A new report from Mercer suggests that millennial workers who rent for their entire careers must save 50 per cent more than homeowners in order to have a sufficient monthly income in retirement. The 2023 Mercer Retirement Readiness Barometer measures the age at which different personas can comfortably retire based on their participation within employer-sponsored defined contribution (DC) pension plans and benefits provided by the government, including Canada Pension Plan (CPP) payments, Québec Pension Plan (QPP) and Old Age Security (OAS) benefits.
“A millennial who rents for their entire career would need to save eight times their salary in order to achieve retirement readiness, retiring at age 68. That same millennial, if they own their home, would only need to save 5.25 times their salary – and be able to retire three years earlier, at 65,” the Mercer report states.
Looking at boomers, meanwhile, they say those acting on the impulse to take risk off the table in response to poor market conditions and inflation, would be making a tremendous mistake. “Moving a portfolio to guaranteed, interest-based investments for just the first three years following retirement makes it 10 per cent more likely that a retiree will run out of money. This is in comparison to staying invested in a balanced portfolio, subject to market fluctuations. Delaying the commencement of CPP and OAS to age 70 from age 65, meanwhile, decreases the probability that Mercer’s theoretical retiree will run out of money in their retirement by nearly 15 per cent.
