Recent polls suggest that Canadians aren’t using two potentially valuable retirement savings vehicles to their full potential.
Scotiabank data show that a growing number of Canadians are dipping into their RRSPs. One-third of respondents to the bank’s survey report having withdrawn funds, up from 23% in 2005. They’re also taking out more money, with an average withdrawal of $24,531: more than double the average figure from 2005. The top reason cited was to take advantage of the government’s Home Buyer’s Plan for first-time purchases. However, 14% said they used the money to cover day-to-day expenses, and 6% paid for a vacation. The results also indicate that Canadians over age 50 were most likely to withdraw from their RRSP prior to retirement.
Another survey, by ING DIRECT, reports that most Canadians aren’t taking full advantage of the tax-free savings account (TFSA), which has been on the market since 2009. Almost one-third of respondents (31%) said they don’t have a TFSA and don’t have a plan to open one this year or next.
Lack of cash to stash away in a TFSA appears to be a leading factor, with 53% saying they don’t have money to put away in the savings vehicle. Another key challenge is lack of education: among respondents, 44% said they have only a vague idea of how the TFSA works, while 19% said they don’t understand it at all.
“The TFSA has been around for nearly four years, and it’s unfortunate that so many Canadians aren’t taking full advantage of this savings opportunity,” says Peter Aceto, president and CEO of ING DIRECT. “Since its launch, the TFSA has been a great way to reach short-term and long-term savings goals and provide flexibility that other investment options, like RSPs, don’t.”