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TORONTO, ONTARIO--(Marketwired - Aug. 28, 2013) - According to a study released today by the BMO Wealth Institute, Canadian Baby Boomers are significantly unprepared financially for retirement. The study has revealed that Boomers are currently, on average, more than $400,000 short of their individual retirement savings goal.

This is particularly concerning given that the oldest of the Boomers (defined as those born between 1945 and 1964) turned 65 in 2010 and many others are just a few years away from retirement age.

According to Statistics Canada, the average senior couple spent $54,100 in 2009. "Generally speaking, if a typical middle-class retirement costs in the area of $54,100 or so a year for a couple, they will need to determine how much they need to have saved and how much they can withdraw in order to sustain that retirement lifestyle," said Chris Buttigieg, Senior Manager, Wealth Planning Strategy, BMO Financial Group. Mr. Buttigieg added that, based on historical returns and a four per cent withdrawal rate, retirement nest eggs should be approximately 25 times the size of annual withdrawals. This would mean that, to be able to generate $54,100 in retirement income a year, a retired couple would need to have saved roughly $1,352,000.

According to the BMO Wealth Institute study:

• Canadian Boomers anticipate they will each need, on average, $658,000 to feel financially secure in retirement.
• Yet they have only saved an average of $228,000, which leaves them $430,000 short of their retirement savings goal.
• Almost half (46 per cent) are not confident that they will be financially secure in retirement, up from 20 per cent in 2006.
• Boomers would like to retire, on average, when they turn 59. However, they feel they will need to work, on average, until the age of 63. More generally, 34 per cent would like to retire in their late 50s (56-60), compared to 29 per cent in 2006.

"As Canada's Baby Boomers prepare to head into their retirement years, many are discovering they don't have the funds they had hoped would be available and now face the reality that they have little time to play catch-up," said Mr. Buttigieg. "However, it's encouraging to see that they are being realistic about their retirement needs and are considering other ways to manage the shortfall."

How Boomers plan to make up for their lack of retirement savings?

In addition to delaying retirement, the study also found that Canadian Boomers plan to generate income in a variety of other ways:

• Almost three-quarters (71 per cent) of Boomers expect to take on a part-time job to earn extra income after they officially retire.
• Forty-four per cent will sell off collectibles, antiques or possessions they no longer use.
• About one-third (32 per cent) expect to sell their home, while 19 per cent will rent out part of their home for additional income.

"The study's findings should send an urgent message to younger Canadians that they have to think beyond their immediate day-to-day financial needs and always have an eye on their future, particularly their retirement," said Mr. Chris Buttigieg.

Mr. Buttigieg concluded, "The game plan for young Canadians is clear: imagine what you would like your retirement to look like, work with a financial professional to develop a straightforward financial plan that aligns with your goals and objectives, open an RRSP or TFSA as soon as you start your first job, and start putting money aside from an early age. By doing so, they can help ensure that their financial transition from work to retirement is easier than the situation many Boomers are facing today."

Regional Data

Survey results cited in this report are from a Pollara survey with an online sample of 1,003 yet-to-retire Canadians 18 years of age and older, conducted between August 2 and August 7, 2013. A probability sample of this size would yield results accurate to ± 3.1%, 19 times out of 20.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $549 billion as at July 31, 2013, and more than 46,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.