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Changes to CPP will enhance income security in retirement

For Canada’s baby boomers — the biggest demographic wave in our nation’s history — the light at the end of the retirement tunnel is becoming ever so bright. (Some, of course, are already basking in the glow.) This massive bubble of people born from 1946 to 1965 are either busy finessing their retirement plans or — for the younger ones — starting to take retirement seriously.

For those who don’t have well-defined benefit pension plans through their employer — something that is becoming more of a rarity, especially for younger Canadians — the Canada Pension Plan has undertaken changes designed to better facilitate retirement, writes Business in Vancouver contributor David Lee, a financial adviser at BlueShore Financial Credit Union. Starting in 2019, CPP contributions will increase by one percent for employees and employers and two percent for the self-employed. This will increase the annual payout target to 33 percent of pre-retirement earnings from about 25 percent of pre-retirement earnings. Lee writes that this will benefit those who are at least 10 years away from retirement or who do not have a defined-benefit pension plan through their employer. Ultimately, Lee writes, income security will be enhanced for retirees in the future. And they will be numerous. Statistics show that the boomer generation — 50 to 69-year-olds — currently make up 27 percent of the population, compared with 18 percent in that age group two decades ago. ◊