Can younger generations afford retirement?
One positive to arise from the global pandemic is the engaged approach taken by the younger generations when it comes to retirement savings.
Generation Z (ages 18-23) and Millennials (ages 24-40) often are labelled as poor money managers. They’re saddled with debt – student loans, car payments and other self-inflicted debts - and have little concern with paying it off.
That’s not an ideal recipe for a comfortable retirement.
Though the widespread uncertainty precipitated by the ongoing pandemic may have helped shift a focus on saving and spending habits.
The kids are saving
According to a 2021 survey by Sun Life Financial Inc., nearly 90 per cent of Generation Z and 80 per cent of Millennials are saving and planning for the future. Additionally, 81 per cent of Gen-Zs and 76 per cent of Millennials admit they’ve increased their attention on financial security.
However, only 60 per cent of Generation X (ages 40 to 55) and baby boomers (ages 56 and older) could say the same.
Of the Millennials who are actively saving, roughly half of those surveyed have set aside up to nine per cent of their income for retirement — $5,000 of the average annual Millennial household income of $55,000.
When is it enough?
Thirty years of investing at that rate would result in approximately $600,000 in retirement savings. But when you consider that the majority from these two demographics expect to retire by 60, it’s uncertain whether that savings would last 25-30 years (or longer) in retirement.
Coupled with the fact the average Millennial carries a debt load of approximately $30,000, additional monthly contributions to savings instead are paying off credit card debts.
However, some savings are better than no savings. And the sooner young people start saving for retirement, the better. This is especially important for the younger generations, who are more likely to switch jobs or be unemployed or underemployed at some point in their careers.
Early and consistent saving means the less you’ll have to save overall.
Those who are new to pension saving are encouraged to attend LEARN, our half-day workshop that helps with the basics of managing your finances and how a pension fits into your plan.