Why Gen X struggles to save for retirement: survey

More than a quarter of Canadian gen-Xers (28%) haven’t saved anything for retirement, finds a Franklin Templeton Investments Canada survey that contrasts that finding with 37% in the U.S.

On both sides of the border, gen-Xers would consider retiring later than planned if they do not have enough income (56% in Canada and 59% in the U.S.), the survey adds, noting even millennials who are likely decades away from retirement would consider retiring later. More than half of North American millennials are open to pushing out their retirement timelines (51% in Canada and 54% in the U.S.).

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What must be considered is pre-retirees may not have as much say in when they retire as they think. The survey says nearly a quarter of North American retirees surveyed actually stopped working earlier than expected due to circumstances beyond their control, including health issues and company downsizing (23% in Canada and 22% in the U.S.).

“With the rising cost of living—coupled with school-aged children, their own student loans or aging parents to attend to—generation X is being stretched beyond their financial limits,” says Duane Green, president and CEO, Franklin Templeton Investments Canada, in a release.

“This reinforces the importance of financial planning advice, and incorporates tools like setting up automatic contributions to help ensure you are better prepared for the future.”

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Why gen-Xers aren’t saving

Nearly half of Canadian gen-Xers, who do not maximize or know their annual contribution limits in all of their registered accounts, say they can’t save more because their incomes are too low. More than a quarter say their expenses are too high.

Meanwhile, 24% have prioritized paying down debt; 46% have a mortgage; and 28% are renting out their homes.

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Matthew Williams, senior vice president of Franklin Templeton Investments Canada, forecasts that Gen-Xers may not be as lucky as the previous generation when it comes to saving and retirement, given many baby boomers were able to sell in high-flying real estate markets and had pensions.

Conversely, many gen-Xers could “have hefty mortgages that they can barely afford—especially if interest rates increase—and some do not even have home equity as they are renting,” he says in the Thursday release.

But the picture isn’t rosy for all baby boomers, either. Even where that cohort can rely on housing market gains, it’s still shocking that 20% of pre-retiree baby boomers have saved nothing for retirement, the survey says. This could be why 74% of them are stressed and anxious about their retirement funds.

Financial advice helps

Canadians who have never had an advisor are much more likely to have some kind anxiety compared to those who currently get advice (71% vs. 56%). Indeed, those who have never had an advisor are four times more likely to experience significant stress about their retirement savings than those who have.

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Further, the correlation between working with a financial advisor and saving more for retirement is strong across generations: Canadians who are not retired and have an advisor are three times more likely to have saved more than $100,000 for retirement versus those who currently do not have one (49% vs. 16 %).

When asked if they have a strategy to generate income for retirement that could last thirty years or more, those with an advisor were more than twice as likely to have a strategy, the survey finds.

Additional findings

Generational

48% of millennials haven’t saved anything for retirement.
28% of millennials live with their parent(s) or their spouse’s parent(s).
47% of millennials, who do not maximize or know their annual contribution limits in all of their registered accounts, claim their income is too low to save for retirement.
Twice as many pre-retiree baby boomers expect that the government pension will be their primary or secondary source of retirement income compared to millennials (40% vs. 19%).
Over half of pre-retiree baby boomers would retire later if they had to but, when faced with the reality of that choice, only one third of retired baby boomers actually did leave the workforce later due to insufficient income (52% vs. 33%).

Retired vs. not retired

51% of retired people are relying on a government pension as their primary and secondary source of retirement income, compared to 25% of pre-retirees.
39% of retired baby boomers are relying on a workplace pension plan as their primary source of retirement income, compared to 21% of pre-retiree baby boomers.
41% of pre-retiree women say their top concern about retirement is running out of money, compared to 15% of retired women.
27% of those newly retired (one to five years into retirement) say their expenses increased since they retired, compared to 38% of those 11 or more years into retirement.

Regional findings

31% of Ontario and 31% of Quebec residents haven’t saved anything for retirement, compared to 15% of Manitoba residents.
55% of Alberta residents did or would consider retiring later due to insufficient income, compared to 40% of Quebec residents.
Saskatchewan residents are most concerned about running out of money in retirement, while both Alberta and Quebec residents are least concerned (39% vs. 28%, respectively).
B.C. residents are most concerned about health issues in retirement while Saskatchewan residents are least concerned (35% vs. 19%).
Quebec residents are most concerned about lifestyle expenses in retirement while Atlantic Canadians are least concerned (27% vs. 17%).

About the survey: Conducted online among a sample of 2,009 Canadians and 2,002 Americans, the survey was administered from Jan. 17 to Jan. 28, 2018. The data is statistically weighted by age, gender and geographic region in Canada, and by age, gender, geographic region, education and race in the U.S.

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