Seniors increasingly likely to retire in poverty, study says
Trend begins with younger people less likely to save for retirement, as employers decrease pension plans
Calgary millennials admit they aren't storing enough cash away for their retirement years — and more seniors are at risk of retiring in poverty.
While a new study from the Broadbent Institute focused on those approaching retirement between the ages of 55 and 64 financial experts say it highlights a trend — young people who aren't planning for the future.
For many, retirement is at the back of their minds.
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Engaged couple Jay Moch and Gail Medley are both millennials.
"There's other things to think about. We've got a wedding to pay for and a mortgage so you kind of are thinking about paying all of that off before you think about retirement, which is probably stupid in the long run," said Medley.
Her fiancé says he feels like there is still plenty of time.
"I think our generation is probably a lot less prepared than the generations before. I look at my grandparents and my parents and they're set," said Moch.
Dig out of debt
Daniel Harrison dug himself out of a debt burden when he was 20-years-old; an experience that helped launch his career with planning firm Financial Strategies.
He specializes in helping other millennials manage their money and says most of his clients aren't properly educated about retirement.
"People are left to just kind of to figure it out for themselves," said Harrison.
He says people put off saving or paying down debt until they are closer to retirement "that's when they start to realize then it's too late to really do anything."
In order to improve his personal finances — he consulted banks and switched his focus from earning more to controlling his spending — and says he's in better shape for the future.
Researchers with the Broadbent institute found that only 15 - 20 per cent of middle-income Canadians who are retiring without an employer pension have saved enough to retire comfortably.
About 47 per cent of Canadians don't have a pension from their employer and that number drops among younger workers.
That means the number of seniors who slip into poverty will worsen in the decades ahead as more seniors are becoming dependent on government programs like Canada Pension Plan and Old Age Security, the report says.
Angela Lock, a bankruptcy specialist with Grant Thornton Ltd., says there's a generational gap when it comes to managing debt and saving.
"Seniors carry a lot more guilt and a lot more stress, as a contrast the younger people don't carry that same sense," she said.
The report's author is urging federal government to move quickly on CPP reform and to think about enhancing the GIS benefit for both singles and couples entering retirement to reduce their chances of slipping into poverty.