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Why 20-somethings might have difficulties retiring by 65

From graduating University, leaving home, finding a partner, having kids, to becoming financially independent, we 20-somethings seem to be doing everything a little later in life than the previous generation. So it makes sense that retirement might also happen later as well.

By the time my mom was 29, she was married with 2 kids – and a homeowner by age 24. Meanwhile at age 29, I feel like I can barely take care of myself. :|

Even though retirement might seem a long ways off, 20-somethings are in the best position to begin saving for retirement. The more money you can save today, means the more money you will have in the future. Yet, it seems like very few of us are putting enough money into our RRSPs, or even thinking about retirement at all.

Retirement as we know it today is based on the idea that you work for the majority of your life, until you have accumulated enough money to quit your job and live off of your savings – typically in your mid-60’s. But what will retirement look like in 30-40 years when we’re ready to retire? And will the traditional method of saving our income until our 60’s lead to a comfortable retirement – or will we fall short?

Here are some reasons why 20-somethings might face difficulties staying on track with a retirement plan:

More debt upon graduation

According to the Canadian Council on Learning, the average tuition for a university undergraduate in 1990 was $1,464. But by 2010, that number had more than tripled to an average of $4,917. As a result of the increase in tuition, graduates who completed their programs in 2000 owed 68 per cent more than students who graduated in 1990.

The average debt load of university graduates in 2009 was $26,680 – which doesn’t include credit cards, lines of credit, car loans, or mortgages. And with a shortage of job opportunities for new graduates, it is easy to see why it can be hard for 20-somethings to begin their journey towards financial independence.

Higher cost of living

In most of Canada’s major cities, the age-old principle of purchasing a home no more than 2-3x your gross annual salary is not realistic. A January 2011 study done by the Frontier Centre for Public Policy showed that the median Vancouver home at $602,000 was 9.5 times the $63,100 median household income in the city. Meanwhile, the median Toronto home at $379,000 was sitting at 5.1 times the $74,800 median household income.

It’s not just housing that’s more expensive in comparison. It’s everything from the cost of fuel, to movie tickets, to groceries and clothing.

Not only do students have more debt upon graduation, and a higher cost of living, there are also other expenses that other generations didn’t have – such as cell phones, personal computers and internet access – all of which is considered essential in order to be competitive in today’s job market.

Less employers offering pensions & benefits

Many companies have stopped offering traditional pensions or medical benefits to new hires, or have significantly cut back on the plans that they offer. Since I entered the workforce six years ago, I have only worked for one company that offered an RRSP plan with a company match (four per cent).

I have also been employed by companies that don’t offer a health benefits plan at all. Which means that everything from a visit to the dentist, to getting a prescription filled came out of my pocket.

Retirement cash-outs

Previous to 1992, the opportunity to borrow money penalty-free from your RRSPs was not an option. With the introduction of the Home Buyers’ Plan in 1992, an estimated two million people have borrowed more than $15 billion of their own RRSP savings to purchase a home.

The Lifelong Learning Plan, which was introduced in 1999, has seen an estimated 50,000 people borrow approximately $363 million since its inception.

While these programs are “penalty-free” as long as you repay the money back into RRSPs within 15 years, borrowers will end up losing tens of thousands of dollars in potential tax-deferred growth if they take the entire 15 year period.

More opportunities & accessibility

The world is much more accessible than it once was. Many young adults are finding opportunities abroad that just weren’t widely available 10 or 20 years ago, such as teaching English abroad, volunteering in third-world countries, or spending a year traveling. These opportunities tend to mean that 20-somethings will take that much longer graduating from university, getting into the work force, and finding their way out of debt.

Travel and exploration aside, 20 years ago, there weren’t iPads, smart phones, flat screen TVs, video game consoles, or DVD movies to buy – not that you need to buy any of those items, but they are there. What’s more, with the internet, we don’t even need to leave the comfort of our own home to buy anything. Late at night, or on a rainy day, with a click of a mouse, we can buy whatever we want – which does nothing to curb impulse shopping.

