The Generation Gap

As a young teacher I try very hard not to come across as a “know-it-all” to my co-workers.  I work in a small school, and out of about 15 staff members, I am the only one under 40.  When certain topics come up, it is very difficult to keep my mouth shut, especially when people are dead wrong!  A situation like this occurred yesterday.

It all began when one of my co-workers (Staff Member A) brought up the fact that they had heard that the USA was looking at increasing the pension age to 67, and she stated this “fact” while visibly upset.  Staff Member B quickly jumped in and stated that he had recently read that Prime Minister Harper was looking to kill the Old Age Supplement (OAS).  This quickly degenerated into how crazy it all was and the politicians were all crooks etc.  Maybe it was the head cold, maybe it was because I expect more out of people who are supposed to be educating our future leaders, but whatever the reason, I just couldn’t take this banter any longer. So I stated in a calm voice, “If I could opt out of every single pension plan right now, including OAS, CPP, and our teacher’s pension I definitely would.  I would sign that away in 30 seconds without thinking twice.”

This drew a lot of stares.  As the youngest person in the room on a daily basis I guess I’ve become the representative for my generation by default.  Here is the conversation that followed:

Staff Member B: “Why do you say that?”

Me: “Well, it’s very simple, government-ran retirement was never meant to support a person for 30+ years.  If you guys are this upset about possibly working a couple more years in order to make the pension fund solvent, then there will be nothing left for me.  The bottom line is that people over 40 are the only ones voting, so I’m sure my interests will be kicked to the curb for the next few decades and I’m going to be forced to support your generation.  I’d rather just worry about myself if given the choice,” (Man, looking back, that sounds like a Ron Paul stump speech).

Staff Member C: “Well, we’re supporting our parents right now, and we’ve worked damn hard for our retirement.”

Me:Ya, you’ve supported your parents, who had a life expectancy of 75-80.  Also, there was way more of you than there are of them.  Today’s retirees are living 5-10 years longer, and the population pyramid just doesn’t work anymore.  Something has to give, either my taxes go up, current social programs get slashed, or you guys have to contribute a little more to the plan before you retire.”

Staff Member A: “Well I don’t know about all that crap, but I know I’ve worked too damn hard to work another 8 years!”

Me: “I know I work too damn hard to have the government steal all of my money.  You all had better hope my generation doesn’t just take its ball and go home.  Anyway, I wouldn’t worry too much, they will absolutely have to phase in an extended retirement age over time since it would be political suicide to piss off the tail end of the baby boomer generation and no politician would ever do that without softening the blow considerably.  Plus, the OAS is NOT CPP.  CPP is what you paid into, and there has been absolutely no mention of cutting that back.  OAS comes out of the new budget every year.  Why should someone earning 40K-100K a year be entitled to a further OAS ‘top up?’ ”

Staff Member B: “It just doesn’t seem fair that we’ve paid into this all our lives and now it’s changing.”

Me:But the situation has completely changed.  Actuaries had calculated your contribution amounts based on the idea that you wouldn’t live that long after retirement, and the returns from the market would be higher than they currently are.  Something has to give now that you’re living longer and returns are lower.”

Staff Member B: “Yeah, I don’t pay attention to that politics stuff, I just want my retirement.”

At this point I am absolutely screaming inside my head.  It is no wonder our democracy appears broke beyond repair some days.  I wanted to you yell, “You are not fit to teach high school students!  Your head is so far into the sand, and yet your vote is worth as much as mine is?!”  I’m fine with views opposing mine, and there are some good arguments out there that the pension age should not be raised, and that if we up our immigration levels everything can still work out fine, but to simply say, “I am part of the most privileged generation the world has ever seen, and I don’t care about anyone else, I just want my retirement and I won’t listen to anything different,” really boils my blood.

Finally, after a semi-awkward silence, a fourth co-worker spoke up.  Now this is a guy I really respect, and he is often the final voice at the table.  Just one of those people filled with wisdom.  He states, “You would even pull out of your teacher’s pension?  They get great returns, and are privy to investment options that you can’t get as an individual investor.” 

I responded, “That’s true, our fund does beat about 95% of mutual funds out there.”  At this point everyone around the table nodded their heads as they no doubt had read the brochures that our union sends out every quarter.  Then I continued, “But they still trail their benchmark index by .5%.” 

“How could that be?”

“Where are you getting your information from?”

“You’ll see when you’re 55 how great our pension is.” 

