Millennial homeowners said to have easier time saving for retirement

Those of us of a certain age worry about our millennial kids and grandkids, chiefly because of the massive costs they face in order to own a home, and the higher interest (and mortgage) rates they are dealing with.

If there’s a silver lining, it may be that those home-owning millennials will have an easier time saving for retirement than their peers who rent — so says an article in the Financial Post.

“Owning a home could make all the difference between millennials having enough money to retire or being forced to work longer than their parents did,” the article explains.

“If millennials — who today are in their late 20s to early 40s — rent throughout their working lives, then they must save a lot more than homeowners in order to retire in their 60s, according to the 2023 Mercer Retirement Readiness Barometer,” the article continues.

“This is a generation where being able to retire is one of the top three challenges when we look at unmet needs,” Mercer Canada’s Jillian Kennedy states in the article.

The article says millennials who rent “will need to save eight times their salary over the course of their career to be able to retire at age 68.” But a millennial homeowner needs to “only” save 5.25 times their salary to be able to retire three years younger, at age 65, the Post reports.

These figures are based on a millennial earning $60,000 annually and saving 10 per cent of their salary to a monthly savings plan, starting at age 25.

OK, so why are the homeowners able to save so much less?

“Homeownership gives retirees flexibility, as retirees who downsize may be able to access a significant amount of money. Renters, conversely, must pay rent every month or face eviction – whether they are 25 years old or 85 years old,” the Post reports, citing a Mercer media release.

As many of us worrying parents and grandparents already know, the big problem millennials face with housing is its cost.

“The composite benchmark price of a home in Canada rose 87.4 per cent over the last decade to February 2023, according to date from the Canadian Real Estate Association,” the article notes. These days, the article continues, “mortgage payments as a percentage of income on a ‘representative’ home stood at 64.6 per cent in the fourth quarter of 2022.”

Housing is said to be “affordable” when it represents one-third of disposable income, the article concludes.

Things sure have changed. Our late dad used to tell us, when we were kids growing up, that a mortgage should cost no more than “two years’ salary,” and that housing costs were affordable as long as they represented 25 per cent of salary. Those rules of thumb probably worked in 1965 but you’d have to make a heck of a lot of money to be able to follow them today!

The article tells us that even those millennials fortunate enough to enter the housing market still need to save a lot of money to be able to retire at 65 — we assume this is absent a pension plan at work. If you are saving on your own for retirement, check out the Saskatchewan Pension Plan. SPP will take your contributions, invest them in a pooled fund at a very low cost, and — when it is gold watch time — will help you turn your invested savings into retirement income, including the option of a lifetime annuity payment.

SPP no longer sets any limits on how much you can contribute to the plan. You can make an annual contribution of any amount up to your available registered retirement savings plan (RRSP)room. And you can transfer any amount into SPP from an existing RRSP.

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Scott Terrio knows all about the issues facing senior retirees.  Terrio, who is Manager, Consumer Insolvency at Hoyes, Michalos Licensed Insolvency Trustees, recalls doing “a lot of speaking engagements for senior groups” about money and debt. He said “retired people, who have lived a long time, ask a lot of questions (about finances), and they are certainly not a retiring bunch.”

Save with SPP spoke recently with Terrio by phone.

He says that debt is a problem for retirement, “both at the front end and the back end.” Debt can certainly encroach upon the money people want to set aside for their retirement, he explains, but it is even a bigger problem for those who are actually retired.

“Life is expensive,” says Terrio. As interest rates declined, and people’s equity grew, retirees – most living on a fixed income — began taking on debt for the first time. Seniors, he explains, began tapping into their equity for “various things,” such as helping the kids and grandkids get ahead and buy homes. These days, many have tapped into credit to pay for day to day living, he says.

Today’s retired seniors began making use of their equity, but at the same time, began to live longer. “People are living much longer than ever before. Retirement can last for 30 years or more.”  That can be costly, Terrio says. “The cost of (long term care) will kill you financially,” he says. “Care is very expensive – thousands a month – and that adds up if you live into your 90s.”

Retirees typically get into trouble gradually, he says. A lot of newly retired seniors don’t realize that they will usually owe income tax unless they have their pensions and government benefits adjusted to withhold more tax. “They are used to being on payroll, where someone takes the tax off for you. That doesn’t happen when you’re retired, and you can find yourself in a hole.”

