INTEREST RATES AND INFLATION PUTTING RETIREMENT AT RISK - ESPECIALLY FOR MORTGAGE HOLDERS AND RENTERS

A new Co‑operators survey shows nearly half of respondents with mortgage payments or currently renting say they will need to work past the age of 65 to fund retirement

TORONTO, Feb. 27, 2024 /CNW/ - As Canadians continue to grapple with high interest rates and rising cost of living, a new survey from Co‑operators shows that Canadians, especially those who rent or have mortgage payments, are managing these economic pressures by putting off saving for retirement.

The Co‑operators survey found that those who rent and those who have mortgages share similar views about retirement planning. Renters appear most mired by day-to-day expenses, with the majority (77 per cent) saying they have either not started saving for retirement or have less than they planned to have saved by this age. For those who have mortgage payments, over half (51 per cent) have also saved less than they planned to by now. This contrasts with mortgage-free homeowners who appear better positioned for their golden years - three quarters (76 per cent) say that they have saved as much or more than they planned to by now with three in 10 (32 percent) saying they have saved more for retirement than they expected to.

"Canadians are facing a precarious and challenging situation as they try to prioritize their spending. As a result, many are putting their retirement at risk, especially those who pay a mortgage or rent," said Rob Wesseling, President and CEO, Co‑operators. "This is a clear signal that today's economic strain is jeopardizing the long-term financial security of most Canadians."

By and large, Canadians feel resigned to a retirement that looks nothing like that of past generations. While more than half (57 per cent) of mortgage-free homeowners are confident their RRSP and other savings will fund their retirement, mortgage holders and renters are much less confident. Only three in 10 (28 per cent) mortgage holders and two in 10 (22 per cent) of renters think their RRSP and savings will be enough.

Faced with the increased cost of housing and lending rates, many renters (43 per cent), and a fair number of mortgage holders (23 per cent), say they are unsure how they will fund their retirement. Only 13 per cent of mortgage-free homeowners are uncertain.  A significant proportion of both mortgage holders (48 per cent) and renters (38 per cent) expect to work either full or part-time past the traditional retirement age of 65, compared to only a quarter (24 per cent) of mortgage-free homeowners.

"These survey results show that Canadians are facing a tough choice – paying for living expenses today or putting some money away for tomorrow. But by setting aside their long-term goals, they're risking a bleak future," said Jessica Baker, EVP of Retail Wealth, Co‑operators. "The fact of the matter is, it's not a question of either-or. Experienced financial advisors can help figure out a way to manage day-to-day expenses while maintaining a long-term plan for financial stability."

A plan is a critical part of reaching short and long-term financial goals. Despite this, only half of respondents say they have one. The one in four respondents who developed their plan with an advisor reported the highest confidence in their financial security (60 per cent positive vs. 38 per cent national average). The most common perceived barriers to investment for those without a plan were: thinking they don't have enough to invest (27 per cent), investing being too complicated (22 per cent), and not knowing where to start (14 per cent).

Concerningly, these perceived barriers are manifesting a very real barrier to retirement planning - a delay. Waiting for calmer financial times, or for a higher salary, means more Canadian's will be paying for retirement out of their pay cheque instead of collecting compound interest. That can make reaching the desired amount and age for retirement even more challenging. Someone who starts contributing at age 40 instead of age 30 would need to contribute nearly twice as much on an annual basis to reach the same savings goal by age 65.

Even in the face of a challenging financial landscape, it's clear that Canadians can't afford to wait for sunnier days. For those unsure where or how to start, Co‑operators offers the following advice:

1.  Reach out to a financial representative.

• Seek the advice of a licensed financial professional who can help you build a plan that considers your budget and needs.

2.  Set your savings and investing goals.

• Saving and investing can start with any amount of money and a tangible goal can help you create a plan that works for you.

3.  Leverage an RRSP, TFSA or FHSA.

• Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) are easy to set up and help you pay less income tax, enjoy tax-deferred investment growth, and benefit from compound interest.

About the Survey

The national online survey of 1,500 adult residents of Canada was conducted between January 24-30, 2024. The sample was randomly drawn from a panel of potential survey respondents (Leger Opinion). Post-stratification weights were applied to the sample based on 2021 census population parameters to ensure representation by province, age, and gender. An associated margin of error for a probability-based sample of this size would be ± 3 per cent, 19 times out of 20.

About Co‑operators

Co‑operators is a leading Canadian financial services co-operative, offering multi-line insurance and investment products, services, and personalized advice to help Canadians build their financial strength and security. Co‑operators has more than $62 billion in assets under administration and has been providing trusted guidance to Canadians for the past 78 years. The organization is well known for its community involvement and its commitment to sustainability. Achieving carbon neutral equivalency in 2020, the organization is committed to net-zero emissions in its operations and investments by 2040, and 2050, respectively. Co‑operators is also ranked as a Corporate Knights' Best 50 Corporate Citizen in Canada. For more information, please visit: www.cooperators.ca.

Mutual funds are offered through Co‑operators Financial Investment Services Inc. to Canadian residents except those in Québec and the territories. Segregated funds and annuities are administered by Co‑operators Life Insurance Company. Terms and conditions apply. Please refer to cooperators.ca/mutualfunddisclosure for details.

Co‑operators Financial Investment Services Inc. is committed to protecting the privacy, confidentiality, accuracy and security of the personal information that we collect, use, retain and disclose in the course of conducting our business. Please refer to our privacy policy for more information. Co‑operators® is a registered trademark of The Co‑operators Group Limited. © 2024 Co‑operators Financial Investment Services Inc.

For further information, please contact: [email protected]

SOURCE The Co-operators Group Limited