The comments cascaded down and I basically just smiled and played it all off for the sake of sane relations going forward.  I mean it really isn’t worth it right?  I’m not changing anyone’s mind anyway.  Then my stupid mouth kicked in again before I could stop it.

“Regardless of everything else, why am I not allowed to opt out of our teacher’s pension if I want to?  Isn’t it somewhat against my rights as a free citizen to have my money taken from me on the basis that I don’t know what to do with it and that someone else knows better?  For that matter, why am I forced to pay into the CPP?  Shouldn’t there be a waiver I can sign that says I am not entitled to any of that money, but yet I don’t have to pay any premiums?  It just doesn’t seem right that more and more of my money is taken at gunpoint every year.”

Staff Member A: “What do you mean ‘at gunpoint’?”

Me: “The tax man calls the cops, who have guns right?”

After this the conversation kind of died down and we all went back to teach the students that will eventually be responsible for my pension (now THAT is a scary thought).  The more I thought about this conversation, the more I realized that the youthful support that Ron Paul is getting down in the Republican Primaries is really not all that unusual at all.  My generation has a right to be scared.  Very few of us vote, most of us gave up on government efficiency and democracy in general a long time ago.  These negative citizenship habits just get reinforced every time we see our money gets taken from us by the bigger voting block that precedes us and we can see no end in sight.

The staff room I’m in is the logical conclusion of the cradle-to-crave “someone else please take of me” philosophy that we all seem to have embraced.  Regardless of what political stripes you have, if you are never forced to truly be responsible for your own well-being, then you likely have no idea about what you’re talking about and have never taken the time to become truly educated on the issues.  If we were all responsible for our own retirement plans I bet more people would know what a benchmark index plan was, or just how important demographics are to the whole question of retirement age!  Instead we put our collective head in the sand, stick our hand out and yell, “My piece is too small, give me more, I don’t care who it hurts!”

Written by Teacher Man

TM writes about all things personal finance over at My University Money and Young and Thrifty. He intends to continue his quest for lifelong learning and hopefully help others along the way.

38 Responses to The Generation Gap

  1. Our society educate people in a way that in people’s mind set, we don’t need to worry about our retirement. This is just a false peace of mind, which is dangerous. Peolpe think that CCP and OAS can save us from food bank and shelters in bus stops. Peolpe also thinks that RRSP is a good investment because they save money right away, but they forget one really important point, you do not know when are we going to die! You prepared a 20 years worth of RRSP. What if you live longer than that? Wake up people! We need to think more about our retirement. Our fate is in our hands, not government, not your financial plannar, or fund manager. Think more about what you need and plan accordingly.

    • Isn’t it a good thing that the system is designed to makes us responsible for our own retirement? I mean, I think it’s great we have a safety net, and a little extra help after we turn 65, but I think there are HUGE needs elsewhere in society. Let’s start teaching people how to fish once again, instead of giving them the table scraps.

  2. Interesting post. I think your fellow teachers sound like they are happy and secure in the current set up and don’t want it to change. You sound like you’re very educated on the topic, but also very confrontational and frankly, “know it all”. And nobody likes a know it all..

    • I know Ellen… this is definitely a weakness of mine. I try to balance it out by being useful in a lot of other areas! If it generated a little insightful thought I’m fine with taking a little heat for it!

    • My thoughts exactly. Especially a condescending younger “know it all” who thinks they know more than their older peers.

      • I honestly try to never be condescending, and I’m quite certain they know more than me in many areas, but isn’t it possible that I might actually know more than my peers in this one area? If that is the case, why should I defer simply because of age?

  3. Excellent post. I was captivated. Bravo for you for standing up for reason amongst a room full of entitled cry-babies. They all go home at 3pm and have the summers off, yet they act like they deserve more. Nobody deserves more. You have to go out and earn it. And if they don’t like it then they should have done something about it. You had every right to inform them of the truth after they start in with their public moaning. Well done.

  4. Awesome and well written post!

    “I am part of the most privileged generation the world has ever seen, and I don’t care about anyone else, I just want my retirement and I won’t listen to anything different,”

    Comments like this from that generation have me *smh* because they are the same people who laugh at the new grads out of school right now who can’t find jobs. Often telling them that they want everything handed to them and if they want a job they have to work for it. Which is fine, but they seem to have that same mentality about retirement.

    • The sad thing is that the last thing we need right now is a generational war. It is also REALLY the last thing our generation wants because we simply don’t vote and they do. This means that if it comes down to tough choices we get to lose every time. Democracies around the world need to re-emphasize the social contract instead of everyone just pulling for as much as they can get.

