Tuesday, August 18, 2009

New Retirement Plan

The advocacy group CARP has a multi-part plan for pension reform (the web page with this article has disappeared since the time of writing), but they had me at the first part.

Currently, a retiree with no income or pension gets $13,636 per year from Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). CARP would like to see these benefits “substantially increased” and for benefits not to be reduced for married couples.

Suppose that the total benefits jump to $18,000 per year, and that a married couple would get $36,000 per year. Assuming that no income tax would be paid on this, I think my wife and I could live on $3000 per month. This brings me to a possible new retirement plan.

Add up your current total retirement savings and divide by the number of years left until you turn 65. If you think you could live on this amount each year, then you could quit your job right now! Your savings would run out just in time to start collecting the new and improved OAS and GIS.

This strategy isn’t without its risks: maybe CARP’s proposals won’t be adopted, and maybe you can’t live on as little money as you thought. On the plus side, this plan may have you retiring much sooner than you thought possible.

If too many Canadians find their inner frugality and adopt this plan, I’m not sure who would be left to pay the taxes to cover OAS and GIS payments, but math doesn’t seem to be a big part of CARP’s plans.


  1. Thicken: I wonder the same thing (although I did it a little more sarcastically in this post).

    CC: I see CARP as just one of a chorus of advocacy groups that ask for ridiculous amounts in the hope of getting more. The problem is that CARP draws in supporters who hope for more for themselves without realizing that CARP's plans are unrealistic.

    1. The comment above is replies to two other comments:

      Thicken My Wallet:

      Great in theory but who's paying for this?

      Canadian Capitalist:

      CARP has lost all credibility by constantly asking for more without giving any thought to where the money comes from. "Reform" in CARP's dictionary likely reads "voting for yourself unearned entitlements".