# CPPIB are killing it Jerry.......killing it.



## sags (May 15, 2010)

The CPP is projected to be 700 Billion or more by 2040. The charts go nowhere but up and up and up.

There is going to be one big pile of money left after the big boomer cohort bite the dust.

Contributions were 4 Billion last year. Investment income was 40 Billion........10 times the contribution rate.

The current benefits are too low for current retirees who built the fund, and should be expanded with more contributions and higher benefits for future retirees.

But...... Stephen Harper has issues with the CPP.

http://www.cppib.com/en/our-performance.html


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## GoldStone (Mar 6, 2011)

sags said:


> The current benefits are too low for current retirees who built the fund


You must be joking.

Read the report by Canada's Chief Actuary:

Intergenerational Balance of the Canadian Retirement Income System

1. CPP was on an unsustainable path before 1997 amendments. 

2. To restore CPP sustainability, 1997 amendments introduced steep hikes to the CPP contribution rates.

3. Boomers entered the workforce well before 1997. Younger boomers spent most of their careers contributing to the CPP at a low, unsustainable rate. Older boomers enjoyed a solid 10-15 years of low contributions.

4. Post-boomer generations entered the workforce near or after 1997. Post-boomers will be paying into the system at a much higher rate for their entire careers. Why? To fund their own benefits, but also to subside the benefits for the boomers who didn't pay enough.

As a member of post-boomer generation, I find your statement insulting. You said:

_"The current benefits are too low for current retirees who built the fund"_

In reality, the opposite is true:

The current benefits are too high for current retirees who didn't pay enough into the fund. Current retirees are enjoying a free ride, courtesy of the younger generations.


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## cainvest (May 1, 2013)

And don't forget they moved OAS age eligibility to 67 ..... just happens to be right near the end of the boomer generation.


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## sags (May 15, 2010)

The Chief Actuary for the government predicts a 6% return on investment per annum. The return has exceeded 8% per year for 10 years and 18% last year. 

The CPPIB has investment opportunities that will far exceed 6% per year.

The assumptions are ridiculously off base with 2014 alone on current annual investment returns and the total capital in the fund.

Why is the government trying so hard to convince Canadians the CPP is in jeopardy........calling it "partially funded" and "pay as you go" and other nonsense.

Look at the CPPIB charts. Straight up until 2040 and beyond. 

The CPPIB doesn't forecast a time when benefits will cost more than contributions and "some" of the investment returns.

They project out 75 years...........for future workers who haven't even been born yet.

I trust the CPPIB figures a lot more than the governments.


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## sags (May 15, 2010)

cainvest said:


> And don't forget they moved OAS age eligibility to 67 ..... just happens to be right near the end of the boomer generation.


Harper did...........Trudeau will return it back to age 65.

Stephen Harper has issues with the CPP................and the OAS.


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## Causalien (Apr 4, 2009)

CPP fund dropped by 20% during 2008 crash.

It is the one fund that is well managed in Canada. If you start increasing distribution because of one good year, you will eventually force it to become like the unfunded ones in US. Pay as you go.

Now if only we can do the same with our oil fund like norway we can actually be richer than a country that's smaller than us.

I am expecting these kind of conflict to pop up more often. As a non baby boomer, I am seriously considering going Galt and have the means to do so. However, my belief in he Canadian system is keeping me at bay. 

After 3 years around the world, I will finally be back and evaluate Canada with new found eyes.


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## fraser (May 15, 2010)

IF you propose increasing CPP in a good year would you be in favour of the converse......reducing it in a bad year? Don't think so.

CPP is in good shape now, thanks mainly to Paul Martin. Let's leave it this way as it is being well managed. It is just too bad that the EI program is not run in an independent fashion apart from Government 'looting'.


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## sags (May 15, 2010)

Not for a good year, but they have had a 8% return for 10 years, which include the recession years.

They are ahead of their own projections and the size of the fund is giving them opportunities that few funds could manage.

Maybe not today..........or tomorrow, but at some point the money will grow to a point to be considered "surplus" and guess what happens then.

The government will want to scoop up the surplus and all those pensioners who received less than they should have will have paid for it.

I agree................not today. But how about there is some consideration of what the benchmarks might be for a raise in benefits?

At the very least, could not the maximum death benefit be raised from $2500 ? What about survivor benefits ?

