Survey shows younger RRSP investors more likely to contribute towards their retirement and buying a home
As the COVID pandemic took countless lives and forced people to adopt new routines, it also caused them to reevaluate their priorities in life. And if a new poll of investors is any indication, it might also have prompted younger Canadians to think more about the future.
In a January survey of 1,547 Canadians conducted by Leger for Questrade, 53% of respondents with an RRSP said they’re not planning to contribute more this year. Two fifths (39%) said they were planning to increase their contributions, while the rest answered “I don’t know”.
While young adults might have been known to quote the mantra YOLO even within the last half-decade, young Canadians in the survey showed an outsized interest in preparing for retirement. Focusing on respondents between 18 and 34 years of age, three in five (57%) said they plan to contribute more to their retirement.
“In previous surveys, when we looked at younger cohorts, they tended to think more short-term,” said Rob Shields, chief marketing officer at Questrade. “Younger people were more mobile and transient, and they were working more in the gig economy, so they weren’t necessarily getting advised to open an RRSP.”
Of course, the younger generation appears to be making limited contribution increases. Among the 18- to 34-year-olds who planned to contribute more to their RRSPs, more than half (53%) planned to increase their contribution by $4,000 or less. In contrast, among respondents who were 55 and older, 40% said they were planning to increase their contribution by $4,000 or more.
Looking at the motivations of Canadians who want to contribute more, 46% cited a desire to prioritize their retirement, making it the top reason for extra RRSP contributions. Another 28% said they were trying to grow their nest egg earlier, and 23% – including 35% of 18- to 34-year-olds – cited a better understanding of the importance of starting earlier.
“This last survey showed a bit of an uptick on long-term thinking among young adult Canadians,” Shields says.
Of course, it’s not just retirement on the younger generations’ minds. While only 8% of respondents with an RRSP said they’re using their RRSP to purchase a home, that number more than doubles to 17% among respondents between 18 and 34 years old.
But at the same time, 45% of that group said they’re most worried about the impact of inflation on mortgage costs, compared to just 29% of respondents overall who cited the same concern.
“We've been in a very low inflation period for a long extended time, and a lot of everyday items were actually in deflation,” Shields says. “What we’re seeing now is the reverse of what some people have grown up with, and they could be reacting to the fear of the unknown.”
And while the survey did not dive into the reasons why respondents chose not to contribute more, Shields suggests that people might be deferring their contributions in favour of other priorities.
“The good news is that despite the ongoing challenges with inflation and the pandemic, Canadians do remain committed to their future and retirement,” concluded Shields. “We do know that younger Canadians understand the importance of starting early, which is significant. The longer the time horizon, the more one can make investments work for long-term goals, to secure one’s financial future.”