Financial future for millennials is vastly different from that of previous generations, KPMG in Canada poll finds
Barely half of Canadian millennials think they will ever be able to afford a house, which could have a dramatic impact on their ability to retire, finds a new poll commissioned by KPMG in Canada.
Home ownership has traditionally been a key pillar in funding Canadian retirement plans, but unlike the Gen X and baby boomer generations that preceded them, millennials are finding home ownership is no longer an assumed rite of passage of adulthood and a means of securing their future.
The KPMG Millennials and Retirement poll found that only 54 per cent of millennials will ever be able to afford a home, which would be a big drop from home ownership levels of previous generations. According to data from Statistics Canada, 70.1 per cent of Canadians aged 35-54 and 76.3 per cent aged 55-64 owned a home in 2016.
The poll surveyed 2,500 Canadians, including 1,000 millennials between the ages of 23 and 38.
Key Poll Findings:
"The financial future for millennials is vastly different from that of previous generations," says KPMG's Martin Joyce, Partner, National Leader, Human & Social Services. "They face unique challenges when it comes to building wealth despite having more education and income, primarily because of housing unaffordability.
"While Canadians generally believe home ownership is essential for a financially stable retirement, most millennials feel times have changed and they can't rely on their home to be a viable nest egg like their parents have."
The reality of soaring house prices and high levels of personal debt has many millennials giving up on the idea of owning a home as their parents did, with 46 per cent calling it a pipedream.
"What we are seeing is that millennials face a choice today that their parents' generation didn't," says Mr. Joyce. "They either buy a home or focus on saving for retirement. Buying a home involves taking on considerable debt because house prices are so high in relation to incomes, and that limits millennials' ability to save. While most feel home ownership is an investment for financial stability, they worry their home will be worth less in the future."
While millennials make more money, partly because they are the most educated generation in history, those who have bought homes are also far more indebted than previous generations, making it harder to save for retirement. According to Statistics Canada, they have a debt-to-income ratio of 216 per cent (meaning they have $2.16 in debt for every dollar of disposable income), which is much higher than Gen-Xers and baby boomers had at their age. In turn, high rents, especially in major urban centres, are also squeezing the younger generation's ability to save for retirement.
When asked to look ahead to 2050 at the future of retirement, all Canadians see a much different landscape from the one enjoyed by the older cohorts today. A large majority thinks more people will remain in the workforce and that Canada will have a retirement age higher than 65.
"We're concerned that millennials will not be in the same position to retire as the generations that preceded them were," says Mr. Joyce. "A variety of factors is hampering their ability to accumulate more wealth and prompting calls for government reform."
Most believe the government should play a greater role in meeting future retirement needs of Canadians.
Other key poll findings include:
KPMG in Canada used Methodify, a research automation platform, to study Canadian attitudes. Tables available upon request.
About KPMG in Canada
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) is a limited liability partnership, established under the laws of Ontario, and the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG has more than 7,000 professionals/employees in over 40 locations across Canada serving private- and public-sector clients. KPMG is consistently recognized as an employer of choice and one of the best places to work in the country.
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