Monday, December 27, 2010

The Upcoming Financial Security Crisis by Ravinder Tulsiani

In a previous article titled "Reasons Not To Invest In Real Estate", we mentioned that corporate pensions are seriously under-funded. In this article, I will point out how big business and the government have responded to this quiet crisis.

In essence, they haven't.

In fact, to avoid this problem, over the past few decades big businesses have moved away from defined benefit plan (DBP) to defined contributions plan (DCP) or to Group RRSPs. So what does that mean? While in the past, upon retirement the employer was on the hook for any shortfalls between your pension savings and your benefit payout during retirement; this liability was quietly transferred over to individual in the form of group RSP or DCP. The spin doctors sold this bag of goods by suggesting that DCP & Group RSPs offer greater choice, certainty, product selection and ultimately better control by the individual over his or her retirement money.

The reality is, that the big businesses have now capped their maximum exposure up-front, they are now only offering to match employee contributions on a percentage basis, and have no obligation in the event of a short fall at retirement; guess who is now responsible...? Us!

So, where is the government on this? Well, do you really expect the Canada Pension Plan to bail out all the baby boom generations expected to retire over the next 15 to 20 years? The shortfall is expected to be in the billions. Who would pay for it... taxpayers? Here is good way to know if a government plan is in trouble... if the leader of the ruling party promises to keep it alive during an election promise... you know it's in trouble. I hope it stays too, but relying on the government for a bailout is a poor retirement plan.

As mentioned in the above article, we mentioned that a study commissioned by TD Waterhouse found that two-thirds of people polled who have not retired are stressed-out about retirement investing, mainly because of uncertainty or a lack of money.

If you're in the two-thirds category who are concerned about out-living your savings at retirement... what are you doing to avoid being another statistic? Do you feel secure that your current investments will give you the returns needed to secure the financial future for you and your family?

If not, you should strongly consider investing in real estate. Why? Today's term deposits and market obligations offer minimal growth, which are insufficient to creating a successful wealth accumulation investment plan. Furthermore, the stock market's meager results and fluctuations do not offer the stability and profitability required to solidify these types of earnings. On the other hand, real estate has proven over time to be the primary choice of the wealthy for investing their money. In fact, over 90% of the wealthy became so through real estate.

You now have a choice...

You can choose to follow the remaining 10% who became wealthy through other investment vehicles, or you can put the odds in your favour and follow the path of least resistance by investing in real estate.

About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.