Nearly a third of young Canadians have not tucked away any money for retirement, even though many plan on leaving the workforce before they hit age 60, a recent survey suggests.
A Bank of Montreal survey released Tuesday found that 27 per cent of young adults -- between the ages of 18 and 34 -- have yet to save any money for retirement.
At the same time, 41 per cent of those surveyed expressed a desire to retire before age 60.
Tina Di Vito, head of BMO’s Retirement Institute, noted that young adults might not realize that squirreling away funds early on in life will make it easier to hit retirement goals later on.
“A clear dichotomy exists between what young people think about retirement and what they are actually doing to prepare for it,” she said in a statement issued Tuesday.
Of the respondents who had started saving, 52 per cent had put their money into a Registered Retirement Savings Plan, while 36 per cent had funds stored in a tax-free savings account.
Prime Minister Stephen Harper introduced tax-free savings accounts, or TFSAs, in 2008. The accounts allow adults to put away up to $5,000 a year to grow tax-free.
Though TFSAs have been popular, critics have noted that when Canadians begin to withdraw money from the plans, that income will not factor into whether they’re eligible for Old Age Security or Guaranteed Income Supplement.
What’s more, the survey reports that while almost a quarter (23 per cent) of Baby Boomers over the age of 55 have thought a lot about how long they might be retired, only five per cent of young adults have done the same.
Still, the report acknowledged that there were several factors that might affect one’s financial planning including the burden of student debt, lower wages and poor job prospects.
While many BMO survey respondents had not started saving for life after work, the majority (82 per cent) agreed that retirement planning was important.
Even so, only 23 per cent of respondents had consulted a financial planner for assistance.
“While it’s great news that young adults appreciate the importance of retirement planning, it’s a concern that many are not backing it up with concrete action,” said Di Vito.
The BMO survey comes months after the release of the federal budget which confirmed that the government is forging ahead with plans to raise eligibility for Old Age Security to 67 from 65.
The reform, which also applies to the Guaranteed Income Supplement, will be gradually phrased in over a six-year period starting in April 2023. Anyone born on or after April 1, 1958 will be affected.
The BMO survey, titled Broadening the Approach to Preparing for Retirement, was conducted online by Leger Marketing, between February 8 to February 16.
The margin of error is plus or minus 3.1 per cent, 19 times out of 20.