Owing the Canada Revenue Agency for unpaid taxes isn’t usually a huge debt, but if you don’t have money to pay it, it can be “the straw that breaks the camel’s back,” he explains.

It’s having to pay for things like taxes that starts seniors looking at credit, and debt, he notes.

Once you use up your credit card room, “the banks love giving lines of credit and higher credit card limits to seniors, who tend to have equity, and since nine of 10 of them tend to pay it back.”

That’s why the expected jump in interest rates is also concerning, Terrio says.

“When interest rates go up, they have a direct effect on lines of credit,” he says. “Even an increase of $100 a month in interest payments is bad news for a senior. Now they have to pay that every month. And since the real rate of inflation is probably six, seven or even eight per cent, everything you’re buying is now more expensive and you have less money to spend. That’s the main issue.”

Debt is not something people get into on purpose. “In any age category, very few get into debt intentionally. It’s a gradual creep, usually driven by events such as loss of a job, sickness, divorce. You can maybe absorb one of these things at a time, but two – no way.”

As well, older Canadians want to help their children and grandchildren save for education and housing. “We are seeing the greatest intergenerational wealth transfer of all time,” Terrio says. And that can use up savings and leave people with debt as their only option.

The problem with debt is that it no longer is seen as a bad thing, Terrio says.

Maybe, he says, older folks once saw debt as shameful, but it is “not a shame thing” for many Gen X, Gen Y or millennials. “The younger people get accustomed to it, they less they are bothered by it.”

The problem, he concludes, is that debt “is seen as cash flow as opposed to debt.” People need to remember that credit card and line of credit money “isn’t your money… it’s the bank’s money.”

We thank Scott Terrio, who many years ago worked in Swift Current for a major farm equipment company, for taking the time to speak with us. Did you know that the money in your Saskatchewan Pension Plan account is locked in until you reach retirement age, and is also creditor-proof? If you run into financial troubles on your way to retirement, your SPP nest egg will be unaffected. It’s another great feature of the SPP.

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Save with SPP recently reached out to Andrea Andersen, Principal, Western Canada Leader and Financial Advisor at Edward Jones for the company’s thoughts on a recent survey on retirement carried out by the firm Age Wave. Here are her answers to our questions.

We were interested that “purpose” is seen as one of the four pillars along with health, family and finances. This suggests that maybe the research shows people are looking for more meaning in their retirement than perhaps in the past. Is that your impression too and can you expand on why purpose has become (apparently) more important?

Absolutely – one of the biggest insights from our study was that the majority of retirees say that all four pillars—health, family, purpose and finances—are interdependent and essential to optimal well-being in retirement. We were also surprised to see just how crucial purpose is to retirees, as 92 per cent surveyed said that having purpose is key to a successful retirement. 

One reason for the prioritization of purpose is that scientific research has shown that having a sense of purpose can actually reduce the risk of cognitive decline, cardiovascular disease and depression, and is essential to a long, healthy and potentially cost-saving retirement. Another reason we found was that having purpose helps retirees feel both useful and youthful. Nearly all (93 per cent) retirees say it’s important to feel useful in retirement, and 87 per cent also say that being useful helps them to feel youthful.

Retirement is a time of enormous freedom, but that same freedom from work and family responsibilities can also create a missing link when it comes to how to live a life filled with purpose. During the pandemic, we’ve seen many retirees have taken on new roles and responsibilities, such as providing childcare to grandchildren, shopping for higher risk neighbours, and providing emotional comfort to family and friends. These stepped-up roles have given retirees a greater sense of purpose and connection.

The idea that COVID is causing some people to postpone retirement is interesting, but we were also interested to learn that 20 million Americans and two million Canadians stopped making retirement contributions during the pandemic. What caused this – lack of employment and tight finances? Pessimism about the timing of their retirement? We’d be interested in your views on why people paused retirement savings.

Our study showed that the pandemic’s effect on finances has not been equally distributed by age, wealth, gender, or retirement status. The greatest negative impact has been felt by Gen Z and Millennials and the least by Silent Gen, who have the safety nets of pensions, Social Security, and other means to provide financial security.

