A retirement crisis may be approaching in Canada as rising living costs discourage individuals from saving and as many baby boomers nearing retirement have nothing saved.
According to the 2023 retirement poll from Healthcare of Ontario Pension Plan and Abacus Data, more Canadians struggled to save for retirement over the past year due to high levels of inflation and rising interest rates. Across the board, 44% of adults failed to save, a 6% rise over the prior year. The main concern for 70% of people is trying to manage the high cost of living, closely followed by worries that their paycheques won't be enough to keep up with inflation.
The fact that a sizable portion of baby boomers, who are between the ages of 55 and 64 and have not yet retired, don't seem to have nearly enough funds set up, though, may be more concerning. In fact, one in five people hasn't saved anything, and nearly half have only $5,000 or less saved for retirement. Another 75% had $100,000 or less saved, which is alarming given that Canadians anticipate needing $1.7 million to live well in retirement, according to a Bank of Montreal analysis released this year. As a result, individuals anticipate having to retire later than they had anticipated. Of those surveyed, 54% believe that increased inflation will force them to postpone their desired retirement date.
As they struggle to keep up with rising expenditures, older people are also starting to notice that their standard of living is beginning to suffer. In contrast to 33% of people across all age categories, 38% of people aged 55 to 64 report feeling behind. According to Ivana Zanardo, head of Plan Services at HOOPP, "the picture is bleak for those older Canadians," she told The Canadian Press last week.
The numbers indicate that the baby boomer generation will face challenging times in the future, which may also indicate that a retirement financial crisis will hit us sooner rather than later.
About 70% of Canadians have consistently agreed that there will be a retirement income crisis in Canada during the course of the five years that HOOPP and Abacus Data have performed this survey, according to Abacus Data CEO David Coletto. If current economic patterns continue, the results for older Canadians indicate that a crisis may be approaching faster than previously thought.
The study discovered that the situation isn't much better for younger people. 51% of individuals between the ages of 18 and 34 report suffering from rising costs and having to spend more money than they make. 31% of people over the age of 35 also experience this. Younger Canadians are also particularly concerned about the impact that high-interest rates will have on their capacity to pay off debt and their own retirement savings. They also worry about managing growing inflation, skyrocketing house prices, and if they will be able to get a sufficient pension through their employment.
We've known for a while that the children are not doing well when it comes to saving for retirement, but it turns out that their parents are also not doing well, according to Zanardo. A work pension is one alternative that many Canadians are hoping might save their retirements. According to the survey, 69 percent of respondents would be ready to forego a pay rise in exchange for a healthy pension, and 80 percent believe that businesses should be required to contribute to employee pensions. Another 74% think that taxpayers will end up paying for workers without sound plans.
However, according to Zanardo, access to pensions through people's jobs has been declining for some time, making it challenging for Canadians to save money for retirement. Recent economic difficulties have only exacerbated that.
"Declining access to workplace pensions, as well as high housing costs, have been taking a toll for years," the speaker stated. But more recently, high rates of inflation and interest have been added, creating what might be a perfect storm for people who are having trouble saving money.