Rosalind Evans
A new survey from the Healthcare of Ontario Pension Plan (HOOPP) reveals that many Canadians are struggling to save enough for retirement due to the challenges presented by inflation and escalating interest rates, with a considerable number considering postponing their retirement plans.
Ivana Zanardo, HOOPP’s head of plan services, notes that the persistent issue of rising inflation and interest rates has made it increasingly difficult for Canadians across all age groups, particularly the older demographic, to save for retirement.
Even though inflation has been gradually diminishing recently, the April year-on-year rate of 4.4% remains over twice the central bank’s target rate, set at 2%. Last week, the Bank of Canada escalated its overnight rate to 4.75%, after numerous consecutive months of maintaining it steadily, due to concerns about persistent inflation.
The study conducted by HOOPP and Abacus Data, released on Thursday, found that nearly 44% of Canadians aged between 55 and 64 who are yet to retire have under $5,000 in savings. Moreover, one in five individuals within this age bracket disclosed that they hadn’t set aside any funds for their retirement.
Zanardo painted a grim picture of the situation for these older Canadians. Over half of the respondents aged 55-64 expressed that escalating inflation might force them to reconsider their planned retirement date.
A troubling revelation from the survey is the older age group’s lack of preparedness for retirement. Zanardo expressed her concerns stating that instead of eagerly anticipating retirement, many are contemplating whether they can retire as planned due to inflation and rising interest rates, leading them to consider delaying their retirement.
David Coletto, CEO of Abacus Data, revealed that about 70% of respondents have consistently agreed that Canada is on the brink of a retirement crisis over the five years of conducting this survey. He stated that this crisis may be imminent for older Canadians if current economic trends persist.
One of the significant worries respondents outlined is accumulating adequate retirement funds. Among all participants, 44% admitted that they didn’t save any money for retirement in the past year, a rise of 6% year over year.
The survey also indicated that young adults aged between 18 and 34 find it tough to plan for their future. Half of this group confessed to living beyond their means. At the same time, a majority expressed concerns about the influence of higher interest rates on their retirement savings and ability to clear the debt.
Despite the increasing cost of living, Zanardo insists that consistent early saving is still the best strategy for retirement. However, this proves challenging when concerns over inflation-adjusted income, housing affordability, and retirement savings come into play.
Nearly 70% of respondents said they would accept lesser pay for a more robust pension. Furthermore, 78% opined that it should be mandatory for all employers to contribute to employee pensions in some capacity.
The survey results underscore the increasing economic pressures facing Canadians, especially those nearing retirement. It highlights the urgent need for financial strategies to address the imminent retirement crisis and the role of employers in contributing towards employee pensions. As rising inflation and interest rates continue to impact Canadians’ ability to save for retirement, the prospect of a delayed retirement could become a reality for many.
