Merry Christmas. Happy Holidays to all.

  36. Rachelle on December 21, 2013 at 1:32 pm

    Leech’s book is on my reading list. I’m very fortunate to have a pension, but it’s being eroded. I think it’s a terrible idea to force average citizens to fend for themselves and invest for the income they’ll need when they can no longer work.

    Investments may seem simple enough to some, but there are traps everywhere and mistakes can have devastating consequences. We have been thrown to the wolves.

  37. HP on December 21, 2013 at 3:56 pm

    Third Rail is on my reading list for sure!

    Being a teacher makes it extra interesting to read what Mr Leech has to say on the idea of pension reform.

    Have a great holiday!

  38. Jambo411 on December 21, 2013 at 5:16 pm

    I am not that keen on the expansion of the CPP. As pointed out few people get the max now.

  39. Gary on December 21, 2013 at 5:42 pm

    Merry Christmas and Happy New Year Rob and Marie. Knowledge is power and you two are doing a great job of giving us knowledge. Thanks!

  40. Eric on December 22, 2013 at 12:11 am

    Merry Christmas!

  41. Jesse on December 22, 2013 at 12:22 pm

    The book sounds great. Thanks for keeping me informed about financial matters.

    Merry Christmas!

  42. Steve B. on December 23, 2013 at 12:43 pm

    Thanks for writing the “Weekend Reading” – it’s always good.
    Wishing you both a very Merry Christmas.

  43. Helen Hercun on December 23, 2013 at 1:28 pm

    Look after a company pension plan and always interested in passing on infio about CPP so would love to get a copy of the book to share with others!

  44. Cindy on December 23, 2013 at 2:45 pm

    Would love to read the book!

  45. TGW on December 24, 2013 at 1:21 am

    Have downloaded podcasts from CBC’c radio show “The Currant” where they also discuss “The Third Rail” amoungst other topics on pension reform and Canadians.

    Merry Christmas, enjoy both Boomer and Echo’s posts.

    Boomer best post was when you talked about your own pension situation.

    Echo , I also appreciate you post about a “unique” family situation in regards to finance, savings and retirement.

  46. Verna on December 24, 2013 at 6:29 am

    I heard Jim Leech on the CBC news a couple of months ago promoting this book. He likened the current opinion within Canada as a “race to the bottom” and used a great parable to illustrate. This book has been on my list ever since.

    Thanks for highlighting what I expect will be a great read!

  47. Doug on December 25, 2013 at 9:40 am

    My wife and I have always had the goal of Freedom 55. I didn’t consider it retirement, just the ability to do non-workplace activities on our own schedule. We always lived below our financial means – never buying the latest toys, fashions, etc. and have been able to max out our RRSP’s, TFSA’s, and other investments. When we finished paying off the mortgage (at an early rate) we continued to invest those biweekly payments. Now that we have been retired for a year and a half, the patience of long-term saving has finally paid off. We travel a lot, but still with the goal of living below our financial means – camping, vacation rentals, flying on credit card points – meaning we can travel even more. If you wait until you are 65 or older, the mind may be willing, but the body is not as able to do the kinds of activities you want to.

    Yes, I have a teachers pension (my wife has no pension) and I took a penalty by retiring early. Many people are not aware that teachers will be paying 13% of their income in 2014 into the pension plan (yes, it is matched by the gov’t)- not sure how many people are willing to save that much on their own. As well, at 65, the annual pension is reduced by the amount you receive from CPP. If you wish to leave a survivor benefit to your spouse when you die, their is a monthly fee for this as well. Unlike RRSP’s, when you both die, nothing get’s passed on in your estate.

    Instead of so much pension bashing, wouldn’t it be better to find ways to strive to improve pensions for all, instead of trying to tear down what those you are envious of already have. Ask your employer why some of the corporate profits couldn’t be used to match your own contributions!

    I know this is a bit rambling (it is Christmas morning), but I hope we can bring some reasonable, non-political discussion to pension enhancement for all.

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