    • No they aren’t typically the people laughing at recent graduates because many of those graduates are their own kids and I’m certain they don’t want their kids unemployed! Besides, the author made up the comment and I doubt they truly feel as he’s stated.

  5. Gen Y has been extremely coddled, yet now faces the job prospects of a depression. (Because that’s what it is, even though no economist will admit it for fear of the Pygmalion effect). It’s an extraordinary mismatch that has result in delayed adulthood, basement dwellers, videogame addicts, late-20s alcoholics, and perpetual students. Also you’re absolutely right to question your pension. The Ontario Teacher’s Pension Plan is completely unsustainable. The actuarial model requires higher-than-realistic returns (especially since, when the Boomers retire, they’ll need to start selling tons of assets which will drive down prices in many markets such as housing and stocks) and an ever-larger supply of workers (teaching jobs will only dwindle as the population of young people continues its decline). Defined benefit pensions are already paying current benefits out of current contributions — isn’t that the definition of a Ponzi scheme?

    • My only hope for our pension plans is that the older teachers keep working longer and longer (which we are seeing a lot of). Unfortunately this kills job prospects for the incoming class of teachers (and the universities feel no moral hazard in releasing 3x the number of teachers needed). I guess what I’m saying is that I got in “under the wire” but the demographic time bomb you depict has to hit sooner or later.

  6. Yes the lack of education bugs me too. It’s a generational thing but also an industry thing. People interested in someone taking care of them tend to go into teacher or government jobs. Not all of course but I think you’re encountering a larger sample of “entitled behaviour” by working as a teacher.

    • Absolutely. No one is more entitled. I have a post coming up about why teachers are the worst choice to instruct a personal finance course. This is compounded by the fact that we spend all day in a room full of teens, so we get a disproportionate view of our own intellect.

      • Entitled? They’ve kept their end of the deal, how does that make them “entitled”? Have they not operated in good faith? Are private company employees who get a pension “entitled” too? Are you entitled if you get a company match on a 401K? Is anything an entitlement other than straight salary and you must feel entitled if you get it?

        Twenty plus years ago when I was fresh out of college the government plans were used as the low end example of why the company plans were better. Now after decades of corporate “more with less” government plans are the golden children to be torn down and you gleefully join in your own gutting?

        I hope you find yourself supporting your unemployed college grads, supporting your parents who have fallen on hard times, and have your spouse out of work when you have people talk to you about being entitled and needing to cut your benefits or make you work years longer. Many of the people I work around daily have been and are experiencing this and, employed in public or private, are feeling anything but entitled.

  7. I am over 40 and have been wishing I could opt out of SS and other retirement programs for over 20 years. Yeah I’ve seen the writing on the wall for that long. I have no illusions of collecting anything resembling a decent living income after retirement, even though my contributions over the years would have provided me with a comfortable retirement IF I had been able to invest them myself in a tax deferred account.

    What pisses me off even more though is that I no longer even live in the US and yet my government still feels entitled to tax all of my income worldwide. That’s a totally ‘nother story though.

    • I’m in the same boat as you MI! The best part is that I never lived in the USA at all! I’m actually considering relinquishing my American citizenship based on this problem.

      • Not an option for me as I don’t have second citizenship anywhere (yet). If you are going to do it then it might as well be as soon as possible lest the IRS take half your wealth as an expatriation tax.

  8. Loved the post. Will include in my Weekend Reading roundup! ;)

    This wasn’t necessarily a generational thing, but more like an educational thing. Some teachers, I’ve heard, like some other professionals feel entitled. I have no idea where this comes from and why is it so pervasive.

    • For teachers I honestly believe that it comes from never having to look at their own finances. Really, as long as you pay your house off, keep consumer debt down, and are smart with buying vehicles, you never have anything else to worry about. Your pension should allow for “Freedom 55″ and all of your insurance rates etc are taken care of for you by someone else. If this has been your entire working life, you start believe that’s how it is for everyone I think.

  9. Interesting discussion, and one we’ll probably hear a lot more about in the future. Maybe Winston Churchill said it best:

    “The best argument against democracy is a five-minute conversation with the average voter.”

