|
LIFE CYCLES
For most us, income peaks at about age fifty-five, give or take a few years, although the peak-income age will likely rise in the future as people live and work longer. Of course, all of the corporate downsizing in recent years has caused many to retire early; but, many of those are taking on new careers. Spending typically peaks at about age forty-five to forty-eight when the last tuition bills are paid-later if children were postponed. In the past, households began to pay down their debts in their late forties. Historically, Canadians were very good at paying down debt, including mortgages. Indeed, half of Canadian households age forty-five to fifty-four were mortgage-free in 1996. In the United States, there is less incentive to pay down mortgage because mortgage interest is tax deductible.
Earlier generations began to accumulate wealth in their mid-forties. They may still have had large debts outstanding, but their after-tax cash flow allowed for some net saving after expenditures and debt servicing. From the mid-forties until retirement, wealth accumulation continues (chart VII-1). This has becoming increasingly difficult for Boomers-particularly in Canada-with large debt burdens, the non-preferential tax treatment of mortgage interest, slow income growth, falling Canadian dollar, inordinate tax burden and high unemployment. What's more, the Canadian stock market has dramatically underperformed in comparison to the U.S. since 1980, so even if we did accumulate wealth in Canadian stocks, they haven't done nearly as well. Canadian family living standards have fallen meaningfully below the U.S.
|
