PM RITA TRICHUR; BUSINESS REPORTER
Two out of three Canadians expecting to retire in 2030 are failing to save enough money to cover basic household expenses in their golden years, says a new study released today by the Canadian Institute of Actuaries.
The report, “Planning For Retirement: Are Canadians Saving Enough?,” warns the greying baby boomer generation to either scramble to sharply increase their annual savings or plan to work past age 65 to avoid financial hardship.
"The message for most Canadians in their early to mid-40s is they will need to save more if they expect to enjoy an independent retirement," said the Institute's president, Normand Gendron.
"Governments need to provide Canadians with more education about the role that different savings vehicles can play in generating retirement income, and provide tools and incentives that encourage more households to save."
Canada’s public pension system is not intended to provide all the income needed for an independent retirement, the study said, noting it is only geared to replace about 40 per cent of gross income for households earning the average industrial wage, which was about $40,000 in 2005.
Canadians must act fast to build on this income through some combination of workplace pension plans, registered retirement savings plans, home equity and personal savings, it added.
In fact, actuaries determined a 40-year-old single person earning about $40,000 would need to save as much as 20 per cent, or $8,000, of his or her gross income every year for the next 25 years to cover necessary expenses in retirement. The study found that only a third of Canadian households are currently on track.
The study's findings stand in sharp contrast to a recent opinion poll by Pollara Inc. that found 55 per cent of Canadians aged 40 or older feel some level of confidence that they will have the financial resources to retire comfortably.
Those with retirement savings feel more confident, as do those with a workplace pension plan. Three out of four people surveyed said they plan to retire at or before age 65.
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