Canadians won’t be able to retire until they’re 75, according to a new study by Mercer Canada.
The Mercer Retirement Readiness Barometer predicts that Canadians aged 28 with an average income of 45,000 per year won’t be able to achieve the traditional retirement age of 65.
Instead, Canadians will be retiring at 75 — or, as the study ominously warns, “not at all.”
The reason? Well, despite what Australian millionaire Tim Gurner thinks, it isn’t avocado toast.
“In order to achieve the traditional retirement age of 65, our prototypicall would need to increase their combined savings rate to ten percent, starting today,” the study says.
“This is not a realistic prospect for many members of this generation, who have more immediate financial priorities: paying down debt, managing student loans or buying their first home.”
In contrast, the average Canadian boomer at age 60 with current earnings of $100,000 will be ready for retirement by 65, primarily thanks to “defined benefit pension plans” managed by their employer.
The average Canadian Gen Xer — aged 45 with current earnings of $70,000 — will also be able to retire a few years earlier than millennials.
So how can Canadians afford to retire earlier? According to Mercer, the answer is simple: employers must do more.
The consulting firm suggests introducing better employees savings programs that promote debt re-payment, access to personal savings accounts and guidance to prepare millennials as they approach retirement.
Canadians can also make better investment decisions.
Mercer recommends investing in “a healthy mix of equities and bonds,” and making sure that your savings rate is as close to 10 percent as possible; that means if you’re earning 45,000 a year, putting away $375 per month before tax.
The consulting firm warns that “a savings rate any lower than six percent total annual company and employer contribution means that retirement may be altogether impossible.”
In conclusion? It’s no surprise that Canadian are ditching Toronto and Vancouver to move to more affordable cities. Ottawa, you’re looking good.