Why We Need a Lifetime Retirement Saving Limit

Abstract

From 1977 to 2007, DB pension plan membership dropped from 31% of private sector workers to 16%. Today, more than 12 million of Canada’s 17.5 million workers do not participate in a DB plan. With declining DB pension coverage, low interest rates and increasing life expectancy, pensions are harder to accumulate — and more expensive. Even workers who delay retirement will need to save more to maintain their living standards in retirement. But can they? For many workers saving in RRSPs and DC pension plans, the answer is no, because contribution limits are too low. To demonstrate this, we developed a model that shows the retirement savings accumulations possible under Canada’s tax rules for retirement saving from 1974 through 2011.