Are the feds wrecking your plan?

The moment that many seniors have long feared is coming—the government is moving in on Canada’s retirement system. While details weren’t clear at press time, most observers expect the March 29 budget will take aim at Old Age Security (OAS), the federal program that sends monthly cheques of up to $540 to Canadians 65 and older. If the Harper government follows the lead of other countries, it could raise the age of eligibility to 67.

These changes are likely to meet with the ire of seniors’ groups, and they’re stressful for Canadians planning their retirement. But Warren MacKenzie, president of Weigh House Investor Services, says people with a solid financial plan should not be blown off course. First, he says, any changes will be phased in over time: folks who are in their 60s now aren’t likely to be affected. And losing two years of OAS shouldn’t be life-altering for younger Canadians. “If the government delays the age for starting OAS to 67, that means you would lose no more than $13,000—even less after taxes,” says MacKenzie. “If that’s going to make a noticeable difference in your retirement, then you’re cutting it too close.”

All of this is a useful lesson for anyone building a long-term financial plan. Every plan makes assumptions, and a lot can change between now and the day you retire. But as long as you develop good habits during your working years, you’ll be on solid ground. In your early and mid-career years, it’s simple: spend less than you earn and invest the rest wisely. As you approach retirement age, crunch the numbers once a year or so to see if you have enough money to last. If not, working for a few more years can make a huge difference. If you find yourself spending at unsustainable levels after you’ve already retired, MacKenzie says small reductions in monthly spending are usually enough to get you back on track.

While we’re likely to see more tinkering with government benefits, that doesn’t mean you should factor these programs out of your retirement plans. “In the years to come, people are going to have to depend more on their own resources, but it’s unnecessarily conservative to assume you’re going to get nothing,” says MacKenzie.

4.4% The poverty rate among Canadian seniors. Despite fears of a retirement crisis, this is one of lowest rates in the OECD.