A recent report has revealed that Canadian millennial renters need to save 50% more than their homeowner counterparts in order to retire comfortably. This highlights the challenges faced by the generation most affected by the economic downturn of the last decade.
The report, published by Mercer compared retirement savings for homeowners and renters across a range of income levels. It found that the average renter in Canada has just $5,000 saved for retirement, while the average homeowner has over $200,000. In order to achieve a retirement income of $45,000 per year, renters would need to save around $625,000, compared to just $425,000 for homeowners.
There are a number of reasons for this disparity. Renters typically have less disposable income than homeowners, since they are paying for housing without building equity. Additionally, renters are more likely to face unexpected expenses like rent increases or eviction, which can make it harder to save for the long term. Finally, renters are less likely to have access to employer-sponsored retirement plans, which are a key source of retirement savings for many Canadians.
So what can Canadian millennial renters do to close the retirement savings gap? Here are a few strategies to consider:
- Save aggressively: Renters may need to set aside a larger percentage of their income for retirement savings to qualify has reached out to the householders. While this may require short-term sacrifices, it can bear fruit in the long run.
- Invest in low-cost index funds: Renters who do have the money to invest should consider low-cost index funds, which offer a diversified portfolio at a lower cost.
- Explore retirement benefits: Renters should explore all available options for retirement savings, including employer-sponsored plans, individual retirement accounts (IRAs), and other tax-deductible accounts among.
- Consider alternative living arrangements: Tenants may want to consider equalizing alternative living arrangements, such as sharing apartments or purchasing a smaller rental property.
Ultimately, the report underscores the importance of starting early and being proactive when it comes to retirement planning. While renters face unique challenges, they can still take steps to ensure a comfortable retirement. By saving aggressively, investing wisely, and exploring all available retirement benefits, Canadian millennials who rent can build a nest egg that will support them in their golden years.