Posthaste: Increasing cost of living is eroding Canadians' retirement confidence
Canada’s high cost of living is eroding the confidence of its residents when it comes to their retirement plans.
Two-thirds of Canadians say inflation has made it difficult to save for retirement, while 74 per cent said high prices have added to the concerns that their retirement nest egg may not be enough, according to a recent survey by Bank of Montreal.
Canada’s inflation rate inched lower to 2.3 per cent in January, but a 16.7 per cent drop in gas prices was the main factor behind the dip. Without gas prices, inflation was three per cent, right on the upper limit of the Bank of Canada’s target range.
Among those who said inflation is hurting their savings prospects, about half said they are paying between $100 and $300 more per month for necessities, while a third said it’s costing them more than $300 extra.
Canadians are trying to make up the difference, with 31 per cent saying they are contributing less to retirement, 27 per cent are cutting back on spending and 17 per cent are pausing retirement savings altogether.
As a result, they may be falling behind on retirement savings. Canadians are earmarking about 3.74 per cent of their disposable income for retirement, amounting to about $3,570 per year, according to a report by Fidelity Investments Canada ULC .
Fidelity said Canadians under the age of 35 have median household savings of $159,100, which grows to $738,900 for those 65 years of age or older.
But BMO said Canadians are worried about their money lasting. While 30 per cent said they don’t know how long their savings might last, 22 per cent said they would last between 10 and 20 years and just 13 per cent believe they will last more than 30 years.
BMO recommends retirement savers start planning early, maintain savings plans as part of their regular expenses and seek professional advice to recommend new saving strategies.
“The key is to stay invested and take a proactive approach,” Brent Joyce, chief investment strategist at BMO Private Wealth, said in a release. “By incorporating inflation assumptions into comprehensive financial plans, we help Canadians understand how their portfolios can perform over decades — not just years. With disciplined investing and expert guidance, clients can ensure their money grows faster than inflation and supports the lifestyle they’ve envisioned.”
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Canada’s inflation rate slowed to 2.3 per cent year-over-year in January, as a steep drop in gasoline prices moved the overall rate down.
In total, gas prices dropped 16.7 per cent in the month, meaning inflation without gas actually ticked up to three per cent.
The GST/HST holiday in early 2025 meant that restaurant prices climbed 12.3 per cent last month, while other products covered under the program, including toys, clothing and alcohol, also rose.
The figures have some economists suggesting that the door may be opening for the Bank of Canada to cut interest rates once again.
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For those scared of running out of money in retirement, a quick assessment from a financial planner can go a long way to inspire confidence or make sure you are on the right track. These meetings can also help with understanding all your investments and where to go from there. Read more here.
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McLister on mortgages
Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.
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Today’s Posthaste was written by Ben Cousins with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.
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