Over 60% of Canadians are afraid of running out of money in retirement, study shows — Here's how to manage that anxiety with solid financial planning

The generation feeling the biggest sting

There is something to say about youthful abandon and living life to the fullest when your responsibilities are less crucial. However, young adults are becoming increasingly concerned with their financial security.

Sixty-three percent of Canadians between the ages of 18 and 24 years old are stressed about how much money they will have saved for their future, and report being anxious about making bad decisions now that could impact their financial situations in the future.

Those between 28 and 44 years old represent 67% of the group who say they are worried, with women representing a vast majority at 66%.

However, these worries lessen as Canadians age, with only a third of those 65 years and older saying they are scared about their retirement finances.

What economic factors are causing the most stress for those concerned with their finances?

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Inflation and affordability are top concerns

Michel Leduc, the senior managing director & global head of public affairs and communications for CPP Investments, says that running out of money because of longer life expectancies is an factor for why many are feeling financial stress. “This underscores the importance of building a solid understanding of your personal finances and seeking resources to improve financial literacy to help you manage money more effectively,” he said in a statement.

The top two concerns that are keeping Canadians up at night are Inflation and affordability concerns, which, in the past year alone, has resulted in Canadians raising their retirement savings goal over 30%, from $700,000 to $900,000 to ensure less stressful Golden Years.

Don't worry, though — you can take steps today to prepare for retirement and ease the anxiety about your financial future.

Plan your retirement roadmap

First of all, if you're a working Canadian, you are already saving for yourr retirement through your CPP contributions.

According to Leduc, “One thing that Canadians have that protects them is that their CPP benefits are payable as long as they live and are indexed to inflation. They can take comfort in the fact that the CPP – in part through the work of CPP Investments – will be there for them and for generations to come.”

Additionally, this social insurance program is one of the largest pension plans in the world, with the CPP Fund holding more than $675 billion in assets with a 10-year net return of 9.1%.

Beyond CPP, the Canadian Investment Regulatory Organization (CIRO) has a useful roadmap for retirement and says that how much to save depends on the strategy you want to use.

According to CIRO, $1 million is a good target number to save. Another recommendation is to add up all your investments and withdraw 4% total during your first year of retirement, adjusting for inflation each year.

It is also important to think about your lifestyle — do you want to travel, what will your healthcare require, do you have expensive hobbies? These factors should come into play when you think about how much to save.

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Where to put your money for retirement

You can save your money using accounts such as Registered Retirement Savings Plan (RRSP), where all contributions and earnings are tax-free. Another option is Tax-Free Savings Account (TFSA,) which may be more appealing to Canadians with lower income earnings because the benefits stay the same regardless of how much money you take out.

Consider finding everyday ways to save for retirement. Whether it’s making sure you work out a budget and stick to it, shopping around for insurance to get the best rates, or meal prepping so that you can save on grocery costs — every penny saved today is a penny in your pocket for when you’re older.

Something else to consider is that delaying your retirement may not work in your best interest, even if you continue to work and earn past the traditional retirement age of 65. Some companies' benefits programs stop at the age of retirement, so if you do end up working and run into health issues or get injured on the job, you may not be covered.

Money worries are top of mind for many Canadians, but with careful planning and consideration you can put some of the retirement anxieties at bay.

Sources

1. CPP Investments: Nearly 2 in 3 Canadians worry about retirement savings: survey (Oct. 30, 2024)

2. Canadian Investment Regulatory Organization: A Guide to Retirement Planning and Living