Longer life expectancy

It’s no surprise that we are living longer than ever. In 1970, the average life expectancy of a person Canada was 72.7 years. In 2009, that number jumped to 81.2 years on average. While that might not seem like a lot, it means a lot more savings is needed in order to finance almost 10 more years of life expectancy. And of course, those are just averages. There is a significant possibility that the 20-somethings of today will live well into their 90’s and beyond.

Do you think the retirement at 65 is out of reach for today’s 20-somethings?


Author: Krystal Yee

I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.


  1. Cassie says:

    I think it’s possible for young people now to retire when they hit their 60’s, but it won’t be the retirement that’s being advertised to the boomers, and it won’t happen if they live like their peers. I’ve watched more than a handful of advertisements aimed at soon to be retirees that makes retirement look like one big long extended vacation. That’s nuts. If I can’t afford to live like that when I’m making an income, how can I afford to live like that when I’m living off savings? It’s unrealistic. Likewise, it’s unrealistic to think I could live the way some of my peers have been living, completely maxed out, and expect to retire. I think if retirement is set as a goal, then it’s possible. Expectations just need to be tempered a bit.

  2. Do I think that retirement at 65 is out of reach for today’s 20-somethings? Absolutely not! In fact, I believe they are better placed than we were to retire even at an earlier age.

    Yes, things that worked for earlier generations (like pensions and social security) are disappearing. Jobs with security, too.

    However, today’s economy presents opportunities that didn’t even exist for earlier generations. You are reading one right now – look at the top of this page and see the “HIRE ME” button. This didn’t exist ten years ago.

    Technology is much more pervasive and rife with opportunities. New careers exist, like social media director, for instance. Second jobs are a lot easier with the internet, should that be a choice.

    Youngsters (I’m retired so I can say that) also have, through the internet, an awareness of the financial traps we stepped into through ignorance. If you just follow this one blog, that alone will equip you to make far better decisions than earlier generations made. Certainly, you won’t have any blind faith that your employer or your government will take care of you in your old age because you took care of it.

    You also have another big thing going for you: the economic cycle. If you are aware of it (and by reading this you just became aware of it) you know that we experience a recession every 7-10 years. Prices go up and down. That includes things like houses and investments. And so you have the opportunity to wait until the next recession to buy your house, should you decide that’s best for you.

    And you’re young enough that you can buy low and sell high several times as the economic cycle does its usual thing.

    There is much more I can say – maybe I should do a guest post if Krystal wants :) But these are just a few reasons I believe today’s 20-somethings can do far better than their predecessors did.

  3. Savvy Scot says:

    I fully intend to retire by age 55. I am lucky in that my company offer a final salary pension scheme and I have this option. That said, I will continue to save and invest for my future!

  4. I think what we consider retirement will be different. A lot of people have the conception of retirement as a big long vacation. The media does not help this notion. Even if I retire at 60, I will probably end up working on something else. The way I see retirement is the ability to not have to work, but having the choice to work on something new!

    • Krystal Yee says:

      Totally agree. I’m excited to retire, but my idea of “retirement” is not having to work for a living. I’d like to be able to have the freedom to choose what I do with my time.

  5. Tim Stobbs says:

    I’ve got to agree with William, if anything getting to FI is easier today than in pervious years.

    With the internet you have the option to work anywhere (eg: Krystal’s current situation in Europe)so you don’t have to be stuck in those high cost of living areas…as long as you have high speed you can easily get a place to live that is affordable.

    Also the internet allows comparsion shopping and getting stuff for free easier than ever before. So you don’t have to pay full retail for much of anything.

    Also I seem to recall seeing an article on an inflation adjusted basis food costs are actually cheaper today than the mid-80s.

    The big wild card is the oppurtunites that Krystal mentioned. But they also means you may never ‘retire’ in the traditional sense, so many people are aiming for an ideal lifestyle instead of retiring at all.

    It’s all about building the life of your dreams…not anyone elses. It won’t be one big long vacation, but rather a mix of work (or fun depending on the project) and relaxing time.

