Following on the heals of my post saying that Vancouver residents are spending 60%+ on housing I see that David Dodge, former governor of the Bank of Canada, says that Canadians need to be saving 20% of their gross income. I’m not sure what that works out to after taxes but it’s a lot! Furthermore, “Canadians over 30 who have not kept up with their savings, he said, will need to put aside far more than 20 per cent of their income for a smooth retirement or they will have to work well past 65.”
That leaves at most 20% of your income left for all the things you need to live like food, transportation, clothing… I don’t know what world Dodge lives in but something has to give. Our economy relies on people spending money and has become a service economy and yet we are supposed to save all the money we can and live on about 2% of our gross wages?!?
I think the answer is to find a career that peaks at about age 70 and keeps you paid out into your 80s. I can’t see any other way that most will survive. Of course the Bank of Canada depends on low interest rates to increase borrowing and to refinance our staggering deficit at low rates. Interest rates are aimed at making sure those with money hand it over to the government either through tax or interest rates below the rate of inflation. I think what Dodge means is that unless Canadians save 20% of their incomes the federal government will have no one to get money from in the future. Once our CPP is drained and no one has any savings the house of cards will collapse and we will sell off what little Canadian owned property we have left.