The majority of Canadians are not prepared for retirement, despite having RSPs, according to a poll.
The TD Waterhouse 2008 RSP Investor Poll shows that of the 87% of Canadians who have RSPs, only 14% have developed a formal plan detailing their financial goals and what is required to reach them. Participants between the ages of 50 to 69 are more likely to have outlined a financial plan, but at 18%, it is still a relatively low figure.
“An RSP is the cornerstone of saving for retirement, but it shouldn’t be confused with a retirement plan,” says Patricia Lovett-Reid, senior vice-president, TD Waterhouse. “There’s a growing focus on the changing face of retirement—how people are living longer, more active lives and expecting more from this stage of their lives, but there’s not enough serious goal-setting or discussion about how one’s retirement will unfold.”
According to the Canadian Institutes of Health Research (CIHR), by 2021, 6.7 million Canadians will be over the age of 65. A decade later, one quarter of the country’s population will be over 65.
That’s a lot of the population retiring at once, especially since the poll found that almost two-thirds (64%) of respondents say they plan to retire before or at the age of 65.
“The profound demographic shift taking place in Canada is forcing many of us to rethink how we plan and prepare for retirement,” concludes Lovett-Reid. “Still, the gap between aspiration and preparation continues to be wide. Most people want to retire fully at or before age 65. Yet this year’s poll shows Canadians are becoming less confident in their ability to retire comfortably, and very few have taken the step of developing a formal plan.”
Results from the poll also suggest that Canadians’ are less confident they will be financially secure when they retire. This year, 73% of respondents said they were “somewhat confident” they will retire comfortably, compared to last year’s 84%. Of those who said they do not feel confident, 66% feel it is because of an inability to save, due mostly to high debt.
As well, the poll indicates that retirees plan will be active. The majority of non-retired investors (85%) plan to travel, while the same percentage plans to take up a new hobby. Many also predicted they will be involved in caring for grandchildren or their elderly parents.
“What these numbers tell us is that income needs in retirement will vary,” says Lovett-Reid, adding that spending will decrease as retirees age and become less active. However, costs increase again later in retirement as assisted living and care becomes a requirement. More than half (55%) of the poll’s participants believe they will eventually need assisted care, but half of them are not confident they will be able to afford it.
Just over half (57%) of the poll’s participants were able to provide an estimate as to how much a comfortable retirement will cost and the results show significant variations between region and age group. British Columbians estimated an average of $923,000 where as residents of Quebec said an average of $486,000. Those under the age of 34 guessed they will require $933,000 compared to those between 50 and 69 that said they will need about half as much ($477,000).
A broad gap also exists between what men foresee as an adequate retirement savings, compared to women. Male respondents calculated they will require an average savings of $848,000—59% higher than women, who estimated an average of $532,000.
According to the poll, 80% of non-retired investors will rely on a combination of their personal savings and RSPs for income in retirement, with slightly more than half mentioning the CPP or Old Age Security. Those younger than 50 are less likely to rely on government sources of income.
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