One of the biggest financial challenges we saw impacting Americans and Canadians alike during the pandemic is what’s been dubbed the “she-cession,” or the deepening of the economic gender gap. Women were more likely to lose their job or exit the workforce due to the challenges of COVID-19. They have also been far more likely to take on the lion’s share of time spent caring for family members, including home-schooling children and providing eldercare to parents. One of the outcomes of this is that only 41 per cent of women planning to retire said they were saving each month for retirement, compared to 58 per sent of men.

Pressing short-term financial needs have also taken precedence over longer-term goals. Combined with the existing gender pay gap, the headwinds facing women saving for retirement present a serious challenge. It’s crucial for women – and anyone facing retirement savings shortfalls – to work with a trusted financial advisor to determine a holistic financial plan to prepare for short and long-term financial goals.

The healthspan vs lifespan findings were equally fascinating, we had not heard it expressed that way before. The idea that a significant chunk of retirement may be in poor health doesn’t seem to get discussed often. Do you have any additional thoughts on that topic – should people, for instance, think about planning for a period of poor health where their care costs will be higher?

We know that money is an essential ingredient in retirement planning, but it’s not the only one. On average, the World Health Organization reports that the gap between life expectancy and healthy life expectancy, defined by the years lived in full health and free from disability, is 10.9 years for Canadians. That discrepancy tends to fly under the radar when pre-retirees are counting down the days until they can pursue their retirement dreams.

Saving for long-term care is a priority for many of my clients, who have seen older relatives suffer from medical issues – from suffering from a broken hip to cognitive decline caused by Alzheimer’s disease. These situations can leave retirees needing assistance from short-term hospital stays to full time care through hospice. For those concerned about the rising costs of long-term care and the potential financial impact it may have on them and their families, it might be worth considering long-term care insurance.

An advisor can help you identify which long-term care costs might be covered by your existing insurance and where additional coverage is needed. It’s important to weigh the benefits of insurance with its costs versus the risk of not having it and needing it. There’s always the possibility that you’ll pay for coverage you’ll never use, but I recommend it for clients who may not have the coverage to pay for these potential needs.

Finally, what surprised you most about the findings of this research?

I think the most surprising finding from the study was that 77 per cent of those planning to retire wish there were more resources available to help them plan for an ideal retirement beyond just their finances. This is hugely important as the vast majority of retirees surveyed say that in addition to saving for retirement and managing finances in retirement, it is important to think about all the other factors that contribute to a healthy retirement.

This research reminds me to challenge clients to think about the other aspects of their retirement planning outside of the finances. I now make sure to respectfully ask clients about their non-financial retirement goals, from where they will live to which activities will give them a sense of purpose, to get the conversation flowing.

We thank Andrea Andersen for taking the time to answer our questions. If you’re interested in saving for retirement – but aren’t all that sure how to go about it – the Saskatchewan Pension Plan may be the answer you’ve been looking for. Send SPP your pension contributions, and they will be professionally invested, grown, and at retirement, paid out to you as retirement income, with the option of receiving a lifetime annuity.

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With an end to the pandemic in sight, we are all hopeful that things are about to start returning to normal.

One trend that’s been happening since last year, reports Global News, is “young adults (being) forced to move back in with their parents.”

Factors like campus closures or lack of employment are reasons why the kids may return to the nest. Another factor might be the fact that housing is so unaffordable these days.

What should parents do to make the best of such a situation?

Noted financial author and commentator Kelley Keehn recommends setting “some ground rules” before the kids move back in.

“Are they paying rent? If they’re unemployed are they looking for work? When they do get back on their feet do they need to pay back the bank of mom and dad?” she states in the article. If these details aren’t clear right off the top, “resentment can set in,” the article warns.

The trend of kids returning home is big south of the border as well, reports the Huffington Post. Numbers of Americans aged 18 to 34 returning home are rising, and parents – who might have been thinking of downsizing – are now thinking about going bigger on their homes to make room for the kids.

A total of 26 per cent of millennials live with their parents in the U.S., up from 22 per cent before the recession of 2007, the article notes.

But there’s good news – the kids moving home are taking advantage of the situation to boost their education, and ideally snare a better job, the article concludes.

