Most Canadians saving enough for retirement: survey

Here’s a conclusion you don’t often see during the height of RRSP-selling season: Most Canadians are saving enough for retirement.

According to a new report from consulting firm McKinsey & Co., many of us won’t starve in our old age thanks to existing government programs, as well as steady economic growth and rising real estate prices that are underpinning our wealth.

The survey, which includes responses from 9,000 working people and 3,000 retirees, shows 83 per cent of Canadian households are on track to maintain their standard of living in retirement.

It also highlights “a perception gap,” with about 60 per cent of Canadians worried they won’t have enough money to live comfortably in their golden years.

“Demographic shifts and rising life expectancy have created a common perception among Canadians that they face a retirement crisis, and that millions will be forced to significantly lower their standard of living when they leave the workforce,” says the report. “A strong majority of Canadian households are actually on track to maintain their standard of living in retirement.”

Translation for workers: Maybe you can afford that iPhone 6 after all.

Note to retirees: The kids are all right.

The survey may be welcome relief to many Canadians during this time of year, when financial services companies bombard us with advertisements about socking away more money for retirement. Most surveys released at this time of year also suggest that Canadians are in deep trouble if they don’t start maximizing those RRSP and other savings vehicles - immediately.

McKinsey has a different take, which many experts will disagree with. It says many Canadians will be financially sound thanks to “strong universal social programs,” coupled with the “considerable wealth of Canadian households.”

It cites data showing Canadian households have a combined net worth of $8 trillion in 2013, which equals a median net worth of more than half a million dollars for households nearing retirement.

Of course income and cost of living varies greatly across Canada, and everyone has their own definition of living comfortably in retirement.

For example, the McKinsey report says a two-income couple with a combined income of $40,000 or less throughout their working life can maintain their standard of living in retirement based solely on income from programs such as the Canada Pension Plan, Old Age Security and Guaranteed Income Supplement.

That might work in a small town in Ontario, but will be seemingly impossible in cities such as Toronto and Vancouver.

The McKinsey report says 14 per cent of households surveyed are spending more in retirement, while 33 per cent want to spend more but can’t afford it. The rest, about 53 per cent, are spending less in retirement and don’t feel like their missing out.

Of course, not everyone will be living comfortably in retirement. The study shows 17 per cent of the nation’s households financially unprepared for life after work. Those are mostly people who don’t or can’t save enough.

The report recommends a targeted approach from policymakers - especially for those with higher incomes without a company pension plan - instead of new retirement programs aimed at all Canadians.

“Targeted solutions to address the lack of readiness in these groups could strengthen Canada’s already robust retirement readiness,” says the report. “However, these solutions should be balanced in such a way that they maintain the fairness of the system for all of Canada’s households.”