By Sheryl Smolkin
A CIBC poll conducted by Nielsen reveals that younger Canadians are more optimistic about their retirement and ability to save but they are less likely to be taking action. The poll also found that expectations of older Canadians fall dramatically.
Thirty per cent of Canadians aged 18-24 say they expect to live better in retirement than they do today but the number falls to 17% for 25-34 year olds and continues to drop to three percent of those aged 55-64.
Despite their optimism, younger Canadians are less likely to have started saving. Forty percent of 18-24 year olds and 23% of 25-34 year olds say they have not yet started saving for retirement, compared to just 16% of Canadians overall.
The poll results suggest that although younger Canadians are positive about their future retirement plans, they may be relying too much on time to meet their retirement goals and not taking necessary actions now that could help them realize their goals.
“Time is on the side of younger Canadians who have many years to retirement, but that’s only an advantage if you take action and use those years to start accumulating savings,” says Christina Kramer, Executive Vice President, Retail and Business Banking, CIBC. “While it’s not surprising that younger Canadians are optimistic about how they expect to retire, the fact that so many people nearing retirement aren’t as hopeful speaks to the importance of having a financial plan in place earlier on.”
The poll also revealed that the majority of Canadians (58%) believe it is still possible to put money away each month and retire in their 60s, particularly 18-24 year olds (71%), and to a similar extent, 25-34 year olds (68%).
This is a positive finding, according to Kramer. “Considering how often we hear talk of the increasing cost of living, it’s good news that so many Canadians, especially younger people, still think saving for retirement is achievable,” she says. “The key is to make a plan and take steps to begin saving – the sooner you start putting money aside and earmarking it for your retirement, the longer you’ll have for your money to grow.”
Advice for focusing on retirement savings
- Talk to an advisor: Meet with an advisor to understand your options, and work with them to develop a plan that can help you in managing multiple financial priorities and staying on track over the long term.
- Contribute regularly: Set up a regular investment plan to automatically withdraw smaller amounts throughout the year, rather than trying to find the funds for a large lump payment at the deadline.
- Save at work: Many employers offer group retirement savings plans, defined contribution plans or the Saskatchewan Pension Plan to their employees and top up employee contributions by a specified amount. Save at work and take advantage of this free money.
- Don’t lose sight of the longer term: While it is important to address immediate financial needs such as debt reduction or saving for a large purchase, it is equally important to keep future goals such as retirement in sight.
The Saskatchewan Pension Plan is a defined contribution retirement savings plan open to all Canadians. If you have RRSP contribution room, you can save $2,500/year or transfer in $10,000 from another RRSP. In 2013 the SPP balanced fund earned 15.8% and this fund has average a return of 8.1% since it started in 1986. For more details about the plan and how to enrol, see the SPP website.