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Why are some millennials so anxious about saving for retirement?

Young person facing a financial choice.


Allison Poppel has retirement covered. She invests $100 a month in her employer's group RRSP, and has saved $4,200 in her own personal RRSP. And though she does have a TFSA and a loan that will soon total $16,000, "I actually put more money in RRSPs," she says. "Retirement is seen as when you're having fun – it's a time of freedom."

Ms. Poppel is 21.

"I don't have that [retirement] anxiety because I'm saving," says Ms. Poppel, who works part-time as a career coach for a Winnipeg-based non-profit and is in her fourth year of health sciences at the University of Winnipeg. "Having those funds earmarked for retirement is my security blanket."

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And she's no anomaly. Himself a millennial, Andrew Kirkland, president of Justwealth, a Toronto-based online portfolio management platform, says many of his millennial clients ask about their retirement savings options, despite the long time horizon.

"People are focusing really heavily on retirement. And it's a world away," Mr. Kirkland says. "Sometimes we are dumbfounded. If you're 22 years old, you've got a lot of time and things may change significantly."

Yet the anxiety persists. Seventy per cent of millennials surveyed in 2016 by Franklin Templeton said that retirement makes them anxious. And a 2016 poll conducted by The Globe and Mail finds that retirement is the second-most pressing concern for this demographic, right after real estate. Debt, intriguingly, comes a distant third.

Why are millennials so worried about an event that's light years away? Blame it on aggressive public policy – and an aging society. According to Dr. Paul Kershaw, associate professor, School of Population and Public Health at The University of British Columbia, the intense focus on the financial needs of the elderly have, by osmosis, infused 20– and 30-somethings with a sense of retirement paranoia.

Dr. Kershaw says policies such as Old Age Security and the Canada Pension Plan are some of the strongest in Canada. "That's partly why there's so much cultural momentum to focus on that public policy area," says Dr. Kershaw, who heads Generation Squeeze, a generational inequality awareness organization. He says that because the population is aging, Canada's collective societal focus has moved toward the concerns of the elderly.

"Culturally, Canadians have been socialized to be concerned about retirement savings. We've primed the younger demographic that the biggest risks are down the road – failing to recognize that socioeconomic vulnerability has actually shifted dramatically toward younger life stages."

Plus, millennials have grown up in households where "I haven't saved enough for retirement" has been a common refrain. Ms. Poppel says her parents are in that camp, even though both have good salaries. And they don't view retirement as an exciting phase in life," Ms. Poppel says. "I'm not them."

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But in the razor-sharp focus on retirement, other key financial concerns are missed. Ms. Poppel readily admits she should prioritize paying off her student loan over investing in her RRSPs. And she knows other financial hurdles loom large. "I'm definitely super financially vulnerable to a whole bunch of things," she says.

Mr. Kirkland says he finds millennials often believe that retirement is their main concern, but realize it isn't when he delves deeper. Other priorities often quickly emerge, such as mortgage payments, child care costs and living expenses.

He counsels his clients to focus more on their immediate concerns, such as paying off debt before investing, or saving in a TFSA instead of an RRSP, to prevent locking in funds.

Mr. Kirkland also says millennials should sit down and draw up "buckets" representing their financial priorities in the short term. "What are the buckets of things that you need to do?" he says. "If retirement is one of them, that's great." But Mr. Kirkland says home ownership and child care might be in the near future – and need to be addressed.

Dr. Kershaw argues that changes have to be made to public policy governing these bucket areas of housing and child care, as well as transit, in order for millennials to be able to save for retirement at all. "The economy is eroding under that younger demographic. It is much more challenging for this demographic to put savings aside for down the road."

Plus, there's the trend toward precarious employment, as well as a movement away from company-funded pensions, issues Ms. Poppel admits have her concerned.

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"Most people I know don't have pensions. If I don't save, who will?"

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