While the numbers may seem high, working Canadians have been questioning whether the CPP will be around when they need it. The worry is that as boomers age and stop working, more money will be withdrawn from the CPP's coffers than contributed.
Will the fund disappear? Probably not. Here are five reasons why the CPP is safe.
1. The CPP is making money
â€¨The Canada Pension Plan fund earned $3.2 billion in the last quarter, pushing its value to $152.8 billion. That’s up 9.1 per cent year over year. The fund did pay out $2.6 billion last quarter, but overall it was in the black.
2. Actuaries approve of the CPP's status
â€¨Canada’s chief actuary looked at the fund and said that it’s sustainable at the current 9.9 per cent contribution rate for 75 years.
3. The CPP is relying less on the markets
â€¨The CPP investment board is making more of an effort to own private holdings rather than companies listed on an exchange, which are subject to market fluctuations. While it still makes most of its returns in the market, it’s also buying more malls, office towers and private companies.
4. Changes have been made to the CPP
â€¨Last year, the government made some changes to Canadian Pension Plan structure to encourage people to work longer. You can opt in to CPP payments when you're 60, but you'll get about 36 per cent less than if you start receiving payouts at 65. If you wait until you're 70, you’ll make 42 per cent more per month than if you take it at 65.
5. More improvements are coming
â€¨As boomers age, there will be more pressure put on the system, but it’s highly unlikely that the Canadian Pension Plan will disappear. If anything, more changes will be made to ensure that it’ll stick around. Some people may not like those changes, but the government has said it’s committed to keeping it viable.
If you are worried that the CPP will disappear by the time you retire, there’s one solution: start saving. If there’s anything we’ve learned from the financial crisis, it’s that you can’t rely on others to make you money. Sure, CPP funds help retirees, but for a lot of people those payments aren’t enough to make ends meet as it is. Save money yourself and you won’t have to worry about getting a government cheque.
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