More employees expect to retire later than originally planned, according to a survey.
The Canadian Payroll Association’s (CPA) sixth annual National Payroll Week Research Survey finds that 79% of employees expect to delay retirement until age 60 or older, up from 70% over the past three years. The No. 1 reason cited for retiring later in life is that employees are not able to save enough money.
Employees also continue to raise the bar in terms of what they think they will need to retire comfortably:
- fewer now feel that savings under $500,000 will be sufficient (18%, down from an average of 21% over the past three years); and
- more think between $500,000 and $2 million will be required (68%, up from an average of 60% over the past three years).
Yet despite upward adjustments in perceptions of what constitutes an adequate nest egg, the vast majority of employees are nowhere near reaching their goals. Seventy-five percent say they have put aside less than a quarter of what they will need in retirement (up from an average of 73% over the past three years).
And even among employees closer to retirement (50 and older), 47% are still less than a quarter of the way there, indicating a significant retirement savings gap.
Saving less
The low savings rate has become even more prevalent this year. Half of all employees are putting away just 5% or less of their pay, versus an average of 47% over the past three years.
Of those who indicate they are trying to save more today than a year ago, fewer are able to do so (65%, down from an average of 67% over the past two years). Part of the reason for low savings is that 44% of employees are spending all of, or more than, their net pay. The survey identifies children, home renovations and education among the top reasons for increased spending.
The provinces/regions with the highest percentage of employees spending all of, or more than, what they earn are Manitoba (58%), Atlantic Canada (58%) and Saskatchewan (54%).
“Those who are trying to save but finding it hard to succeed should consider directing a portion of net pay into a separate savings account and/or a retirement savings program,” says CPA president and CEO Patrick Culhane.
Living paycheque to paycheque
More than half (51%) of employees report that it would be difficult to meet their financial obligations if their paycheque was delayed by a single week. This is up from an average of 49% over the past three years.
For those ages 18 to 29, the number is even higher: 63% report living paycheque to paycheque.
Another finding confirms that more than a quarter of those surveyed are living very close to the edge. A total of 26% say they probably could not pull together $2,000 over the next month if an emergency expense arose.
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