The PsychCentral blog says there can be a lot of positives for the relations between parents and kids when they move home, but parents need to stay calm about the unexpected change.

“Don’t freak out,” the publication advises, and blame the kids for not trying hard enough to be independent. Have conversations about “what is OK and what isn’t OK” in your house, and remember your kids aren’t teenagers and will be expecting more freedom than in the past. Try to make sure the kids are contributing, even in some small way, towards the costs of living, and set up a timetable for their stay, the article adds.

WebMD expands on that point, advising us not to “fall back into mommy mode” and realize that the now adult kids have “different attitudes, needs, and eating, sleeping or partying habits than they did when they were younger.”

Save with SPP can add this important thought for parents – the kids are almost certainly doing this move as a last resort. Few adult children truly want to move home. So, if you do get a second chance to live with your kids, make the most of it – you’re helping them to get ahead in life by doing so.

Do your kids have a pension plan at work? If not, the Saskatchewan Pension Plan may be a smart option for them. A truly end-to-end retirement program, SPP takes your contributed dollars, invests them professionally and at a low cost, and then can convert those invested savings into a lifelong pension when you reach the golden handshake. SPP has been securing retirement futures for 35 years now – check them out today.

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Pandemic is causing 8 million Canucks to rethink retirement

There’s no question that 2020 has been a year like no other. Its effects on the economy and our finances have been profound.

A new study by Edward Jones and research company Age Wave, reported on by Global News, shows what impacts the pandemic has had on retirement savings in particular.

The report says a whopping eight million Canadians “are rethinking their retirement timing” due to the pandemic. While one of every 10 Canucks still plans to retire early, “one third believe they will retire later,” citing financial concerns, the Global article notes.

“If many working adults were not adequately prepared for retirement, COVID-19 has thrown them even farther off course,” the article notes.

The study found that two million Canadians “have stopped making regular savings to their retirement savings.” Before the pandemic, the research shows, 54 per cent of adults were confident about retirement. Now, that confidence indicator is down to 39 per cent, Global reports.

“Those who think they’ll have to postpone retirement cited needing more income, shrunken savings, investment losses and increased uncertainty about how much they’ll need in retirement,” the article says. “The few who are considering anticipating retirement amid the pandemic, on the other hand, said they `realized that they were looking forward to retirement, or they want to spend time doing other things that are more important to them than work,’” the article states.

The article quotes financial author Alexandra Macqueen as noting that those with workplace pension plans, notably defined benefit plans, aren’t as impacted by the pandemic and can still choose to retire early.

(Save with SPP interviewed Alexandra Macqueen recently, here’s a link to the interview)

“What I’m … thinking more and more is that the difference between people with pensions and without is getting so much more stark,” she says in the Global article.

The article notes that older Canadians (boomers and the cohort that is older than them, the “Silent Generation”) are generally doing fairly well during the pandemic, while younger generations (millennials, Gen Z, and Gen X) are struggling.

The older are helping the younger financially, the article concludes, while the younger generations are making sure their elders are staying health, a “silver lining” of intergenerational cooperation amidst the pandemic.

The article underlies the disparity between those who have a workplace pension and those who don’t. When you’re in a plan at work, pension contributions are deducted from your pay – the savings is automatic, a “set it and forget it” way to pay yourself first.

The pandemic will eventually end, but if you lack a workplace pension plan, you still can set up an automatic retirement saving system of your own.

The Saskatchewan Pension Plan lets you automate your retirement savings through pre-authorized transfers from your bank account. You can start small – an affordable contribution – and ramp it up when you’re making more in the future. If there’s a trick to retirement saving, it’s to start doing it and then keep on with it. Starting and stopping won’t get you there. Pay your future self first. The money you set aside today may be missed in the short term, but in the long run you’ll have more security for the future, post-work years.

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It’s clear to most of us – especially older Canadians – that younger people have a very different way of doing things. So that said, what do they think about retirement?

Save with SPP spoke recently to David Coletto, founding partner and CEO of research firm Abacus Data. His firm has carried out a lot of research on millennials – indeed, he has a book in the works – and he has noticed quite a few things about how younger people approach money and saving.

