Posthaste: Crisis brewing as people quit saving for retirement during pandemic

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Two out of three Canadians say they saved nothing for retirement at all this past year, a new survey from HOOPP says

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Good morning!

Canadians may have socked away more money this past year, but that hasn’t translated into larger retirement savings.

In fact, many say they didn’t set any cash aside at all for retirement.

According to the third annual Canadian Retirement Survey from Healthcare of Ontario Pension Plan (HOOPP) and Abacus Data, two out of three, or 63 per cent, of Canadians neglected their retirement savings. That’s 5 per cent more than the year before.

That comes as 46 per cent say they’ve saved more than usual since the pandemic began. But even of those, 52 per cent put nothing into their retirement piggy banks.

Meanwhile, anxiety over saving enough is keeping Canadians awake at night. Half say it’s their top concern, just behind worries over the costs of day-to-day living.

And it’s a fear that stretches across all income levels, from those making $50,000 or less (52 per cent are “very concerned”) to those making over $100,000 (42 per cent).

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“Canadians across the board are acutely aware of the importance, and challenge, of saving for retirement,” Steven McCormock, SVP, Plan Operations, HOOPP, said in a news release.

Retirement planning has had to take a backseat for many amid increased financial pressures brought on by the pandemic. Fifty-two per cent say the crisis has hurt their finances. But it’s especially bruised those who are younger or have lower incomes.

People aged 44 and under were twice as likely to report a major negative impact to their finances (24 per cent), compared to only 11 per cent of those aged 60 plus. It’s the same thing for those who make less than $50,000 a year. Twenty-five per cent say their finances suffered, compared to 11 per cent of those making $100,000 or more.

“The pandemic has exacerbated the divide between those who can save for retirement and those who can’t,” David Coletto, Abacus Data’s chief executive, said. “Those who are the least likely to save – younger and lower-income Canadians – were the hardest hit by the health crisis.”

With so many people struggling to save, 63 per cent of Canadians fear there’s a retirement crisis brewing. And 65 per cent think saving for retirement is just too expensive to manage.

That could be one reason why many are looking to their employers to help bridge the retirement savings gap. Canadians say they want good pension plans at work, with 71 per cent saying they’d even be willing to accept a lower paycheque in exchange for a solid plan.

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Meanwhile, a huge majority (85 per cent) of Canadians believe every employee should have an affordable plan through their workplaces.

“As business leaders and decision-makers plan for our post-COVID ‘new normal,’ it’s clear that Canadians would strongly support improvements to retirement security for everyone,” McCormick said.

The yearly survey was conducted in April 2021 and polled 2,500 Canadians.

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The TFSA overcontribution penalty tax is equal to one per cent per month for each month you’re accidentally over the limit.

CRA’S CHILLING TFSA ASSESSMENT The Canada Revenue Agency offered a “chilling take” on overcontributions in tax-free-savings accounts this week, writes Jamie Golombek. The rules surrounding how much you can put into your TFSA can trip people up, leading to a one per cent penalty for each month you’re mistakenly over the limit. You can ask the CRA to waive the penalty if it was a “reasonable error,” but the agency may not always grant relief. In fact, Golombek posed a hypothetical scenario to the CRA in which a taxpayer asks for relief due to a TFSA overcontribution from the shares of a company that then goes bankrupt. The agency’s response is downright harsh. Read about it here. Photo by Brent Lewin/Bloomberg files

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  • Mark Carney speaks at an event hosted by the Montreal Council on Foreign Relations about international finance as a key to fighting climate change.
  • Marco Mendicino, minister of immigration, refugees and citizenship, will announce new initiatives to help Canada assist even more refugees.
  • David Lametti, minister of justice and attorney general of Canada, and Carolyn Bennett, minister of Crown-Indigenous relations, will speak to the media regarding the passing in the Senate of Bill C-15, An Act Respecting the United Nations Declaration on the Rights of Indigenous Peoples.
  • Indigenous Services Minister Marc Miller announces funding in support of numerous Indigenous community projects to strengthen their food security and agricultural economic development.
  • Demonstrators rally at two locations in downtown Vancouver demanding insurance companies stop backing the Trans Mountain Pipeline.

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Canadian companies are on a mergers and acquisitions spree this year fuelled by cheap debt, ample cash and high valuations. According to FP Data, companies have been involved in 729 deals worth $158 billion as of May 31. That’s $1 billion more than last year. Stefanie Marotta has the story behind the “unprecedented” boom in M&A in Canada.

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To read more stories like this, don’t forget to sign up for the Financial Post’s new FP Finance Newsletter.

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When the new mortgage stress test came into effect on June 1 and ate into the average Canadian’s homebuying power, you probably saw numerous mentions in the media about a potential cooling of Canada’s overheated housing market.

Well, it turns out that “cooling,” when it comes to Canadian real estate, is about the same as throwing your Brita at an active volcano.

The Canadian Real Estate Association has announced that home sales in May were 103.6 per cent higher than a year earlier. The national average sale price for the month ballooned 38.4 per cent over the same one-year period.

Still, this was CREA’s headline: “Housing market continues to moderate in May.” Our content partner MoneyWise lays out what a “moderating” Canadian housing market looks like. Hint: It’s still blazing hot.

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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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