Gen Z Aims to Retire at 59: Financial Prudence or Unrealistic Ambition?
Despite facing significant financial hurdles such as housing market barriers, rising living costs, and student debt, Generation Z Canadians are setting an ambitious retirement target age of 59, according to a recent poll by the Canadian Imperial Bank of Commerce (CIBC). This goal marks the earliest retirement timeline among all generational cohorts surveyed, highlighting a notable shift in financial planning attitudes among younger adults.
Generational Retirement Goals Compared
The CIBC poll, which surveyed Canadians across different age groups, found that individuals currently aged 18 to 29, representing Generation Z, have an average retirement target age of 59. In comparison, millennials and Generation X respondents indicated they intend to retire at age 61 on average, while baby boomers reported an average target age of 63. This data suggests a progressive trend toward earlier retirement aspirations as generations become younger.
Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, commented on the findings, stating, "It shows optimism. Either Generation Z is 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." He emphasized that retiring at 59 requires planning for potentially another 30 years of life, making it challenging to accumulate sufficient savings that will last throughout retirement.
Expert Skepticism and Financial Realities
Colin White, chief executive of Verecan Capital Management Inc., expressed skepticism about Generation Z's retirement goals, suggesting that the younger age might be seen as "a flex" rather than a realistic financial plan. "I don't put a whole lot of weight on it," White said, noting that these aspirations could change within five years as financial priorities evolve. He added that immediate financial freedom and managing current expenses often take precedence over long-term retirement savings for young adults.
Golombek echoed this sentiment, pointing out that inflation and short-term goals, such as saving for a home down payment, can divert funds away from retirement accounts. "People are seeing the cost of goods, particularly groceries, go up and it's eating into the monthly budget," he explained. "They're putting a lot more money into meeting day-to-day expenses." This reality underscores the tension between ambitious retirement targets and the pressing financial challenges faced by Generation Z.
Early Savings Habits and Financial Tools
Despite these obstacles, the CIBC poll revealed that younger Canadians are starting to save for retirement earlier than previous generations. On average, Generation Z begins saving at age 24, compared to 29 for millennials, 30 for Generation X, and 33 for baby boomers. This earlier start provides a longer time horizon to benefit from compound interest, which can significantly enhance retirement funds over decades.
Golombek highlighted that younger Canadians also have access to more advanced financial tools than older generations did at the same age, such as the Tax-Free Savings Account (TFSA). According to the poll, about 46% of Generation Z respondents prioritize contributing more funds to their TFSAs, while only 23% focus on their Registered Retirement Savings Plans (RRSPs). In contrast, millennial and Generation X respondents showed equal preference for both savings vehicles, with approximately 42% prioritizing each. Baby boomers also favored TFSAs, possibly due to age-related restrictions on RRSP contributions after 71.
This shift toward TFSAs among younger savers reflects a strategic approach to tax-efficient investing, which could support their early retirement goals. However, experts caution that without comprehensive financial planning, these ambitions may remain out of reach. As White noted, "Having the financial freedom to live your life now is a much bigger deal," suggesting that balancing present needs with future aspirations is key for Generation Z's financial success.