Don't leave a big surplus sitting there to tempt a future government.......the Light Finger Louies of the world.


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## sags (May 15, 2010)

fraser said:


> IF you propose increasing CPP in a good year would you be in favour of the converse......reducing it in a bad year? Don't think so.
> 
> CPP is in good shape now, thanks mainly to Paul Martin. Let's leave it this way as it is being well managed. It is just too bad that the EI program is not run in an independent fashion apart from Government 'looting'.


Not just the EI Fund. If you look at the history of the OAS, there were special taxes levied that were supposed to provide the funding. 

Over the years it changed until all the "extra" tax revenue was amalgamated into general revenues.

And now, Mr. Harper has the gall to tell Canadians who paid all those special taxes that the OAS is a burden to the government ?

It was like the Wintario lottery in Ontario.........that built infrastructure (arenas and community centres).

Then it was changed to the OLG and they introduced slot palaces that would support harness racing.

Now it is all just general revenue.

How quickly they forget.


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## andrewf (Mar 1, 2010)

sags said:


> Not for a good year, but they have had a 8% return for 10 years, which include the recession years.
> 
> They are ahead of their own projections and the size of the fund is giving them opportunities that few funds could manage.
> 
> ...


If those benefits go to anyone, they should not go to those who are currently or soon to retire. They should go proportionately to those who have been paying the higher contribution rate since 1997.


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## sags (May 15, 2010)

Since 1997 most of the contributions have come from baby boomers, who are starting to retire. 

The next generation was still in elementary/high school in 1997.

If all the contributions and returns on investment from the baby boomers was taken out of the fund...........there wouldn't be anything left.


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## My Own Advisor (Sep 24, 2012)

Agreed sags.

Things are not messy now....but in another 10-15 years depending upon CPP returns things could get tight. Most boomers are just starting to retire, we haven't seen the wave come through yet.


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## RBull (Jan 20, 2013)

This seems to be a nice problem to have. The CCPIB seems to have done a masterful job since the reforms in '97. As I read it 57% of 2014's return is from investment and not from contributions. Much of this capital would have to have come from boomers contributions and returns at this time, so may not be quite as simple as viewing boomers are now getting a free ride.

I am a recently retired boomer who has paid into the fund approx 45% at higher rates and 55% at the original rates over my career. 

I believe the right thing to do is to regularly review benefits and if the fund continues to be healthy enough given a long term window of say 50 years of surplus to possibly adjust benefits in a proportionate manner, so that it is fair given what contributions rates have been for each individual. There needs to be a cushion and protection from government raiding it for other purposes, so this might mean no adjustment is possible.


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## cainvest (May 1, 2013)

My Own Advisor said:


> Most boomers are just starting to retire, we haven't seen the wave come through yet.


I wonder if they'll change the CPP rate in another 25-30 years once the boomers have gone through retirement. Another drain on CPP/OAS is the gain in life expectancy, up about 3 years since 1997.


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## Cal (Jun 17, 2009)

I was wondering how long it would take the increased life expectancy to come into this conversation. Definitely a factor that hasn't really made an impact yet.


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## cainvest (May 1, 2013)

Cal said:


> Definitely a factor that hasn't really made an impact yet.


We're right on the starting edge of it -> http://well-being.esdc.gc.ca/misme-iowb/indicator.jsp?indicatorid=33

Looks like a fairly significant increase.


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## sags (May 15, 2010)

Paul Martin raised contributions rates, but he also created the CPPIB and removed the low ROI investment shackles the CPP were previously bound to.

A 250 Billion dollar (and rising rapidly) fund has great latitude in choosing gold standard investments with better than average long term returns.

The CPP outperformed it's own benchmarks for the past 10 years (which includes the Great Recession losses) by 2% or more per year. 

Strip out the 20% losses and they would have almost doubled their gain over the investment benchmark.

The Recession taught a great lesson, and the CPPIB has moved their investment strategy from equities to more diverse areas.

Infrastructure, farm land, commercial real estate, blue chip businesses.......are all under CPPIB ownership now, and all provide steady returns on capital.

It should also be noted, that when the CPP fund exceeds 6% one year, it doesn't need a full 6% the next year to meet it's benchmark.

But the CPPIB have managed 8% per year.............2% more each year for 10 years............compounding annually.

When the fund reaches this size and bigger...an extra 2% per year compounding for years, translates in to a lot of money for future benefits.

