Financial goals for millennials: Introduction
Today’s Brandon’s Blog discusses the notion that financial goals for millennials are being hurt by baby boomers. Not only are we living longer; we’re living better. The expression “65 is the new 55” seems to quite accurately describe the changes in our workforce.
Financial goals for millennials: Baby boomers are working longer
Thanks to no mandatory retirement in Ontario, Baby Boomers can work well past 65. According to 2016 census figures, 20% of Canadians are working, either full or part-time, paid or unpaid, past 65. The number of post-retirement workers has doubled since 1995. Unfortunately for millennials who are blaming their financial woes on the Baby Boomers, working longer makes good financial sense.
Financial goals for millennials: The academic’s view
Craig Riddell, a UBC professor of economics, says, “One of the principal causes is increased longevity, and people are staying healthy longer. Another important factor is the decline in pension coverage, especially in the private sector of the economy, and a gradual switch from defined benefit plans to defined contribution plans.
There is no incentive to retire early with the Canada Pension Plan (CPP) if you like working. CPP no longer has a specific retirement age, such as 65. Instead, there is a retirement “window” between the ages of 60 and 70. The later you retire, the larger your monthly payment. If you are going to live an average lifetime, you will get the same amount in total. You don’t pay a penalty by retiring later. If you retire at 60, you get the lowest payment”.
Financial goals for millennials: The benefits to working past 65
Although millennials are against the trend, there are many benefits to working past 65. Karen Zeleznik, a financial planner at Libro Credit Union reports that:
- Canada Pension Plan benefits jump by 42% if you delay taking them until age 70, even more, if you keep contributing
- Old Age Security payments work on the same principle, but some or all is clawed back for those with high incomes
- Many private-sector plans also offer fatter pensions if retirement is put off past 65
- Tax bills increased by a higher tax bracket from “double-dipping” can be reduced with spousal income splitting
- In the end, it comes down to one thing: How long are you going to live?
- It’s a question of taxation, lifestyle and life expectation. If you live to be 90, sure, delay it, because you will get more for a longer time. It’s just math
Financial goals for millennials: Working past 65 is a great advantage
Working past 65 is a great advantage for Baby Boomers who have not saved enough money to retire comfortably. As long as they keep working they can enjoy a lifestyle that they’re accustomed to and enjoy. And many, plain and simply, enjoy working.
Although millennials like to blame Baby Boomers for their financial woes, the high cost of living and the astronomical cost of housing are the real culprits, not the lack of jobs. The job market can be challenging whether or not the Baby Boomers are working longer. And the reality is that millennials will likely have to work longer as well, due to the increased life expectancy and disappearance of defined pension plans.
Financial goals for millennials: Are you struggling financially?
If you’re a millennial who’s struggling financially, you need to take action before things become dire. Consult a professional trustee for help with your financial problems. The Ira Smith Team can help you get back on your feet financially and start saving for your retirement so that perhaps you won’t need to work past 65. Give us a call today and Starting Over, Starting Now, you can put your financial woes behind you.