Gen Z plans to retire at 59: Are they prudent savers or is that just ‘a flex’?

Young Canadians should include saving for retirement in their regular budget, along with things like rent or mortgage payments, groceries and entertainment. Photo by Dolgachov/Getty Images/Postmedia files

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Generation Z has struggled to break into the housing market and has grappled with financial challenges from the cost of living to student debt, but those aren’t stopping them from setting an ambitious timeline for retirement.

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Canadians currently aged between 18 and 29 have an average retirement target age of 59, according to a poll released this week by the Canadian Imperial Bank of Commerce (CIBC), the earliest of any generational cohort. By comparison, millennials and generation X said they intend to retire at age 61, and baby boomers at age 63, on average.  

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“It shows optimism,” said Jamie Golombek, managing director, tax and estate planning at CIBC Private Wealth Management. “Either (generation Z) are on track because they’re on top of their financial situation … or maybe they just are naive and haven’t actually sat down and done a proper financial plan.” 

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“It doesn’t surprise me that the younger generation is picking a younger age because they somehow think that’s a flex,” said Colin White, chief executive of Verecan Capital Management Inc. “I don’t put a whole lot of weight on it.” 

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White said generation Z’s answer might very well change in another five years, given the financial choices or trade-offs they might have to make as time passes. “Having the financial freedom to live your life (now) is a much bigger deal.” 

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Grappling with inflation and managing short-term goals like saving for a down payment on a home could take precedence over retirement savings, Golombek said. 

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“People are seeing the cost of goods, particularly groceries, go up and it’s eating into the monthly budget,” he said. “They’re putting a lot more money into meeting day-to-day expenses.” 

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That said, younger Canadians are also starting to save for retirement earlier, compared to older generations. The average starting age for generation Z is 24, compared to 29 for millennials, 30 for generation X and 33 for baby boomers, according to the CIBC poll.  

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Starting earlier means a longer time horizon and more time to reap the benefits of compound interest, Golombek said. Plus, younger Canadians have more financial tools available to them now, compared to what older generations had at the same age, such as the tax-free savings account (TFSA). 

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About 46 per cent of generation Z respondents said they contribute more funds to their TFSA, while only 23 per cent prioritize their registered retirement savings plan (RRSP). By comparison, millennial and generation X respondents said they favoured the savings vehicles equally, with about 42 per cent prioritizing each one. Baby boomers also said they contributed more to their TFSAs, though this is could be due to the older generation approaching or surpassing age 71, at which point their RRSPs have reached maturity and can no longer receive contributions.