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February 12, 2022

Young Canadians concerned about retirement

Thinking about the future -- especially retirement -- isn't always at the top of the list when you're young.

Many young Canadians are living for the moment and looking for instant gratification. They already have a lot on their plate to worry about including graduating, funding college or university, and acquiring a good job in today's highly competitive job market. 

So it's no wonder they feel unprepared financially for retirement...it just seems like such a long way ahead in the future.

A new report from BMO Bank of Montreal reveals that 80 per cent of Canadians between the ages of 18 and 34 are concerned about their ability to save for retirement.

That's just one more thing to add to their growing list of worries.

In fact, 55 per cent of Canadians polled in the study believe that their parents' retirement will be somewhat better than their own.

This could be related to the fact that many young people are more focused on paying down debt than actually saving for their retirement. And rightly so. Personal debt levels climbed to 164.6 per cent in the latter part of 2012, according to Statistics Canada. That translates into $1.65 for every dollar of after-tax income they earned.

Janet Peddigrew, District Vice President, BMO Bank of Montreal says, "While it's admirable that young people are focused on reducing their debt levels, they also need to allocate some money to their retirement needs.

"By taking the time to identify both their short-term and long-term financial goals, young people can build a financial plan that works for their life now and well into the future."

Those are wise words to consider. The future always seems to creep up on us before we even know what hit us.

The study also found that almost half of young Canadians (46 per cent) are concerned about paying down debt than saving for retirement; and only one in four (24 per cent) more concerned about their retirement savings.

Their biggest concerns were outliving their retirement savings (77 per cent); outliving their spouse, family and friends (61 per cent); fear of having physical health problems (72 per cent); fear of developing mental health issues (58 per cent); and the inability to afford the lifestyle they want in retirement (72 per cent).

The study also revealed that 94 per cent of young Canadians believe the Canadian Pension Plan (CPP) will play an integral role in funding their retirement; while 91 per cent believe they will rely on their Registered Retirement Savings Plans (RRSP).

Others polled believe they will be able to receive funding through their employer pension plan (82 per cent); retirement income from their spouse (72 per cent); their savings (86 per cent); and an inheritance (66 per cent).

However, Chris Buttigieg, Senior Manager, Wealth Planning Strategy, BMO Financial Group, advises that young people should not rely too much on CPP to fund their retirement as it only provides on average about $500 a month. Not exactly easy street.

"To maximize savings, Canadians should be putting away money for the long term and finding ways to build their retirement savings over time," says Buttigieg. "For instance, a continuous savings plan allows investors to make small, regular automatic contributions to their RRSP directly from their bank account.  It’s a great option for young Canadians who may feel overwhelmed trying to come up with a lump sum before the annual RRSP contribution deadline.”

Now that's some good food for thought.

By Donna Donaldson, MSN Money

Are you concerned about your ability to save for retirement? 




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