    My two cents,

  6. Melissa says:

    I think that retiring now might be easier. I have never seen retirement as a thing that I want to happen but as a think that is going to happen. I wish to be lucky enough to have a career in something that I love doing so that being retired is made a tough choice.

    Also I think that the change in lifestyle is something different. We don’t have as many “settle down, get married, and have kids early” types as before. A lot of people are waiting for that type of life and instead are spending money enjoying their 20s. Those people might prioritize saving money for traveling over saving for retirement.

    Personally, if I can retire at a young age I would but I would still want to work. I cannot picture myself sitting down doing nothing. I want to be secure enough that I have the option to do nothing but have the choice to do everything.

  7. It does seem like the traditional retirement age is definitely out of reach for most 20-somethings since they often don’t even pay off their student loans well into their 30’s and 40’s. And while you can start saving for retirement long before loans and such are paid off, most people would rather do everything they can to get out of debt before building a savings. All in all, everything is getting started later, as you mentioned, so it’s not going to be a surprise if the same goes for retirement.

  8. AverageJoe says:

    Not only is it out of reach for many, but I think it might be undesirable. Part of the reason I believe we’re living longer life spans is because our goals push us toward later-life activities that our parents couldn’t even imagine. I can’t fathom retiring at 65. I’d like to “work” at my job forever.

    • Krystal Yee says:

      I often bounce back and forth between the idea of early retirement, and extending my working career longer so that I can experience more travel and take more breaks along the way. It’s a tough decision!

  9. Christina says:

    This is something I totally agree about and have been thinking about for a couple of years now. For me, I don’t expect to be retiring at 65. Being as people in my family live to early 90s, it’s almost impossible to finance almost 30 years of life. But I don’t really consider that a bad thing. I’m working to have a career that I’m really passionate about so I don’t think I’ll mind working later. But that is presuming I am in good health. If I’m forced to retire, I’ll be scared! That’s why I’m thinking about it now! :)

  10. greg says:

    Do I think that retirement at 65 is out of reach for today’s 20-somethings?

    NO! I am in my early 20s and am on track to be financially independent by 30. I did not receive any help aside from graduating with a 4-year degree with only $15k (USD) in debt. I personally am of the opinion that a lot of unnecessary things are considered “necessary” by most people and that such things lead to spending. IMO this is the cause of many people missing financial targets along with simply not understanding the concept of compounding returns and risk analysis.


    “productivity has increased so much that we can have both the extra possessions and the extra time. Even since 1975, supposedly an era of low productivity growth and stagnation in living standards, officially measured productivity has increased almost 70%. The average worker would therefore need to work only 23 hours per week to produce as much as one working as recently as 1975”

    If I can live on $18k USD/yr while the average household with *ZERO* income earners in the US is given $18,500 USD/yr for free, there is no reason the majority of people should be unable to retire if they make good decisions.

    (data from

    more food for thought:

    “My Deprived Life: Raising a Family on Under $27,000 per Year”

  11. If you start early enough and budget properly, there’s no reason you can’t. Plus, I’m pretty sure that the idea that people in their 20’s are living substantially longer than someone in their 60’s today isn’t correct. Average life expectancy for both is well into the 80’s. (and average means, 50% are going to live past there).

    I do see a difference in the age people are starting careers and starting families. Some of my high school cohort had kids within a couple of years of high school. They’re grandparents now, which I find absolutely nuts given my kids are still at home. We got married in our late 20’s and weren’t extraordinary but definitely getting a bit long in the tooth. My kids extend past that, looking like they’ll be in school for 7-8 years before they even start working. I don’t see how they’ll manage a career and start a family before they’re well into their thirties.

    What’s maybe changed is that folks are starting work later?

  12. Karie says:

    It will be hard if a young person works and retires in the traditional way but I agree that technology will impact this big time. More and more people can work remote and that will save on housing costs as they don’t have to live in a big expensive city.

