Finance

Why retirement planning needs to be a major political issue in 2019 and beyond

Jason Heath: In much the same way governments have encouraged people to save and contribute to their RRSPs using tax refunds, they may need to consider similar incentives to help Canadians focus on the long-term in their retirement planning, including deferring pensions.Illustration by Chloe Cushman/National Post files

Retirement planning does not usually get much attention in federal budgets or election campaigns, where personal finance issues tend to focus on income taxes and social programs. But there are a number of reasons why the topic deserves to be a hot button political issue in 2019 and beyond.

We all know that baby boomers are causing a shift in demographics. Retirement policies need to reflect this evolution and adjust to our aging population. Registered Retirement Savings Plans (RRSPs) and the Canada Pension Plan (CPP) evolved as young baby boomers were growing up, and now new measures need to be introduced as they continue to retire.

Among the more interesting recent developments in U.S. retirement plans is the 2014 introduction of the Qualified Longevity Annuity Contract (QLAC). QLACs allow U.S. retirees to use the lesser of 25 per cent of their qualified retirement savings plans or $130,000 to purchase a deferred annuity that makes guaranteed monthly payments to them for life. Payments must begin by no later than age 85, and the QLAC purchase lowers their required minimum withdrawals from their retirement plans, thus increasing tax deferral. A spouse or someone else can be a joint annuitant.

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