Millennials are worried about retirement. Is it too late to start saving?

The dream of one day retiring seems elusive for most Canadians but especially, it seems, for millennials, with a new BMO survey showing more than 70 per cent of them worry it’ll be harder to retire than it was for their parents.

The anxiety around retirement cuts across generations, with 67 per cent of all respondents saying retirement planning will be more difficult than it was for their parents. However, this fear was most pronounced among millennials (73 per cent).

Gen X expressed similar anxieties, with 68 per cent saying they will have a harder time setting up retirement than previous generations.

Nearly six in 10 Gen Z (61 per cent) and boomers (60 per cent) felt the same.

A good way to know how much money you’re going to need in retirement is to look at your current lifestyle expenses and slash that to about 70 per cent, financial planner Laura Whiteland said.

“If we said, OK, you could live at 70 per cent of your current lifestyle expenses, that’s generally a good rule of thumb. You’re going to be similarly well off,” she said.

This is partially because in retirement, you cut down on employment-related expenses and are living a generally more tax-efficient life, she said.

However, a one-size-fits-all goal doesn’t work for everyone, said Paul Lalonde, head of wealth planning at BMO Private Wealth Canada.

“It’s all based on your goals, your objectives, what you want to accomplish. I can tell you that some people during their retirement years will actually be spending more than they are today because they want to enjoy life. They’ve been frugal and they’ve been saving and now they want to enjoy all those savings,” he said.

You can have a comfortable retirement, even with a smaller nest egg, said Ben McCabe, CEO of Bloom Financial.

“Retirement planning should start with the life you want, not a dollar target. The most confident retirees aren’t the highest earners, they’re the ones who got clear early on their lifestyle, costs and income sources, and adjusted over time,” he said.

There’s no such thing as too early to start planning or saving for retirement, McCabe said.

“Millennials and Gen Z are right to feel pressure from higher housing costs and longer retirements. Starting small and early, even with modest, automated savings, makes a meaningful difference over decades. The biggest regret older Canadians share isn’t poor investment choices, it’s waiting too long to start planning,” he said.

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Saving habits should be built early, Lalonde said. And it starts with one simple golden rule: pay yourself first.

“Most Canadians get paid every second week. So, when those pay cheques come in, it’d be a matter of just going into your online banking account or working with your banker or professional advisor to set up those pre-authorized saving habits every second week. Just take the money from your paycheque and deposit it into your savings account,” he said.

Lalonde recommends committing to an amount and making that the first thing you deduct from your paycheque.

The simplest way to start saving for retirement is to ask your bank or financial institution about the registered retirement savings plan (RRSP) and the tax-free savings account (TFSA), Lalonde said.

“You can’t go wrong with any of those strategies. And we also have the first home savings account (FHSA) to help millennials save for their first home. We strongly encourage you to maximize those accounts,” he added.

While both the RRSP and TFSA are useful retirement tools, they have slightly different purposes.

For example, the TFSA has fewer rules around what you can withdraw it for.

“You’re free to withdraw at any time without penalty, but there are government-mandated limits to how much you can contribute every year. The maximum you’re allowed to put into a TFSA each year is known as the contribution limit and it varies from year to year,” investment management service Wealthsimple says on its website.

On the other hand, RRSPs will help you save money on your current tax bill, but it can come with withdrawal limitations.

Ideally, you’d want to have both kinds of accounts, but depending on your income, you might want to prioritize one over the other, Wealthsimple says.

“The higher your income, the more likely it’ll be that you have a significant chunk of money you can contribute to your RRSP (while still keeping contribution room and deduction room limits in mind), which you’ll then get back as a tax refund,” Wealthsimple says on its website.

“And you know what you can then do with all that extra money you get back? Put it into a TFSA and enjoy more tax benefits.”

Compared with baby boomers, Gen X has a lot more time before they hang up their boots. But McCabe said the decisions they make now will compound over the next decade.

“For many Gen X homeowners, their home will be one of their biggest retirement assets,” he said.

“Thinking about how that equity could support retirement income, whether through long-term planning tools like reverse mortgages later on, or other ways of improving cash flow, helps make retirement plans more realistic and less dependent on everything going right in the markets.”

The important thing is to be realistic, without panicking, Whiteland said.

“It’s never as bad as you think and it’s never as good as you hope,” she said.