There are two reports that contradict one another about whether or not Canadians will be able to retire comfortably.
A C.D. Howe Institute report says Canadians are saving enough and are reasonably well-prepared for life after work, reports Advisor.ca.
The report by author Malcolm Hamilton suggests most save more than the 5% household savings rate and most can retire comfortably on less than the traditional 70% of pre-retirement income target.
Read: Highlights of Benefits Canada’s retiree/pre-retiree research
“The greatest challenges come early in their adult lives when the burdens of acquiring a home and supporting young children strain the family budget,” Hamilton wrote in the report. “After that, things get easier.”
Among the common assumptions about retirement questioned in the report by Hamilton is the need for 70% of your pre-retirement income to maintain your lifestyle.
“The traditional 70% target is reasonable for young families who want to sacrifice heavily for 20 years so they can enjoy, after retirement, the high standard of living they can expect near the end of their working lives,” he said.
Read: Canadians feel better prepared for retirement
However, a report from CIBC says millions of Canadians may face a “steep decline” in living standards once they retire, MoneySense reports.
While a portion of Canadians close to 65 “are on a path to the retirement of their dreams,” those who are younger and those in middle-income brackets are not, according to CIBC chief economist Benjamin Tal.
About 5.8 million working age Canadians will see a more than 20% drop in living standards post-retirement.
With lowered costs of living factored in, Canadians born during WWII and baby boomers will see nearly 100% of their pre-retirement income—meaning their standard of living will be unaffected. However, the report states that the children of baby boomers—the millennial generation—will be much less fortunate due to reduced private pension coverage and lower savings rates.
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