“No one young Canadian is going to be the same,” he says. As well, he adds, the current COVID-19 situation was not yet a factor when he carried out his research. However, he notes that the data suggests that some millennials are “as well off as the previous generation,” but others, less so. It really comes down to whether or not they live somewhere where they can afford a home, he explains.

There are reasons why housing affordability is an issue for millennials, he notes. For starters, housing prices in Canada’s major cities are near all-time highs. As a group, millennials do tend to have debt, and “the debt levels are much higher” than those of older generations, he explains. Dealing with heavy debt from student days, or the cost of raising kids, tends to “delay key milestones” for millennials.

“So much of their experience is different,” he says, “that it is difficult for them (millennials) to think of retirement when they are still focused on today. About one-third of this generation is struggling more than their parents did, and they will be less well off as a result.”

Abacus recently did some research with the Healthcare of Ontario Pension Plan that found, among other things, that 80 per cent of respondents would take a job that paid less money if it offered a pension.

Job security isn’t what it once was, Coletto explains. “There’s more freelance work, more part-time work – what we call precarious work, and less pensions available.”

When there’s no workplace pension, the onus for retirement saving falls on the individual. “It’s lower on the list for them, and saving (for retirement) is difficult to do,” he explains. “They are having to manage a lot of other expenses. And we are talking about the pre-COVID era, here.”

“It’s a big chunk that has to go to savings for a down payment, or to pay for a mortgage,” he says.

And it’s not just the workplace that has changed. Millennials are dealing with “a climate change crisis that is existential.” Some “are putting off having a family” over climate concerns, he says.

Millennials therefore tend to want to do things now, while they still can, instead of deferring life experiences and grand trips until they are older. “If the experiences won’t be there, or are not possible, what’s the point of trying to save? Especially when you can’t afford to,” asks Coletto.

Statistics show that only “one in four millennials put any money into an RRSP, and even those that do don’t have a lot of equity in them,” Coletto explains. And while Tax Free Savings Accounts are more attractive to younger people (due to the fact they aren’t locked in) take-up is pretty low there as well.

Absent personal savings, Coletto is concerned that the gap between those with pensions – such as their parents – and those without will create a real split. “There’s an inequality there which will continue to grow,” he predicts.

A way to avoid that scenario might be for Canada to adopt the Australian model for retirement savings, he explains. There, a percentage of every worker’s salary is automatically placed into retirement savings, no matter where you work. The money is then invested by large funds offering pooling and low-cost investing. Moving to an Australian model is “something that needs to be seriously discussed,” he says.

A final piece of advice from Coletto for millennials is this – look at what your parents did for their retirement, and see what you can learn from them.

We thank David Coletto for taking the time to speak with us.

There’s no question that access to a workplace pension is a great benefit for an employer to offer. The Saskatchewan Pension Plan can help. Please contact us for more details.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

A look at the best of the Internet, from an SPP point of view

Millennials need to boost their savings discipline

A story from CNBC, citing research from U.S. bank Wells Fargo, suggests younger folks, “those who grew up… listening to Bon Jovi” have a harder road to retirement than their Beatles-fan parents.

The Wells Fargo report, called Reimagining Retirement, looks at the savings needs of all the different generations, and reaches some interesting conclusions.

Assuming, the article notes, that you will need to save $1 million to self-fund your retirement, younger people will have to be more self-reliant. “Millennials, less likely to have a traditional pension than baby boomers, need to develop financial discipline. Members of Generation X, finding themselves in their peak earning years, need to ramp up their savings right now,” the article notes.

The report itself shows some of the barriers younger people have to face when it comes to saving (remember, this is U.S. data, but it probably paints a similar picture to what is going on here). The report notes that “65 per cent of GenXers’ monthly income goes towards meeting monthly expenses,” and that only “48 per cent of GenXers agree that they are saving enough for retirement.” The GenXers are advised to avoid dipping into their retirement accounts for non-retirement purposes, to sign up for any retirement savings plans available at work, and to “invest for growth.”

Millennials, the report says, find basic financial skills to be “intimidating.” A surprising 32 per cent of this age group don’t “believe the stock market is a good place to grow their retirement savings,” the report notes. For this group, the advice is to sign up for any retirement programs work may offer, and to try to move any work-related savings with you when changing jobs. They are advised to avoid being too conservative when investing (avoiding risk) and avoid getting caught up in “the latest investment craze.”