How many more years would the CPP fund have to outperform before it made the actuarial calculations obsolete ?

The way I see it.........if the CPP fund collapses or runs into major problems, it is likely to be the least of our problems.


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## sags (May 15, 2010)

According to the 2013 Report

_With the legislated contribution rate of 9.9%, contributions are projected to be more than sufficient to cover the expenditures over the period 2013 to 2022. Thereafter, a proportion of investment income is required to make up the difference between contributions and expenditures. * In 2050, 27% of investment income is required to pay for expenditures*. _

At 6% investment returns.........not the 18% it earned last year or the 8% it earned for the past 10 years, the fund will use contributions and only 27% of investment income (not a dime from the fund) to pay benefit in 2050..........35 years from now.

That is mind boggling. When do they project they would use 100% of contributions and investment income and start to spend some of the fund.

I don't think they even bother to forecast that scenario because it is never going to happen.

As the grows bigger than forecast, it will continually lower the % of investment income forecast to be needed to pay benefits.

By 2050 it could be 10% of investment returns, with the other 90% piling back into a Trillion dollar fund.

Nice problem to have........but are we building a fund just to build a fund, or to pay retirees a fair return on their contributions ?


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## epson600 (Nov 24, 2014)

According to the 21st actuarial report
"Internal rates of return by cohort"

Born / return after inflation
1930 9.6%
1940 6.2%
1950 4.0%
1960 3.0%
1970 2.4%
1980 2.1%
1990 2.1%
2000 2.1%

If anything, you'd have to raise the benefits to be paid to the younger folk born in the 70/80s onwards just for them to break even with the returns that the older folks will get from CPP.


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## cannew (Jun 19, 2011)

As Cdn's we should be greatful we are not facing the mess in the uS. If CPP was increased for low income, they then should consider is a clawback on CPP for high income people, just as they do for OAS. If they did that, they should eliminate the Increase in dividends (tax up by 1.38) and just make dividends a Tax Free income. They could even put a limit on dividends, say $100K then tax overage at 10% or something.


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## cainvest (May 1, 2013)

cannew said:


> If CPP was increased for low income, they then should consider is a clawback on CPP for high income people, just as they do for OAS.


They already have a low income increase, its called GIS.


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## LBCfan (Jan 13, 2011)

Making CPP "progressive" like OAS would change it from a pension plan to a tax. Are you sure that is a good idea? Why not just up the tax on earned income by the amount of CPP contributions, increase OAS and eliminate CPP completely thus saving the cost of a large army of bureaucrats? 

Or why change anything?


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## cannew (Jun 19, 2011)

LBCfan said:


> Making CPP "progressive" like OAS would change it from a pension plan to a tax. Are you sure that is a good idea? Why not just up the tax on earned income by the amount of CPP contributions, increase OAS and eliminate CPP completely thus saving the cost of a large army of bureaucrats?
> 
> Or why change anything?


It seems that people who have high income, should not need cpp\oas\gis. I'm talking about those who have more than $150K or $200k. If I was pulling in that much during retirement I wouldn't object to not receiving the gov't pension (provided they didn't also tax me to death). We are all taxed in numerous ways to cover all gov't costs including pension. Why not simplify the process, possibly save some money and increase the pension to the lower income (like just one pension based on income). Gov't doesn't do anything simply because they may then loose their own jobs and perks.


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## cainvest (May 1, 2013)

cannew said:


> I'm talking about those who have more than $150K or $200k. If I was pulling in that much during retirement I wouldn't object to not receiving the gov't pension (provided they didn't also tax me to death).


So you're suggesting (for the $150k and up) to change the pension plan to a tax and then asking them to give you a tax break somewhere else instead?


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## cannew (Jun 19, 2011)

cainvest said:


> So you're suggesting (for the $150k and up) to change the pension plan to a tax and then asking them to give you a tax break somewhere else instead?


We already get taxed on the cpp\oas so nothing would change.


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## peterk (May 16, 2010)

You know for damn sure that if the CPPIB did horribly over the last 2 decades you retirees would be screaming bloody murder, and demanding that any short fall be made up from general tax revenue.

Particularly when the entire world economy and banking system is on shaky ground, yet every single asset class is through the roof, it's a bit arrogant to think that the returns will be stellar for the future. 6%? How the heck is that conservative?

