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Posthaste: Canadians are giving up on retiring anytime soon as inflation soars Back to video

Good morning!

Older Canadians scrutinizing their finances and eyeing the rising cost of living are coming to the same conclusion: it’s much too expensive to retire right now.

Half of Canadians aged 55 or older are putting their retirement plans on hold as soaring inflation makes daily life more expensive, according to new research from Bromwich + Smith and Advisorsavvy. Many believe their savings aren’t up to snuff to make retirement feasible either, and 62 per cent are delaying an exit from the workforce because they don’t have enough money socked away or invested.

It’s definitely a tricky time to retire amid wobbly stock markets, rising inflation and recession fears. Canadian investors have seen the values of their investment portfolios wither recently as stock markets sink. The S&P/TSX Composite Index is down around nine per cent so far this year, with declines even worse south of the border. The S&P 500 is officially in a bear market, having fallen 20 per cent from its most recent record high. Analysts expect volatility to continue.

Inflation is adding to the toll on people’s finances. Prices rose 7.7 per cent in May from the same time last year, Statistics Canada data show. That’s the biggest increase since 1983. Higher prices of gas, up 34.8 per cent in May year over year, and groceries, up 9.7 per cent year over year, are especially burdensome to those considering making the leap to retirement.

Meanwhile, central banks are aggressively hiking interest rates to combat all that inflation. That’s made servicing debt more expensive. In fact, 40 per cent of Canadians surveyed said their debt loads have made them think twice about retiring anytime soon.

Faced with that much negativity, Canadians have started worrying about a recession. Indeed, a whopping 78 per cent of Canadians think we already are in a recession, or will be in one within the next three months, according to a recent poll from Yahoo Canada and Maru Public Opinion. Economists are increasingly wary as well. Experts at the Royal Bank of Canada and the Bank of Montreal are seeing an increased risk of a hard landing amid relentless inflation.

It’s probably no surprise then, that a large majority of Canadians are feeling very negative about their retirement prospects. A full 62 per cent fear they’ll never have enough money to retire, the Bromwich + Smith/Advisorsavvy survey said. Meanwhile, 71 per cent are afraid they’ll run out of funds if they do take the leap.

“The results of this survey are somewhat dispiriting,” Solomon Amos, founder of Advisorsavvy, said in a news release, adding that retirement planning has become increasingly important after the shocks of the past two years.

As it stands, anyone still hoping to retire this year should take a close look at their personal finances, and factor in the economic landscape, advises one financial wellness expert at Bromwich + Smith.

“Canadians are all feeling a bit exhausted from the last two years, between multiple waves of COVID-19 and a tattered economy,” Laurie Campbell, director of Client Financial Wellness, said. “For those close to retirement, 2022 might seem like the best year to do so. But with inflation still high and bank accounts and retirement savings being depleted, it might be wise to ask yourself, can I retire in 2022?”

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UP, UP AND AWAY Sohrab Haghighat always wanted to be an entrepreneur, but had originally planned to open a café in Niagara Falls, Ont. The café was not to be, but his entrepreneurial ambitions persisted, albeit with a skyward shift in focus: instead of serving good eats, he and his spouse and business partner, Saharnaz Safari, are aiming for the stars with SpaceRyde, a Canadian space industry startup. The company is using balloons to launch rockets and aims to be the “Uber of space.” Find out more in the story from the Financial Post’s UP, UP AND AWAY. Photo by J.P. Moczulski for Postmedia News

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High inflation and interest rate hikes didn’t hold back Canadians from spending in the nation’s stores in April. Retail sales rose 0.9 per cent in April, Statistics Canada said Tuesday. May looks even stronger: preliminary estimates have sales up 1.6 per cent for that month.

Sales at general merchandise stores rose 4.2 per cent. Sales at gas stations were up three per cent. Meanwhile, new car sales fell, as did purchases at building material stores.

“Under the hood, the composition of retail sales seems to be shifting,” Randall Bartlett, Desjardins’ senior director of Canadian Economics, said in a note. “The strength is coming from gasoline stations and a broader group of brick-and-mortar retailers than we saw during the pandemic.

“In contrast, sales may be turning over at pandemic darlings such as building material and garden stores (-4.3 per cent) and grocery stores (-0.5 per cent), although retail e-commerce sales seem to be holding up (0.9 per cent).”

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Registered retirement savings plans (RRSPs) are one of Canadians’ favourite investing tools. More than 6.2 million Canadians contributed a total of $50.1 billion to their RRSP accounts in 2020, according to Statistics Canada. But even with all the enthusiasm for these accounts, financial advisers caution their usefulness diminishes when you don’t take the time to fully understand how they work. Our content partner MoneyWise Canada details five common RRSP mistakes you should avoid.

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Today’s Posthaste was written by Victoria Wells (@vwells80), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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