Young Canadians are well aware of the need to plan ahead and save for their retirement years, but many are procrastinating on this task, according to a new report from the BMO Retirement Institute.
The report, entitled Broadening the Approach to Preparing for Retirement, examines attitudes on retirement among young adults between the ages of 18 and 34. It finds that the majority of young adults – 82% of those surveyed for the report – recognize the importance of retirement planning.
Half of respondents said they’ve opened a Registered Retirement Savings Plan (RRSP) and 36% said they have a Tax Free Savings Account (TFSA).
However, 27% admitted they have not started saving for retirement. And, few have thought about how much they should be saving. Only one in 10 young adults surveyed said they have thought a lot about how much money they will need to save for retirement.
“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,” says Tina Di Vito, head of the BMO Retirement Institute. “A clear dichotomy exists between what young people think about retirement and what they are actually doing to prepare for it.”
Given the wide range of financial demands on individuals in the 18-34 age group, it’s no surprise that young adults are struggling to save. Many young adults are carrying hefty student debt loads and mortgages; job prospects for recent graduates in the current environment are limited; and real wages are lower, according to the report.
Despite these challenges, however, young adults can take steps to begin preparing for retirement, even if they aren’t able to begin putting money aside right away. For instance, Di Vito says they could begin by educating themselves on the retirement planning process.
Financial advisors can help with the education process by inviting clients to bring their children to a meeting. Encourage the young adults to start thinking about budgeting and money management, Di Vito suggests, and direct them to seminars, webinars and other educational resources.
“Parents and other influential adults have to foster an environment that will encourage young people to think about their financial future,” Di Vito says. “Despite the challenging and complex financial realities facing young people today, increasing their financial preparedness for retirement will guide them towards positive results.”
When talking to young adults, advisors should try to make the conversation relevant by avoiding terms like “retirement planning”, Di Vito adds. Instead, use phrases such as “save money for tomorrow”.
In addition, to effectively get the message across, she urges advisors to be open to using the preferred channels of communication among young people, such as smartphones and social networking websites.