Saving for retirement is getting out of reach for young Canadians

TORONTO – Jason Francone, 24, has always been very good with his money.

“Coupons are my middle name; sales are in my DNA,” he says.

But it’s not just the art of bargain hunting that he’s mastered. Francone has also saved in other ways and strived to build wealth since his teenage years.

But soaring inflation, a boiling housing market, interest rate hikes and a struggling stock market, combined with his bouncing from one landscaping job to the next over the years, have left Francone nervous about his long-term financial goals, such as retirement.

“Inflation and other economic pressures have certainly been a very big burden and distraction to my savings,” he says.

Francone said his ability to save for retirement will be a big concern until he finds more stable employment. In the meantime, he stopped making monthly deposits into his savings and investment accounts to ease some of his financial worries.

Although it may seem years away, saving for retirement is a top priority for 26% of Canadians aged 18 to 34, according to a recent survey by the Healthcare of Ontario Pension Plan (HOOPP). However, 79% of respondents in this age group say saving for retirement is too expensive, with 35% having not yet saved anything for retirement and 37% saying they have not saved anything in the past year.

Personal finance experts say the current economic climate will likely cause financial hardship for many young adults, no matter how careful they have been with their money, but won’t necessarily derail their path to retirement.

“I think it will definitely slow them down, but it all depends on how long this economic cycle lasts,” says financial planner Jackie Porter.

She cites the impact the 2008 recession had on older millennials in the 35-42 age bracket and how some have only recently managed to recover financially. The 2008 recession lasted about seven months in Canada and 18 months south of the border.

“Young Canadians will need to save between eight and 12 times their income if they want to retire at age 65,” Porter said.

Access to workplace pension and benefits programs is key to helping young adults get on the right path to a comfortable retirement, she adds. According to Statistics Canada, 35.7% of primary breadwinners under the age of 35 have an employer-sponsored registered pension plan.

Francone didn’t get access to those programs because he was only offered short-term landscaping contracts and says it’s very difficult to get on the full-time roster where he could participate in savings programs.

“Although I made a lot of money, I was never really introduced to putting money aside for retirement or a pension or even having benefits,” he says.

Home ownership is another part of the retirement equation, as it has often been a vehicle used to finance it. The HOOPP survey found that saving for the purchase of a home or property was the top priority for 48% of respondents aged 18-34.

For Francone, who currently lives at home with her parents due to high rent costs, owning property is “extremely important”.

“Even though the goal and the idea of ​​it might be further away than expected at that age, it still hasn’t changed its level of importance,” he says. “It’s important that I live in a place that belongs to me, so that I can have full control of my future.”

Money coach and TikToker Ellyce Fulmore takes a slightly different view of homeownership and doesn’t think young adults should rush into the market.

She argues that a home isn’t always the big investment everyone makes in it because of all the expected and unexpected costs involved. There is also the risk of having to resell it at a loss.

“Your home shouldn’t be your retirement plan,” she says.

Fulmore received many questions from his audience, largely Gen Z and young millennials, about saving and investing for retirement.

“I think most people in my age group feel the pressure to start investing for retirement, putting money aside, but also not knowing where to start,” she says. “With finances being tighter at the moment, it’s an added burden of stress on top of knowing what to do.”

To help navigate the current economic climate and keep retirement ambitions on track, especially as the possibility of a recession increases, Fulmore urges young adults to prioritize an emergency fund and inflate it as much as possible. She suggests having 9-12 months of expenses saved in a high-interest savings account because the cost of everything keeps rising.

She also thinks young adults should stick with their existing financial plan, despite all the noise.

“What’s important is to keep doing what you can instead of stopping everything completely like your first instinct,” says Fulmore.

This report from The Canadian Press was first published on July 5, 2022.

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