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One third of young people not prepared for retirement: BMO

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Young Canadians aren't as well-prepared for retirement as their optimism would suggest, according to a Bank of Montreal survey.

One-third of people under 35 expect to retire by the time they're 60, but are the least prepared for when the day comes, the study finds.

The disparity between goals and reality mostly comes down to attitude. The study suggests that a person may need to be more excited about the prospects of retiring in order to start the planning stages.

"While it's great news that young adults appreciate the importance of retirement planning, it's a concern that many are not backing it up with concrete action," said Tina Di Vito, Head of the BMO Retirement Institute, said in a statement. "A clear dichotomy exists between what young people think about retirement and what they are actually doing to prepare for it."

Some 82 percent of young adults surveyed believe retirement planning is important, with another 52 percent owing a Registered Retirement Savings Plan (RRSP); and 36 percent have a Tax Free Savings Account (TFSA), the survey found.

While gender variables are present, the difference between men and women in the same tax bracket is negligible. The research indicates that the key indicator is the time remaining before retirement, not the actual age of the individual.

Having role models is critical when helping young people think differently about their financial future, Di Vito says.

"Parents and other influential adults have to foster an environment that will encourage young people to think about their financial future," she says. "Despite the challenging and complex financial realities facing young people today, increasing their financial preparedness for retirement will guide them towards positive results."

She offers three tips to help parents motivate their children to save for their future:

  1. Start early -- encourage kids to think about saving and their financial goals as early as their tween or pretween years.
  2. Hold them accountable - If adult children are employed but still living at home, encourage them to pay rent or contribute towards the household expenses.
  3. Speak their language - Instead of 'retirement planning' talk about 'saving money for tomorrow.' Even think of using smartphones or social media to communicate the message.

But such negative factors as high student debt, unemployment and low wages could hinder a young person's ability to save enough for retirement, the study also found.

The survey polled 1,000 Canadians in February and was conducted by Leger Marketing.

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