2013-63 Huge economic crisis

Huge economic crisis? What can it be?

Canadians do not save for retirement so politicians talk about the need to expand CPP. Right now it provides less than a $1000 a month. The proposals are to more or less to double it.

What is going on? Well, the boomer generation is retiring. So, to put it bluntly, it would like, as it has been doing in the past, extract money from the current young generation (you).

The increase in benefits will be funded by increased  contributions. But CPP is not a fully funded plan. In a fully funded plan, what you get is your contributions plus earnings made on your contributions by investing them. The alternative is a pay-as-you-go plan, whereby current contributions pay current benefits. CPP is a mixture of the two plans.

Bottom line: if CPP is enhanced as proposed, people who will retire within the next 40 years will not have paid in full for the increased benefits. There benefits will be paid, in part, by people who will not retire within the next 40 years.

That is you.