Edward Jones Canada has released a new study that examines retirement savings habits. The research found that millennials (ages 26-41) are more likely than other generations to be off-track when it comes to saving for retirement. In fact, 70 per cent of respondents in this cohort are not saving enough for their retirement, with 27 per cent unable to afford to do so at all.
While all Canadians are feeling the effects of prolonged economic volatility, with half (52 per cent) saying the cost of living is the biggest obstacle impacting their ability to save enough for their retirement, millennials are more likely than other generational cohorts to cite their debts (21 per cent), job and employment situation (13 per cent), and lifestyle (9 per cent) as their most significant obstacle.
“We continue to see a decline in defined-benefit pensions offered by employers and saving for retirement has become a self-responsibility for Canadians as a result,” said Julie Petrera, Senior Strategist, Client Needs at Edward Jones Canada. “This is a challenge, especially for millennials who are navigating multiple obstacles that impact their ability to save for their retirement. Having a financial strategy in place that helps them overcome those obstacles to get them on track and keep them on track is so important.”
Millennials ushering in new approach to personal finance
Millennials are significantly more likely to agree that saving for retirement is less of a priority than other financial goals, such as paying down debt, buying a home, or starting a family. In fact, 66 per cent of millennials agree that they are prioritizing other financial goals, compared to 46 per cent of gen X (ages 42-57) and 40 per cent of boomers (ages 58-67).
This short-term approach to financial priorities is a long-term strategy for most millennials, who are also more likely than other generational cohorts to delay their retirement in favour of their lifestyle. Almost three-quarters of millennials (72 per cent) agree they would delay their retirement if it meant maintaining their ideal pre-retirement lifestyle. Despite this, 38 per cent of millennials say their preference would be to retire before they are 65 years old.
According to another recent study conducted by Edward Jones in partnership with Age Wave, this approach may be consequential. As life expectancy in Canada continues to rise, respondents said their ideal length of retirement is 27 years. With almost three decades of retirement to save for, those in or approaching retirement admitted they started saving for this new chapter in life at 37 years old on average but wished they had started almost a decade earlier (28 years old).
Once they retire, millennials are more likely than other generational cohorts to value being active in retirement rather than using it as a time for rest and relaxation. However, they are much less interested in working for pay (22 per cent) compared to those 55+ (45 per cent). Older Canadians (55+) are also more likely to want to volunteer their time in some way (26 per cent), while millennials are more inclined to volunteer their money to support friends or family in need (25 per cent).
While there are generational trends shifting the retirement landscape, and are likely to continue to evolve, the desire for peace of mind remains a constant for Canadians, with two-thirds of Canadians (63 per cent) noting they do not want to worry or at least worry less about their finances in retirement.
“The data points to generational shifts in values and priorities when it comes to retirement, which are impacted by many different factors such as the evolving economic environment that impacts our day-to-day lives,” said Petrera. “When, where, and how younger cohorts retire has changed, and so a traditional approach to saving for retirement may not work for them. As personal finance continues to evolve, your financial strategy should reflect what matters most to you. It’s that simple.”