55% of Canadians surveyed worry about their retirement security
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Results of a survey commissioned by the Healthcare of Ontario Pension Plan (HOOPP) and Abacus Data showed that 55% of respondents are worried about not having enough money to survive retirement. Note that the survey was conducted from April 21 to April 27, 2022, when inflation had not yet reached 7.7%.
David Coletto, CEO of Abacus Data, said, “The overall outlook for retirement security in Canada is darkening. The survey results highlight the challenges ahead for more Canadians who want to save for retirement security. Whether you are young or close to retirement, the outlook is not bright.
Canadians under 35 believe they are less likely to own a home or have more than $5,000 in savings. Meanwhile, 75% of non-homeowners aged 18-34 expressed concern about their inability to buy a home due to high borrowing costs. In addition, the same age group cannot afford mortgage payments.
Coletto said, “75% of all Canadians agree that there is an emerging retirement crisis in Canada. And 72% believe retirement savings are prohibitively expensive. He added that if current trends continue, more difficult times are ahead for the younger generations. According to a poll by Angus Reid, 62% of Canadians aged 55 and over have postponed retirement and 63% fear they will never be able to retire.
The older generation admits to not having enough savings or investments to prepare for retirement. Steven McCormick, Senior Vice President of Plan Operations at HOOPP, said, “Concerns about retirement and savings have been high every year we’ve conducted the Canadian Retirement Survey, and now they’re exacerbated by rising interest rates and inflation.
An aggressive strategy to provoke a moderate recession
Royal Bank of Canada (TSX: RY) (NYSE: RY), via Economists Nathan Janzen and Claire Fan, said, “Canada’s economic growth has accelerated following the pandemic shutdowns. But a historic labor shortage, soaring food and energy prices and rising interest rates are now approaching.
The pair believe the pressures will likely push the economy into a moderate contraction in 2023. However, by historical standards, the slowdown is expected to be modest, they said. According to the Canadian Center for Policy Alternatives (CCPA), the Feds have managed to reduce inflation three times in 60 years. However, a recession followed rapid and aggressive rate hikes.
Invest for the long term
Retirement experts suggest investing for the long term. If you’re young and time is on your side, set aside money regularly to save and invest. For example, RBC is the largest lender in Canada. The $172.4 billion bank has weathered the worst recessions and financial crises, but holds its own firmly until today.
RBC’s dividend history is now 152 years old. The Big Banks stock trades at $120.80 per share and pays a dividend of 4.32%. Assuming you use your TFSA limit of $6,000 for 2022, your investment will generate $64.80 each quarter. In a horizon of 20 years, the silver will reach $13,979.86. The example shows the power of compounding.
Improving retirement security
McCormick said more than half of Canadians are worried about rising interest rates and inflation. This will lead to financial hardship and force them to retire later. Finances permitting, younger and older generations should try to invest and use retirement accounts to improve retirement security.