No, boomers just want to extract as much as humanly possible before the collapse of the system, and then drain that fund down to 0 over the next 3-4 decades as the world economy stalls and returns 0% yet their juiced up pension checks keeps coming in the mail thanks to their own decision to increase their own payments back in 2015.

No way Jose.


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## andrewf (Mar 1, 2010)

Thanks Peter... The boomers are intent on squeezing every drop out of the public finances and it is up to us younger generations to not let them bleed us dry. We are already going to be stuck paying their mind boggling medical care costs as they near the end of life.


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## GoldStone (Mar 6, 2011)

+1 to Peter and Andrew.

Don't forget another boomer legacy: mind boggling government debt. Younger generations will be stuck paying that bill.


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## fraser (May 15, 2010)

I would never be in favour of a reduction/elimination of CPP based on a person's income.

CPP is not an entitlement. Employees employers pay for it-currently to the tune of just under 5 percent of earnings.

We, and our employers, get to deduct or CPP premium from taxable income and we include our subsequent CPP monthly pension as income. That is reasonable.

CPP is not like OAS. OAS is Government funded, CPP is not. I not understand the implied relationship between sovereign debt and CPP.


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## cainvest (May 1, 2013)

cannew said:


> We already get taxed on the cpp\oas so nothing would change.


Sure it would, instead of receiving $12k a year (taxable) from CPP you'd get nothing. OAS wouldn't likely apply to people with that level of income so no loss there.


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## janus10 (Nov 7, 2013)

fraser said:


> I would never be in favour of a reduction/elimination of CPP based on a person's income.
> 
> CPP is not an entitlement. Employees employers pay for it-currently to the tune of just under 5 percent of earnings.
> 
> ...


+1.

I also wanted to point out that the new CPP rules are more punitive the earlier you take them than even before. From Moneysense article, they remind us that taking it early wasn't an option initially. "So far, taking CPP early has been by far the most popular option. About 65% of those who are eligible start their pension before 65, another 30% start it right at 65, and only 5% wait until later." 

With more Canadian workers not having an option to participate in a DB Pension, I would expect that the CPP will be more important going forward and that 36% reduction vs. the old 30% by taking it at 60 will have a significant benefit to the sustainability of the CPP.

There was a 2013 report stating that federal workers real wages have remained flat over the previous 10 years, something similar to my recollection of what has been stated for middle class Canadians in the private sector. I infer that the majority of Canadians currently or soon to retire aren't feeling flush or particularly blessed. 

I don't understand the accusations against a vast swath of people for something that hasn't happened yet, and which those people have no control. My mom and MIL would love more government assistance, but believe it or not, they can't "bleed the government finances dry" because the government controls the disbursement. There is no all you can spend buffet line.


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## andrewf (Mar 1, 2010)

Sure they can. They vote, and old people tend to vote in greater numbers.


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## peterk (May 16, 2010)

andrewf said:


> Sure they can. They vote, and old people tend to vote in greater numbers.


It'll be interesting to see what governments start to do as senior % of the population increases. Combined with the 18-23 low income liberals growing into the 18-35 low income socialists, i expect rampant entitlements on all fronts to massively increase.

Don't worry. As a high employment-income person I'm all too happy to pay for everything.  Until I gain enough skills and assets to expat in a few years, I mean. :cool2:


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## RBull (Jan 20, 2013)

Sure sounds like a lot of hate and assumptions being made for boomers....


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## mrPPincer (Nov 21, 2011)

We boomers should just vote to use it all up now.

Heck, by the time we're gone so will the planet anyways; potable water will be the only real currency by then, not our moldy old dollars, so lets just spend everything right now on the most important generation, the one that created the 60's.. US!! 
___


PS.. was just a little dark humour above ^^^ joking only, not meant to be taken seriously ^^^


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## pwm (Jan 19, 2012)

peterk said:


> No, boomers just want to extract as much as humanly possible before the collapse of the system, and then drain that fund down to 0 over the next 3-4 decades as the world economy stalls and returns 0% yet their juiced up pension checks keeps coming in the mail thanks to their own decision to increase their own payments back in 2015.
> 
> No way Jose.


Well excuse me for living! Please accept my apologies for being born in 1949. By the way, does your mother know that you think this way?


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## LBCfan (Jan 13, 2011)

GoldStone said:


> +1 to Peter and Andrew.
> 
> Don't forget another boomer legacy: mind boggling government debt. Younger generations will be stuck paying that bill.