Retirement can last a really long time!

Writing in Benefits Canada, Simon Deschenes, a partner at  Eckler Limited, notes that when he was growing up in the 1980s, people living to age 100 “made the news,” it was that rare and unlikely.

These days, he writes, actuaries assume that males age 65 “will live to about age 88 and females age 65 will live to age 90 – and that’s for the average Canadian pensioner.” He notes that he recently “came across two statistics that blew my ‘80s childhood mind – the chance of one half of a retired couple, both age 65, reaching 94 is about 50 per cent.” The chances of one member of that couple reaching age 100 is a surprisingly high 10 per cent, he adds.

He concludes by saying the “risk” of living a really long life (known in the industry as longevity risk) should be a major consideration for retirees in how they draw down their savings; he also suggests the new advanced-life deferred annuities are a new tool worth looking at that can bolster your retirement income if you live a really long time.

The Saskatchewan Pension Plan has you covered if you are worried about outliving your savings. SPP has a wide variety of annuity options, check out the SPP Retirement Guide for full details.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

A look at the best of the Internet, from an SPP point of view

No generation is winning at retirement savings: research
You might think that one segment of society – the young, perhaps, or the middle aged, or even the old – would be on top of things with retirement saving.

But research suggests that ALL generations are having a tough time with it. According to recent research from Franklin Templeton Investments Canada – reported by the Canadian Press — all generations “appear to be facing challenges saving for and financing their retirement.”

What are the challenges? The article says longevity – the fact that everyone is living longer – is a big one. Parents of Gen Xers, the article notes, are “living longer and spending more of their money on things like health and travel.” That means there will be less to leave to their kids, the article reports.

Interest rates are the second problem. “Canadians have increasingly large levels of debt which become harder to carry as interest rates rise,” the article quotes Franklin Templeton Canada’s Matthew Williams as saying. More expensive debt repayment means less money for saving, the article suggests.

Finally, many of us just aren’t saving. “A quarter of Canadian Gen Xers haven’t saved anything for retirement,” the article notes. Barriers to saving for them include low income, high living costs, student loans and mortgages, the article reports. But it’s not just Gen Xers who are having problems. A surprising 23 per cent of pre-retiree boomers have saved nothing for retirement, the article states, with that figure rising to 50 per cent among younger millennials.

It’s never too late to start saving for retirement, and no amount is too little. A great way to help fund your retirement is to sign up for the Saskatchewan Pension Plan. If you’re already a member, bump up your contributions a little bit each year. You’ll be happy you did when life after work arrives.

What’s best about being retired?
For most of us, it is almost impossible to visualize what life will be like once we have punched the timeclock for the very last time.

A great blog post by Dave Bernard for US News and World Report breaks it down, listing three chief changes retirees will notice.

First, the post notes, you will finally have time to exercise. Bernard writes that now he can control “when and how” he exercises, rather than having to sneak off to do it at lunch. A second point is the sudden unimportance of weekends – they are just another day when you aren’t working. And finally, he says his creative energy has never been higher. It’s not so bad living on the other side of the fence!

 

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

By Sheryl Smolkin

We recently posted the blog Rent vs Buy: A Reprise, but the subject of when, or even if millennials will ever buy homes seems to be a continuing theme in both the blogosphere and the mainstream media.

Its not surprising that issue is still a live one, particularly in cities like Vancouver and Toronto where housing prices have gone through the roof and only young people with great jobs and a hefty gift from the Bank of Mom and Dad can get their foot in the door.

Several months ago BMO published the report Rent-Weary Millennials Not in a Hurry to Become Home Owners; Need to Save Accordingly. In the prairie provinces, people age 19-35 gave the following reasons why they are delaying home ownership:

• 27%: Don’t feel comfortable making such a large purchase at this point in my career
• 46%: Other priorities take precedence (such as traveling, continuing education or starting a business)
• 33%: Don’t want to be left with no disposable income
• 40%: Not sure where I want to settle down
• 27%: Have to pay off debt first

In a Huffington post blog, Jackie Marchildon asks Are Millennials Choosing To Rent, Or Just Choosing Not To Buy?  She argues that renting is its own lifestyle and although currently dominated by millennial city dwellers in Toronto and Vancouver, it is not unique to this generation, nor to their respective cities.

