Faced with high levels of student debt, many young Canadians are unsure whether they’ll be able to save for retirement, according to a study conducted by Toronto-based BMO Financial Group.
According to the study 80% of Canadians aged 18 to 34 do not feel confident that they will be able to save for retirement. As well, over half of those surveyed believe they will be unable, or only just barely manage, to match the comfortable retirement of their parents.
One of the biggest obstacles in saving for retirement for young Canadians, according to the study, is their debt. Of those people surveyed, 46% said they are more concerned about paying down debt as opposed to putting money aside for retirement. Only one-in-four people said they were concerned about saving.
Getting debt under control is a good thing for young Canadians to do, according to Chris Buttigieg, senior manager, wealth planning strategy, BMO Financial Group in Toronto, however, it doesn’t justify putting off saving for retirement. Instead, Canadians who have finished school and started working could be “hitting two birds with one stone,” says Buttigieg, through saving in a registered retirement savings plan and using the refund to pay down their debt.
Such a strategy should strike a cord with the demographic in the study as 91% said their RRSPs will be a primary source of income during retirement. According to Buttigieg, the key to helping clients make the most of their RRSPs is through setting up a routine. Advisors have clients set up an automatic savings plan, says Buttigieg, even if it’s only a small amount each week or month. “Once it’s set up it’s automatic,” he says, “so it’s a forced savings habit.”
As well, to help younger clients save automatically, says Buttigieg, advisors should discuss the possibility of using an employer savings plans that match contributions. “It’s like a continuous savings plan,” he says, “but the withdrawal will come right from [the client’s] payroll.” Making sure clients set up an employer savings plan is also important because 82% of people surveyed said, like an RRSP, those funds will play a big role in funding their retirement.
Even advisors with an older client base can help younger Canadians, says Buttigieg, by having clients bring their adult children to a meeting. Says Buttigieg: “That’s at least a starting point to getting [younger clients] to think about what’s important to them and what are their goals and objectives in the future.”