Do Canadians need to be forced to save for retirement?

As a worker earning a paycheque, do you need to be forced to save for your retirement? As an employer, do you need to be forced to contribute to the retirement plans of your workers?

In Canada, the answers seem to be yes, and yes.

If you accept that, the reqirement then is to find the most efficient and reliable means to achieve that.

Bottom line, in Canada, the most reliable and efficient means to ensure everyone has a “savings account” on which to live when they get too old to work is the Canada Pension Plan.

The CPP beats private RSPs in that they have far lower fees, and don't suffer a loss of benefits during economic downturns. And since all workers (and their employers) must contribute, everyone has something in the kitty for their old age.

The problem with this is that the kitty only pays an average of about $7,000 per year per retiree, with a minority of workers receiving the maximum $12,150. Not much of a kitty, is it?

There is, of course Old Age Security and the Guaranteed Income Supplement, which bring that up to about $16,000 in total. The poverty rate for seniors has been dropping for a long time, but there are still many older Canadians living on $16,000 a year.

In order to save yourself from this, you need to save money while you work.

How much do you need to save? CARP (formerly known as the Canadian Association of Retired Persons) suggests you need about half a million bucks saved to provide a decent living after you retire. The sources include your account with CPP, RSP and other savings, but that seems to be the standard.

How many Canadians are on track to have that accomplished by the time they plan to stop going to work every day? Not nearly enough to have policy wonks worried about the future stability of the nation.

So that's why the provincial premiers wanted the federal government to boost CPP benefits, over time. They're not worried about the boomer generation, as much as they are about today's 20- and 30-somethings.

Far too many of these Canadians are up to their eyes in debt, and don't have the employment prospects early on in their careers to begin amassing $500,000 in retirement funds on their own.

Idelologically, the feds don't like coerced savings and national benefit plans. As we've seen this week, some of them don't even like helping to feed their neighbour's hungry kids.

In their world, you're better off on your own.

But in the real world, most people don't have much regard for the future.

At age 20, when a plan to amass $500,000 in lifetime savings is the easiest, retirement is just a theoreticall horizon. At age 30, there's still time for a reasonably painless plan, but kids, a mortgage, car loans, student loans, credit card debt and vacations all come first.

At 40, you'd better get it going. Seriously. But seriously, who changes their financial habits at 40?

And at 50-plus, two or three major economic downturn cycles later, your RSP( if you have one) looks pretty ordinary. Voluntary retirement savings plans end up quite a bit less exotic than the photos on the RSP rep's brochures.

Ideology be damned. It takes more discipline (and financial acumen) than most people have to look 30 or 40 years down the road and voluntarily save for their retirement. That's even when the tax code provides you a return up to 40 per cent in your first year of RSP investment, dollar-for-dollar, in tax refunds.

If fear of the future won't induce Canadian workers to save for their retirement, and even a 100-per-cent tax writeoff incentive for RSP contributions doesn't work, what's left?

Outside of Alberta, provincial leaders recognize that federal ideology needs to include a higher degree of forced savings. And the Canadian Pension Plan is about the world's best vehicle to get it.

Not much of a boost is needed, if you start early in a worker's lifetime. Certainly not enough for the phony doomsday scenario federal finance minister Jim Flaherty paints — on the days when he's not saying the Canadian economy is strong.

Flaherty says he won't commit to a CPP reform plan that's farther down the road that he might expect a Tory government to survive. In fact, he won't even be alive when any CPP reform benefits would accrue.

But ideology is a terrible reason to do nothing, when doing nothing will lead to a very bad outcome for a large group of Canadians.

For a young worker, if your government won't force you to save, you'd better learn far more financial discipline than your elders ever had.