Two thirds (65%) of Canadians won’t make RRSP contribution this year, lowest participation rate since 1996
As trends go,
this week's RBC RRSP poll is definitely in the wrong direction. The 20th
annual edition of the poll, released yesterday, finds 32% of Canadians have not
yet started saving for retirement, which is worse than the 24% who had not done
so that was found in the 2008 poll.
Only 36% said
they are planning or have planned for retirement, down from 42% in 2008.
And even among the 55-plus group, only 53% are doing any retirement
planning, down from 67% in 2008. Younger Canadians are even less likely to have
made plans to do so: the poll found 45% of 18-34 year-olds were in this
category.
Most baffling
of all is the finding highlighted in the headline: that only 35% expect to
contribute to an RRSP for the 2009 tax year. This is the lowest RRSP participation
rate since the 34% the poll uncovered in 1996. Of those not contributing this
year or contributing less than prior years, 54% blamed the poor economy.
That's certainly what RBC head of retirement strategies Lee Anne Davies thinks. "It's not
easy juggling many financial priorities especially during challenging economic
times," said Davies [pictured.] 
Naturally, she recommends working with financial advisers. "Consider the unexpected that may
impact your lifestyle, and develop a realistic plan of action."
The picture is
somewhat brighter for those who already have an RRSP, with 76% planning to
contribute at least as much as they did last year. That should be good news for
the financial services industry and especially mutual fund companies, which are
still the top planned RRSP investment choice, for 42% of those polled. However,
that's down from 55% in 2006. The deadline for the 2009 tax year is March 1,
2010.
Has the TFSA started to impact RRSP contribution rates?
So what to
make of these findings? Barring statistical anomalies — the poll of 1,457 Canadians was conducted between Oct. 21 and Nov. 2 — it just seems the age-old phenomenon of too many competing demands for limited resources.
It's true that younger people still have plenty of time
to get their retirement act together and that in this economy, jobs or job
training are no doubt priorities. Then too, for younger people in lower tax
brackets, it's arguable that the new Tax Free Savings Accounts (TFSAs) make
more sense than RRSPs. As we noted in last week's entry about BMO's TFSA
findings, there is a case for low-tax-bracket Canadians to delay RRSP
contributions until they're in a higher tax bracket. At that point, they'd get
a bigger tax deduction by minimizing their taxable earned income.
On the other
hand, they could make an RRSP contribution anyway and just not take the
deduction right away. Generally, I think the discipline of RRSPing year in and
year out, regardless of tax bracket, is the best way to build a retirement nest
egg. There are precious few tax shelters in this country, and the optimum thing
is to take advantage of both the RRSP and the new TFSAs.
I find the
data for the 55-plus group puzzling: clearly these people not only have not
achieved Freedom 55 and don't appear to be interested even in retiring by the
traditional age of 65. I'd suggest their mantra is JKW, or Just Keep Working.
That's
generally a good strategy no matter how strong your finances are but there a
few possible flaws in that thinking. First, it assumes there will always be a
job there to continue working at. Second, it assumes the job-holder will always
be physically and mentally capable of doing so. At some point, that may not be
the case.
–62–
Source The Wealthy Boomer : Retirement
Posted in
Leave a Reply