    I am saving for my 3 kids post secondary education but I am hearing more and more ads for on line university degrees (reputable ones). We will spend a lot more on technology (lap tops, i phones etc) but it will save us a bundle in some areas too.

    I also think more young people will be transient. Not necessarily dragging themselves down with big mortgages and big car payments but doing things like not owning a car or getting a fancy one for a short period of time from leasebusters, renting clothes, jewelry, buying and selling on line.

    People creative with their money will call their own shots!

  13. I’ll probably never truly retire since I’ll always want to be immersed in new projects. But surviving without being forced to work is key. Of course, inflation may become a real problem over the next decade, which is why I try to adopt frugal habits now—my dollars simply won’t stretch as far in the future.

    I do believe financially-conscious individuals can set themselves up for a comfortable retirement, but it will take careful investment planning and effort to attain (especially unfortunately with disappearing pensions in the workforce.)

  14. Excellent analysis Krystal.

    Inflation of assets has outpaced our incomes so it’s been tougher.

    But I think the Internet has been a GREAT equalizer. I couldn’t imagine retiring at 35, and making some pennies blogging while I’m here traveling on a cruise to Estonia.

    If we can harness the Internet, good things can happen!


  15. Lili says:

    I disagree with your point about cashing out your RRSPs for the home buyer’s plan. Your argument assumes that I had money in there that was actually earmarked for retirement, and I’m not just using it as a vehicle for getting a larger downpayment. This is what I’m currently doing, and the only reason I’ve seen friends in their 20s start an RRSP.

  16. Jamie says:

    I live in the U.S. but I moved from a very expensive state to the mid-west because its more affordable to live in the mid-west.

    I also just established residency and I will finish my college education here. Once I’m done with college I will move where I want to live. Definitely don’t plan on living here forever.

    I feel like these days you have to be a professional or own your own business to live well. It’s very difficult to live on just a high school diploma. Employers want at least a 2 year to 4 year degree, they prefer 4 year degree even in the mid-west.

    Even though the cost of college is rising in the U.S., employers are still demanding them. Which is why I decided to live in the mid-west for now.

    I feel like the only people who will afford retirement are those who have made their business successful or have a high paying profession and have good savings skills.

  17. I realize this is short-sighted of me, but retirement just doesn’t enter into my mind. I am living for the next 10 years when I would like to buy a home, build a business and start a family. Those things still feel out of reach with my debt, so I am just working on getting my debt paid off and living my life, not my retirement. I am saving 10% of my income until I reach the next level of income, and then I will increase to 20%. But until then, I am focused on my near term goals which are much more important.

  18. Stacey says:

    I read all the time about 20 somethings who think they are much worse off than those older than them. I am 46 and graduated university last in 1997 with over $38 000 student loans so the number listed above looks nice to me. Being a single parent before I even started post secondary school, that took me many years to pay off. It also sounds like you have a much higher income than I ever have in my life. I left what I thought was my decent paying job, but not sure it was compared to yours, in 2003 due to burn out. I NEVER found another full time job in my field. I have worked lost of part time jobs since that pay poorly; not for lack of trying to find something better. I tried to go back to school for a Masters degree but with 500 people applying yearly for 20 seats, I don’t know how that is possible. I applied twice. I finally went back to school for something different only a few yrs ago but the field I chose is low paying. So low paying that the business I started while still a student, just to pay the rent, pays much better so three years after graduating again, I have stuck with self employment with a couple employees. I am 47 and have nothing saved for retirement because I took my RRSP’s out for my son and I live on back in 2003 and have never had an income that I wasn’t just scraping by, until the last couple years of being self employed. I would LOVE to be 20 something and have 20 something extra years to be saving for retirement, now that I actually have an income that does more than pay the rent and put food on the table again. I also have no assets and not due to blowing money over the years but just due to not having any, even considering my two college diplomas and two university degrees. It has blown me away at the many times I have read the “20 somethings have it so rough” story, since I started reading financial blogs. You have an excellent income, you have YEARS on your side and you will likely have a partner at some point. That’s my other down fall, I have been living on one income all these years. Can we trade places? ;)

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