Latest figures from BMO show more savers turning to RRSPs as constantly changing variables cloud retirement plans
With retirement increasingly on their minds, more Canadians are investing in their RRSPs than ever — though they still need help to pin down a definite financial goal.
According to the latest BMO RRSP study, which drew from a Pollara survey of 1,500 Canadian adults, 69% of Canadians now hold an RRSP account.
Nationally, the amount held in RRSPs has reached $111,922 on average. Those who’ve already contributed reported average contributions of $6,409, compared to $5,247 in 2018; those who plan to contribute said they’ll invest $6,033, up 55% from the previous year’s $3,828.
“It's encouraging to see Canadians across the country emphasizing long-term investing and boosting their planned contributions," said Robert Armstrong, Director, Multi-Asset Solutions, BMO Global Asset Management.
The survey also revealed that Canadians’ retirement plans are shifting in the face of continually changing factors like life expectancy, cost of living, and career paths. Respondents revealed plans to retire by age 62 on average; however, one fourth did not know when they will retire, and one tenth did not think they will ever be able to.
Canadians’ uncertainty and pessimism with regards to their retirement are likely driven by problems with estimating their financial needs. Nearly six tenths of respondents (59%) could not estimate the amount of money they would need for a comfortable retirement. In addition, only 50% expressed optimism that they would have enough money and be free from debt by the time they leave the workforce.
Those who could provide a dollar estimate for the required nest egg said they would need between $1 million and $1.5 million. There was a generation gap in the estimates, with millennials believing they will need more retirement savings on average than boomers ($1.75 million vs. under a million). The survey also revealed a disparity between genders, with women projecting they would need $1.2 million and men saying they’d need $1.4 million.
“The financial equation for retirement is changing, and Canadians need to consider many variables when determining how much they need to fund the next chapter of their lives,” Armstrong said. “It's important Canadians work with a financial advisor to establish an effective plan that prepares them in the lead up to and following retirement. “