Eighty per cent of Canadians between the ages of 18 and 34 are not very confident in their ability to save for retirement, according to a BMO Financial Group survey of 1,000 people.
This could be because many young people focus more on paying down debt than saving for retirement, said BMO, as personal debt levels climbed to 164.6 per cent in the third quarter of 2012, according to Statistics Canada, meaning Canadians owe an average of $1.65 for every dollar of after-tax income they earn.
Almost one-half (46 per cent) of young people are more concerned about paying down debt than saving for their retirement, with only 24 per cent more concerned about their retirement savings, found the BMO survey.
The biggest concerns of young people regarding retirement:
• Outliving their retirement savings (77 per cent).
• Outliving their spouse, family and friends (61 per cent).
• Developing physical health problems (72 per cent).
• Developing mental health issues (58 per cent).
An overwhelming majority (94 per cent) of young Canadians believe the Canada Pension Plan (CPP) will play a role in providing funding for their retirement, while 91 per cent also expect to rely on their registered retirement savings plans (RRSPs). Others think they will get the money from:
• other savings (86 per cent)
• their employer pension plan (82 per cent)
• retirement income from their spouse (72 per cent)
• an inheritance (66 per cent).
"On average, the CPP pays out approximately $500 a month, so young Canadians should not rely on it too heavily to fund their retirement," said Chris Buttigieg, senior manager of wealth planning strategy at BMO Financial Group. "To maximize savings, Canadians should be putting away money for the long term and finding creative ways to build their retirement savings over time. 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."