Retirement planning provides a financial roadmap to meet our needs and reach our goals after our working years. We know it’s important to start planning early, yet these are tough economic times.
Canadians are weathering a perfect financial storm. Persistent inflation, high interest rates and record consumer debt are causing severe economic challenges, including a cost-of-living crisis. It’s hard to save for retirement when you’re struggling to pay rent.
However, the biggest financial risk we all face is running out of money in retirement, and we’re living longer than ever. Today, the average Canadian lives to be 81.6 years old – nearly 10 years older than in 1966, the year the Canada Pension Plan (CPP) was introduced. We all want to maintain our standard of living, especially as we age.
For Financial Literacy Month in November, we worked with Innovative Research Group to conduct a survey to learn about how Canadians are preparing for retirement, how they view their personal finances, and the role the CPP plays in saving for retirement. Below are some key findings.
Retirement is important to most Canadians, but they’re not sure how to get there.
Our survey found two-thirds of non-retirees agree that stopping work to retire is very important, and more than half (52%) cite the CPP as a source of income they’re counting on in retirement. But for many Canadians, their pathway to retirement is not always clear.
Most respondents (53%) say they don’t know how much money they’ll need to retire, and less than half (45%) have a financial plan in place. Only a quarter of respondents claim they set money aside from every pay cheque for retirement, and most Canadians (62%) say they fear running out of money after retiring.
Many Canadians are stressed over their finances, but it helps to have a plan.
Nearly a third of Canadians (31%) say they feel stressed about money daily, and that number is even higher (42%) among those aged 18 to 44, our survey suggests. In addition, most Canadians (53%) say they feel a lot of anxiety about making the wrong financial decisions, 47% admit handling money feels like a chore, and a quarter answered they’re very stressed about retirement planning.
However, there is hope for Canadians who want to retire one day. Those with a retirement plan (45%) maintain they feel less stressed about their financial future as retirement feels more attainable.
The CPP becomes more important to Canadians as they age, especially over 65.
The older Canadians are, the more likely they are to say the CPP is a reliable source of retirement income. Our survey found only 30% of young Canadians (18 to 24) say they expect to need money from the CPP for retirement, compared to 82% for respondents over 65, and there’s growing belief in the CPP as a source of retirement income as people age. In fact, the CPP is the most cited retirement income source for seniors – ahead of savings, investments, and workplace pensions.
Overall, nearly three in four Canadians say they rely on, or will rely on, the CPP to help fund their retirement. Furthermore, almost 70% of Canadians declare they are proud to have a safe and solvent pension fund like the CPP, and 63% insist their CPP contributions are important for the financial security of all Canadians.
Workers in Canada have a head start on their retirement through the CPP.
Whether they know it or not, Canadian workers have already started their retirement planning through their CPP contributions, which are hard at work and growing with investment professionals at CPP Investments. It’s comforting for Canadians to know the CPP is secure and will be there for generations.
Canada’s Office of the Chief Actuary, an independent federal body that conducts analyses on the future costs of the CPP, concluded in 2022 the CPP is financially sustainable for at least the next 75 years based on current projections. That means more than 21 million working and retired Canadians can have confidence the CPP will be part of their retirement plans.
At CPP Investments, we’re working hard to ensure that the CPP Fund will be there for you when you’re ready to retire. We know saving money is hard, especially during a financial storm, and retirement may seem like a distant dream, but it’s never too late or too early to start planning.
CPP Investments Net Assets Total $576 Billion at Second Quarter Fiscal 2024
CPP Investments ended its second quarter of fiscal 2024 on September 30, 2023, with net assets of $576 billion.