Why Millennials May Face a Rude Awakening in Their Golden Years

Apparently some of us may have our heads in the clouds. A recent study from ING DIRECT revealed that the majority (64 per cent) of working millennials aged 18-34 are contributing regularly to their retirement savings, but 69 per cent do not max out their annual retirement contribution savings regularly and 61 per cent reported having no idea of the costs needed for retirement. Most young professionals (YPs) have high hopes for the future and all the money we will accumulate once our careers really take off (if they haven’t already), but we will pay later if we live only for today. Better start incorporating sound financial planning into your #LYNL (Live Your Notable Life) mantra right after reading this…

Think about it: do you really want to spend what are supposed to be your golf-filled, stress-free golden years worrying about money? For many once-retired Canadians, the reality of life after work isn’t what they imagined 20 or 30 years ago, and they are retiring much later than expected and even returning to the workforce. In a separate, related ING DIRECT survey, close to half (48 per cent) of Canadians 55+ who re-entered the workforce after retirement report having to do so because of financial circumstances and nearly a third (31 per cent) returned on a full-time basis. That sounds far from ideal to us. The reality, however, is that 33 per cent say they did not have enough money saved for retirement and 31 per cent say they faced increased living costs. And life isn’t getting any cheaper…

“The reality of retirement for many Canadians is a sobering reminder that you can’t put your financial future on the back burner. Among the many other financial priorities we face during our prime working years, we need to make sure that retirement planning doesn’t get overlooked,” said Peter Aceto, President and CEO at ING DIRECT.

Aceto added that motivation to save, saving regularly and starting early are key to helping Canadians develop a life-long habit of saving that will better prepare them for retirement. The good news is that it’s not too late for most Canadians to start adopting these positive saving habits.

There is a lot to be learned from this boomer generation and many would have done things differently if they could. If given the opportunity to re-visit their 20s and 30s, Canadians who re-entered the workforce said they would have found a way to save more for retirement (29 per cent), they would have started saving earlier (24 per cent) or they wouldn’t have spent money so mindlessly (11 per cent). Furthermore, 40 per cent would have maxed out their annual contribution if they had a better understanding of how much was needed to retire, while 16 per cent felt they would have benefited from a good financial role model.

Their advice? Forty-two per cent said to start saving as early as possible, 21 per cent said to take control of your personal finances, 18 per cent said to learn how to budget, and 12 per cent suggested saving more and spending less.

It all sounds great in theory, but what do we actually need to get motivated? Twenty-nine per cent of Millennials surveyed said good money habits passed on by parents would inspire them to save. Having a financial plan and sticking to it (22 per cent) and knowing a family member or friend who is struggling in retirement/hasn’t been able to retire (18 per cent) were also cited as reasons to feel encouraged to save for the future.

These younger, working Canadians are confident, however, that they will retire when expected because they intend to avoid debt by saving more than they spend (41 per cent), by having a financial plan and sticking to it (37 per cent), or by knowing how much they’ll need to retire (20 per cent). Unfortunately, a significant number of these working millennials (29 per cent) still are’t confident they will retire when they want.

So if you have grand dreams of retiring in Florida or an exotic island abroad before the age of 65, you had better get your priorities straight. There’s no time like now to start.

For a few words of financial wisdom, tune into a live Twitter chat with @SuperStarSaver about RSPs and TFSAs by following the hashtag #OrangeChat on January 23, 2014, from 12 – 1pm EST.


Cover Image from: lenbrzozowski.wordpress.com

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