Millions of Canadians who are dreaming of spending their retirement soaking up the sun in an exotic getaway might have to rein in their expectations, a new CIBC study warns.

The report, issued this week by deputy chief economist Benjamin Tal, says about 5.8 million working-age Canadians can expect to see a 20 per cent drop in their living standards after they retire.

Responding to a debate sparked by Finance Minister Joe Oliver's announcement last week that the government would consider expanding voluntary Canadian Pension Plan contributions, Tal said that change to the current system is "essential."

The report shows that a clear divide along generational lines is emerging. Many Canadians who are approaching 65 are on a path to the "retirement of their dreams," while those who are younger and in middle-income brackets could see a "steep decline" their living standards.

The study, which takes in account a typical drop in expenses in a person's retirement years, says that an average 70-year-old today has enough income to maintain their pre-retirement standard living, thanks to government programs -- such as CPP, OAS and GIS -- pension plans and other savings accumulated in RRSP's.

"Those born during the (Second World War) are positioned to maintain virtually all of their pre-retirement consumption patterns," said Tal.

And Baby Boomers -- born between 1945 and 1964 -- are "only slightly less advantaged."

But it is Generation X and Millennials who are expected to see the most significant drop in their standard of living during their retirement.

Tal says that because of trends towards lower saving rates and reduced private pension coverage, Canadians born in the 1980s are on track to earn only 70 per cent of their pre-retirement income, "implying a 30 per cent drop in their standard of living."

The report says that while millions of working-age Canadians are on pace to replace 80 per cent of their pre-retirement income, averages mask deeper problems.

"Within each age cohort and income group lie a substantial number of Canadians headed for trouble," said Tal.

Tal points out that nearly 60 per cent of Canadians born between 1985 and 1989 and almost half of those born in the late 1960s will only be able to replace or 80 per cent or less of their working income.

"That's why the time to act is now," Tal says.

Conor Bill, the president of investment firm Artemins Funds, told CTV News Channel that he agrees with Tal's findings in the CIBC report.

"We need to change the way we save for retirement in this country," said Bill.

"I think there's a group of people, who are retiring now or in the near future, who are going to be just fine, but, so far, what we're seeing in the next cohort that is coming along is that they are not saving enough towards retirement."

Bill added that there's a "big chance" that if new saving measures aren't adopted, many Canadians will experience far fewer comforts in retirement.

He says that while Oliver's recent about-face to consider expansion of CPP is on "the right track," but payments should be mandatory.

"Extending the Canada Pension Plan is a fantastic idea," said Bill.

"(But) I would take issue perhaps with making it voluntary … consumers are not saving and we need to somehow force them to save for their retirement in some form. Mandatory CPP contributions are … the most broadly effective way we have in this country."