Interesting. I am an early boomer and always thought the debt thing started with PET when I was too young to vote. I was alive though so I guess it's my fault. I apologize.


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## sags (May 15, 2010)

Yes, baby boomers created a lot of debt.............but it has to be put into context.

What would it cost today to build the highway system, bridges, schools, hospitals and equipment ?

The next generation will inherit the debt, but they will also inherit all the assets that was provided by the debt.

Our problems started when the "low tax" theory took hold and people believed we could have all we wanted and also have lower taxes.........a perfect world we thought.

Corporate taxes used to be much higher. The tax on high income used to be much higher. People raised their kids without government assistance and they had more kids.

If you want to look for where the problem is.............look at wages. They suddenly stopped rising and have stagnated for decades.

How and why did that start...........is the real question. (I am convinced it all traces back to the flawed concept of free trade and the death of unionism)

My son works longer and harder than I ever worked in my life............and he earns what I earned 20 years ago, and can buy a lot less with it today.

The people doing the exact same job as I did are earning 50% of what I earned many years ago.

Therein lies the problem. Higher wages = higher taxes = less government debt.

I read a report that more than 40% of today's young working adults are dependant on their baby boomer parents for financial support.

That didn't happen in past generations. Young working adults were able to pay their own way and build a life for themselves.

If the young adults can't build their own lives..........what kind of life is in store for their kids ?


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## fraser (May 15, 2010)

The challenge is that that infrastructure has been crumbling for years due to neglect and insufficient funding. And what we cannot see below the ground is in even worse shape.

You only have to drive around Vancouver, Toronto and Montreal and Golden Triangle cities to see this. We have the debt, but the infrastructure is in desperate need of renewal. So much so that it is now considered an inhibitor to business.

If you want to see what federal governments have contributed to the debt load then take a hard look at Federal Gov't deficits over the past 30 years-most especially those of the Mulroney and Harper Governments. You will be surprised at the numbers and the comparison to other federal government administrations. Then take a look at which Governments actually paid down the deficit over that time period. Again, it will probably surprise many people.

We tend to look at debt in Canada at the Federal level. When we use as a comparator this we can smugly compare ourselves to other countries. But when Provincial debt is added to the total, our numbers are far from attractive. Some provinces have been spending like drunken sailors plus there has been a slow transfer of program expenses to the Provinces from the Federal government.


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## sags (May 15, 2010)

And so...........the Conservatives said they will be kicking around a plan to expand the CPP over the summer months.

They are saying it isn't a "tax" because it will be voluntary, with no employer contributions.

On that basis.............it would be a fail.

There are already lots of ways for people to voluntarily save, and without mandatory employee/employer contributions there isn't much point to it.

Also a rumour they will reduce the GST. The desperation is starting to show.

With a tight three way race now..........and the NDP leading the polls, it will be like an interesting summer of who can buy the most votes.


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## mrPPincer (Nov 21, 2011)

If they allowed voluntary contributions to CPP I'd happily participate.

OTOH reducing the GST yet again would be an incredibly short sighted move.
They won't be getting my vote.


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## andrewf (Mar 1, 2010)

Don't believe their lies. They have been flip-flopping on CPP for years. This is what they call a 'shield'. They spread uncertainty and doubt about the difference between their platform and that of the opposition. This is exactly what they did with climate change. They promised action which they have failed to deliver for 10 years.


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## pwm (Jan 19, 2012)

andrewf said:


> Thanks Peter... The boomers are intent on squeezing every drop out of the public finances and it is up to us younger generations to not let them bleed us dry. We are already going to be stuck paying their mind boggling medical care costs as they near the end of life.


The young people today! In some societies they venerate the old. Not so in Canada it appears, based on posts like this one.


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## andrewf (Mar 1, 2010)

It's more commentary on that generation.


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## peterk (May 16, 2010)

pwm said:


> The young people today! In some societies they venerate the old. Not so in Canada it appears, based on posts like this one.


The old were venerated because they are supposed to be wise, humble, and use their power to make sound decisions for the futures of their grandchildren whom they love so much. Evidence indicates that hasn't been happening very much in the past 30 years...


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## Charlie (May 20, 2011)

10 yr returns is a very short time frame to start mucking with the CPP. 

Let it ride.


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