    Still, the alternatives to democracy don’t look great either. A better-educated electorate would be a great start, although this conversation with educators doesn’t exactly inspire confidence. Thanks anyway for wading into the issue! :)

  10. I am an older woman (60 yr) who has worked full time from age 20. Yes, I am upset about the thought of the Govt moving the OAS collection age to 67 from the current 65, but I do not see it as being greedy or a case of “entitlement”. Unlike teachers or govt workers or the fortunate private sector workers who have a very generous pension plan to help them in their retirement years,I have no work-related pension at all (and this is more & more the case these days)and I have worked hard to save and provide for myself all these years. Unlike some others, I have been content to “live below my means” in order to have a cushion saved for my “old age” – I live in a small (1100 sq ft) home, shop the sales, drive a 12 yr old car, and take moderate vacations. I do not have 100 TV channels, or the latest electronics – I even use the internet at the library or thru work. These are conscious choices I made in order to put extra money away for myself for my later years (which are now on the horizon)and it is fortunate that I chose to do so, as I am now facing job loss thru no fault of my own, but rather due to my workplace closing. So I take umbrage when a “40 something” with a well-paying job (that I help fund thru my taxes) and generous pension plan complains about the “greed” of older workers, and moans about his own situation (are you kidding me?? – lots of people would be glad to be as “hard done by” as you seem to think you are) and lumps me (as an older worker) in with his well-paid work companions!! Not all of us are as lucky as you and your co-workers, despite our best efforts to save and provide for ourselves. If someone has lived beyond their means, and frittered money away, that is one thing, but for those of us who saved and lived modestly and sometimes did without, your comments are most annoying and unfair. I expected better from a “well-educated” person than such a broad-sweeping comment about older persons and their financial expectations!!!

    • Diane, first of all, breathe slowly. If you are 60 I can almost guarantee that nothing will threaten your precious OAS. I’ll try to reply to your points in jot form since you plainly skipped over much of my article (seeing as how you didn’t address any of my major objections, instead choosing only to personally attack me).

      1) I am not a 40 something.
      2) I went to school for two degrees in order to get a well-paying job, how is this held against me?
      3) My pension is not given to me. It is my money that has been matched by my employer (like most people have the option for) and then invested on my behalf (often without optimal results).
      4) I am definitely not personally hard done by. I am just not lucky enough to be in the most fortunate demographic group in the history of planet Earth.
      5) You consistently complain about your income, but why is that my fault, and when did it become my responsibility to fix that on your behalf?

      I expected better from an elder statesmen who should be looking out for all of society and not just their narrow personal interest.

      • I don’t think I’ve come across a more condescending, haughty writer in all my years.

        Also, as an educator of our “future leaders”, you might have done yourself (and your readership) the honour of correcting your rampant spelling errors.

  11. Interesting post, Teacherman. I disagree with the “I want to do it myself” mentality when it comes to retirement. In order to have sufficient funds to retire, you need to save at a high enough rate of your income, for a long enough period of time, at a high enough rate of return, at low enough risk, and low enough cost to amass a sum of money that will create sufficient retirement income at a four percent rate of withdrawal. To expect the ordinary Canadian to satisfy those five conditions on the median household income is not realistic. Costs sink the returns of the small investor even if they are successful. That is why the answer is for a universal CPP at a much higher mandatory contribution rate from employer and employee because the cost is a fraction of one percent and the risk is shared with 10’s of millions of people.

    • When you use the word save, you are in the wrong direction. There is only certain amount of water in a well and only one person can get water from the well at one time. If there are more people want to get the water, they will have to wait. If there are more wells, then more people can get the water at the same time and there are more reserves. This is something to ponder. :)

    • Definitely some logical points Keith. My issue isn’t actually with the mechanics behind collecting and investing the CPP, it is the fact that it may not be sustainable going forward. I would also claim that investing through low-cost ETFs which will soon be commission-free will give most investors the same returns generated by CPP, but you definitely make a good point here in regards to the behaviour of the current investor. I also fundamentally disagree that I should be forced into the plan if I don’t want to be. Wouldn’t some sort of complete withdrawal option be more democratic?

  12. My grandfather worked until he was 73. My dad — 71 because I was still in college. Retiring at 55? That seems unnatural to me.

  13. Hey, I don’t care what people say but those are great responses from your side. People may tell you that you sound like know it all…I say who cares. You seem to know alot more than all your peers and I am glad you polished their brains a bit.

    I am 24 and have a nice job that pays well and I couldn’t agree more with regards to CPP. It hurts to pay it every pay cheque, especially knowing there is very slim chance that I would see any of it when I retire.

  14. Please check your facts–You use the “5 to 10 years” life expectancy difference to differentiate between your co-workers’ parents generation and your own. The appropriate figure is to compare life expectancies *at age 65* between generations, in which case the difference is less than 5 years. Hardly enough to break the back of social insurance.

