Canadians' lack of preparedness for retirement seems to be a chronic condition that even is affecting the younger generation.
There have been lots of studies recently showing that Canadian boomers have not saved enough to create a sufficient income to fund the level of consumption they expect in their retirement. And with life expectancy increasing, the chance of outliving your money is increasing.
As a result, many boomers are expecting to have to continue working in some capacity in their 60s to supplement their income.
A recent national online survey conducted for CIBC found that almost half of 50 to 59 year old Canadians have less than $100,000 saved for their retirement and plan to use employment income to make up for their lack of savings.
Quebec respondents were least likely to say they'll work after retirement while Manitoba and Saskatchewan respondents said they were the most likely to work after retirement.
Now, a recent survey by BMO Retirement Institute shows that only about 10 per cent of young adults aged 18 to 34 have given much thought to how much money they will need for retirement and almost one third have not even started saving yet even though one quarter of them expect to retire early. Only five per cent of young adults have given any serious thought to how long they might be retired.
On a positive note, most young adults surveyed believe that retirement planning is important and slightly more than half have a Registered Retirement Savings Plan and 36 per cent have a Tax Free Savings Account.
"A clear dichotomy exists between what young people think about retirement and what they are actually doing to prepare for it," says Tina Di Vito, head of the BMO Retirement Institute. "While it's great news that young adults appreciate the importance of retirement planning, it's a concern that many are not backing it up with concrete action."
The major factors that are hindering the younger generation in establishing themselves financially generally, let alone for retirement, are poor job prospects in the post-recession economy, student debt levels and lower real wages.
How do young adults learn, then, about retirement and financially planning? Perhaps the best way is from role models like parents.
Half of young adults 20 to 29 are still living with their parents. "Mom and dad can be effective financial role models by demonstrating sound finance management and savings habits along with involving their children early in the process," says Di Vito.
This can include involving talking to their children in their tween and pre-teen years about saving and setting financial goals, opening up a Registered Education Savings Plan (RESP), making regular contributions and teaching them about the power of compound tax-deferred growth.
Parents also can encourage their adult children to contribute toward household expenses as soon as they begin work - perhaps even charging rent -- talking to them about money management and budgeting, encouraging them to attend retirement-related seminars and webinars, and introducing them to financial professionals.
Parents need to do this financial mentoring in a language their children can relate to and understand and through their preferred channels of communication such as smart phones and social networking websites.
"Parents and other influential adults have to foster an environment that will encourage young people to think about their future," says Di Vito. "Despite the challenging and complex financial realities facing your people today, increasing their financial preparedness for retirement will guide them towards positive results."
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
