Jan 13: Best from the blogosphere

Millennials who own homes can’t save for retirement

New research from KMPG Canada has revealed some bleak findings about millennials and home ownership.

According to a KPMG media release, “barely half of Canadian millennials think they will ever be able to afford a house,” and those who do aren’t likely to be able to save much for retirement.

The survey found that only 54 per cent of the 2,500 Canadians surveyed believed “they will ever be able to afford a home.” A further 42 per cent said they were putting off all retirement savings in order to be able to afford a home.

So it’s not all that surprising that 65 per cent of millennials “worry that if they buy a home and delay their savings, they won’t have saved enough for their retirement.”

A final thought – a worrying one – is that even those millennials who managed to buy a house doubt that it will grow as much in value as their parents’ houses did. The survey found that 38 per cent feel “they paid so much for their house that they’re afraid that by the time they want to retire, they won’t get the same price, or much more for it.”

Let’s unpack all this. So the millennials – the up and coming younger set, not yet 40 – are facing such high housing prices that they don’t believe they can enter the housing market AND save for retirement. Getting into the housing market is taking all their cashflow.

And they are worried that today’s expensive houses won’t go up 10 times or more in value like houses bought in the 50s, 60s, and even 70s. Some worry they’ll break even at best, leaving minimal extra money for retirement.

“While Canadians generally believe home ownership is essential for a financially stable retirement, most millennials feel times have changed and they can’t rely on their home to be a viable nest egg like their parents have,” states KPMG’s Martin Joyce in the release.

“What we are seeing is that millennials face a choice today that their parents’ generation didn’t,” Joyce states in the release. “They either buy a home or focus on saving for retirement. Buying a home involves taking on considerable debt because house prices are so high in relation to incomes, and that limits millennials’ ability to save. While most feel home ownership is an investment for financial stability, they worry their home will be worth less in the future.”

Our millennials have an unenviable task ahead of them, for sure. One hopes that the transfer of wealth from boomers will cushion the blow somewhat. And while housing prices aren’t soaring like they did decades ago, they are still rising.

Even if cashflow is super tight for the younger amongst us, it is very important to have retirement savings as part of one’s overall focus. If you can’t throw big money at it, throw small money at it. Those savings will grow and form an important part of your retirement income component down the line.

If you have a retirement plan at work – and especially if you don’t – a great option for creating or augmenting your retirement savings is membership in the Saskatchewan Pension Plan. Members can save up to $6,200 per year within available RRSP room. You can also transfer in up to an additional $10,000 per year from other retirement savings accounts. When you get to the time you want to turn on your retirement income, SPP converts your savings, plus growth, into a lifetime income stream. You can never run out of retirement income, and there are options to look after your survivors as well. Be sure to click on over to SPP and check out their many retirement savings options.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

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