    Factual errors erode confidence in your argument…

  15. A good criticism Brent, but it doesn’t change my argument. I’ve read several recent articles that claim that new advances in cancer and heart disease treatment are affecting the after 65 numbers much more than in the past (where curing of childhood diseases and such had a larger proportional effect on the stat). They seemed to believe the number was pretty close to 5 now (depending how old their parents would be), but admittedly the “5-10″ figure is slightly misleading. I’m not just concerned about “breaking the back of social insurance” but I’m concerned above giving tax dollars to the part of our population with the lowest poverty rate by far when other countries are investing in their young.

  16. Just to clear up a couple of points. In the US the retirement age has already been hiked and this has been the case for some years. I am in the cohort that is at 66 and it rises in increments after that to 67. Done deal.

    Before you get off on us being the most privileged generation ever, bear in mind that most of us had to earn our way through college as loans were nonexistent and scholarships were rare. We graduated into a job market with few jobs and huge numbers of competitors for every job. Many of us took years to work into a career type of position. We had no opportunity to contribute to tax advantaged retirement plans as they did not exist until we were in our mid 30s. Many of us saw our pension plans simply disappear, if we had one at all.
    Now many of us are supporting our very elderly parents who have far outlived their savings and are now failing in mind long before their bodies do. Putting our children through college at the same time, while trying desperately to hang on to our own jobs and save a bit for our own old age. Now they have moved the goal line, see paragraph 1. Lucky us. Maybe you should talk to your parents and grandparents and get some perspective and a history lesson.

    • Gayle, you simply have to quit sipping the Kool Aid. I know everyone thinks they are the most hard done by in society, but the stats don’t lie. Seniors are the least impoverished part of the population. I think it’s you who needs to clear up a bit of history. Your comparison of post-secondary education is laughable when you compare tuition costs versus inflation over the last 30-40 years. You whine about the fact that you could cover your entire tuition by simply working during your summer? REALLY?! I’m not sure what workplace you’re referring to when you say there were no jobs. You inherited an unbelievable infrastructure setup from your parents, and the rest of the world’s economies were in disarray from a little thing called WWII. Why are you still struggling to save for your own retirement as you hit your golden years, and more importantly, what justification is there for my generation to pay for it?

  17. To be fair, there were probably people making convincing promises and arguments for never having to think about how your retirement is funded 30 years ago. You still have gains from educating yourself but not everyone will. Maybe you could teach a simple math lesson by dividing available funds by (# of retirees)x(retired life expectancy) then and now :)

    Unfortunately even if you do “know it all” and plan for yourself, you can’t completely avoid paying for others’ mistakes. Most people won’t take the time to truly understand things and would end up worse off if they had to take care of themselves. Some form of mandatory protection is necessary but we’re in trouble if it ever removes all benefits from taking care of yourself.

    Despite some good reasoning and management, the current government programs are tied to a lot of dead weight from the past. I’ve been looking at this closely since there are eligibility requirements for the CPP and it’s possible to avoid them (not as much for a teacher though). It seems to be managed on a sustainable basis so unless a future government destroys it there’s no concern about it going missing. Part of that sustainability involves repaying past shortfalls so it doesn’t provide a great return. It might be considered as a semi-decent fixed income investment but not a good full portfolio.

    If there was a CPP 2.0 that was managed in the same way but only counting from the date it was started (like TFSA contribution room) I would happily take that as a small backup plan. Maybe PRPPs will help create something like that. OAS is unpredictable since it’s a bad deal now but those who are young now have enough time to reverse the demographic situation. In fact a lot of our problems could be solved that way.

  18. You are absoultely right that those working today need to contribute more to CPP. It’s the only way to fix the retirement problem. But extending the OAS age requirement wouldn’t help as it’s not a fund, it’s paid for by Government revenue. More people working longer doesn’t solve that problem. EI wouldn’t be a burden if it wasn’t cashed out every year by the Feds to general coffers.

    As a 20 something, I’m against putting the retirement age to 67 because it does nothing, the system isn’t insolvant it just needs a kick in the pants. I am also against messing with the OAS benefit because it mainly goes to people of low income, and again isn’t expected to be a problem long term. In 50 years it may take 1% more of GDP, not something we need to be concerned about. And as a young person I also have parents looking to retire in some fashion within 10-20 years. I don’t want their quality of living to deminish because of some stupid crap today.

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