Retirement planning big priority for 30-year-olds: Study

Contrary to stereotypes of an apathetic and directionless generation, 30-year-olds harbour many of the same employment and health aspirations of their parents, and actually surpass their parents in placing greater importance on saving for retirement.

These were the findings of a new study featured in the 30th anniversary edition of BENEFITS CANADA magazine. (BENEFITS CANADA, like Advisor.ca, is owned by Rogers Publishing Limited.) Five hundred 30-year-old Canadians were asked about their employment, health and retirement aspirations.

Most surprisingly, the study found that 30-year-olds are more concerned about saving for retirement than previous generations; the vast majority of respondents say they’re already thinking about or have already started to save for retirement. In addition, they predict that their most important source of retirement income will come from personal savings.

“Forty per cent of their retirement income will come from personal savings,” notes Tricia Benn, director of research for Rogers’s Healthcare and Financial Services Group and lead author of the study.

That is much higher than members of defined contribution pension plans, who expect that their corporate pension will make up a larger proportion of their retirement income, Benn says.

In most other areas, though, 30-year-olds have aspirations similar to those of older generations. They place a high importance on family; a majority want to retire before age 65; and — contrary to many assumptions — they would like to work with the same employer for their entire career. Also, if they had their preference, most would like to have a guaranteed income at retirement provided by their employer, and the vast majority would like health benefits extended into retirement.

“We talk about the generation that encompasses 30-year-olds as if they’re a new breed and their expectations are completely different,” Benn says. “[The study shows] all generations seem to want the same thing, although they may have very different reasons for it.”

Don Bisch, editor of BENEFITS CANADA, speculates that their divergence in savings habits from other generations may stem purely from the fact that they are skeptical of their own ability to save.

“I think the younger generations have grown up with the notion that Canada Pension Plan is not going to be there for them, and they shouldn’t expect the government to fund their retirement,” he says. “There is a bit of an attitude of if I’m going to do this myself, I have to start saving now, and I think that this shows itself also in one of the other figures, which shows that 80% of the 30-year-olds surveyed have either started saving for retirement or are thinking about it.”

Bisch says this skepticism has not fostered a more knowledgeable group of investors, though, as 25% don’t even know what type of pension plan their employer offers. That same skepticism has created a cautious generation of investors that recognize a need for financial planning advice. Sixty per cent of the respondents said that the most important feature their company could provide in managing pension assets would be access to professional financial planning advice.

It’s a lucrative opportunity for employers and advisors to take advantage of this knowledge now, Bisch says, because eventually it will be this group that takes over the largest share of wealth from the soon-to-be retired boomer generation.

“Thirty-year-olds represent the first wave of Generation Y. They are the folks who are going to shape the future,” he says. “With the baby boomers retiring and impending labour shortages, it’s really going to be Generation Y calling the shots,” he says.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com