On the Financial Independence Hub Helen Chevreau (daughter of well-known personal finance guru Jonathan Chevreau) says she is  Young, saving, and hopefully one day will buy a house. She critiques an article about “Tony” in Toronto Life who would rather spend his generous pharmacist’s salary on exotic trips and lavish spending than be shackled by a mortgage. She advocates for a happy middle ground: “somewhere between throwing down $1,500 on a meal and stealing toilet paper from the bathroom of the bar to save a few bucks.”

Another perspective comes from a young married couple who is saving up for a cottage because “they don’t want to invest their money in a shoebox.” They are also paying off student debt ($700/month) and spending $300/month on dog walking for their new Labrador mutt puppy.

Rent to Own | Option to Purchase is an interesting article by Saskatoon lawyer Richard Carlson. “There is no such thing in law as a ‘rent to own agreement.’ The idea was made up by people who wanted to sell to someone who did not qualify for a mortgage,” he says. “There is a good chance it will lead to a problem and a dispute.” He also distinguishes “rent to own” from an “option to purchase” which comes with its own set of challenges. Bottom line is, get independent legal advice before you enter into one of these questionable arrangements!

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

A pair of surveys recently released by Tangerine Bank and TD Bank show that many millennials started saving for retirement in their early 20s, but they do not have a clear understanding of how much to save or how their RRSP savings can be used in future.

A new survey by Tangerine found that the younger generation of Canadians is getting the message to start saving early and build a nest egg for retirement. Despite being in the early stages of their career or still in school, the survey revealed that 62% of millennials (those 18-34) have started saving for retirement and almost half (46%) said they started before the age of 25.

These results are even more impressive when compared to data collected from the 81% of older working Canadians aged 35-65 who are currently saving for retirement. When asked when they began saving, only 18% reported to have started before the age of 25.

Of those 38% of millennials not yet saving for retirement, many (62%) say it’s because of their low salary or not having enough money, and another 23% said it’s because they are saving for a big ticket item like a house, a wedding, or travel.

Nevertheless across the different age groups, the survey’s findings were uniform when it comes to financial literacy. Fifty eight percent of both millennials and older working Canadians felt they did not learn enough about saving for retirement before they started.

This is consistent with the findings of a late 2015 Environics poll conducted for TD bank which found that many millennials are unaware that RRSP funds cannot be used for other items such as making a charitable donation (64%), paying childcare expenses (60%), financing a car (52%), making a personal loan (51%), renting an apartment or purchasing a second home (50%).

Half (50%) of all millennials surveyed by TD correctly identified that RRSP funds can be used for first time home purchase, although just 28% were aware they can be used to fund full-time education as a mature student.

“Saving enough money for a down payment on a home can be difficult for many younger Canadians, so the ability to withdraw up to $25,000 from an RRSP, or up to $50,000 for a couple, can help make it easier,” said Linda MacKay, Senior Vice President, Personal Savings and Investing at TD Canada Trust. “Building up an RRSP from the earliest possible moment not only helps you save on income tax now, but could also help get you into your first home more quickly and lower your monthly mortgage payments down the road.”

But Lee Bennett, Senior Vice President, TD Wealth Financial Planning says there are pros and cons and long-term implications of using RRSP funds to buy a home or pursue further education, including giving up the potential growth of RRSP savings until that money is repaid into the plan. As with any significant investment decision, she recommends investors consult with a financial planner who can help explain what’s best for each individual.

MacKay agrees, adding that it’s important to have a bit of know-how and understand clearly what an RRSP can – and cannot – be used for in order to avoid incurring tax penalties for improper withdrawals and to be able to maximize the amount of money that can be saved. She says this applies particularly to millennials who, as the TD survey shows, have many misconceptions about how an RRSP fund can be used.

You can find basic information on How RRSPs work and Making RRSP withdrawals before you retire on the Ontario Securities Commission’s web site GetSmarterAboutMoney.ca and a more comprehensive discussion from the Canada Revenue Agency at RRSPs and related plans.