Are Canadians Minding Retirement?

The findings of the 21st annual RBC RRSP poll conducted by Ipsos Reid show a difference in attitude and behaviour between two key age groups: Baby Boomers and young adults.

The Boom Years

It's 2011 and that means the first of Canada's Baby Boomers are turning 65 years old. But one quarter (23%) are concerned about having enough savings according to the study. The average age at which this group started saving for retirement was 35. Boomers are twice as likely (42%) to have a formal written financial plan as Canadians in the general adult population (19%) and seven-in-10 (71%) of those who had created a financial plan say they are better off financially because of it. Six-in-10 (60%) of boomers worry (11% a lot/49% a little) about balancing saving for immediate priorities versus putting money away for the longer term or for their retirement.

So what do Baby Boomers feel would be their best outcome in retirement? The most common answer was good health (28%) followed by living life the way they envisioned (25%) and having enough money saved for a comfortable retirement (23%). For Boomers who are turning the big "65" in 2011, two thirds (67%) agree that the best gift they could receive is good health. Interestingly, the majority (64%) of Boomers believes that `age does not matter, it is how you feel' compared to 19% who think 65 is the new 50. A similar proportion (17%) says '65 is 65' whereas 1% feels '65 is old'.

The Young

The younger generation, though, is not so concerned with retirement plans. Nearly one half (45%) of young adults aged 18 to 34 have not yet started saving for retirement, according the study. Moreover, just four in ten (39%) young adults have an RRSP, a five-point drop from last year's poll and the lowest figure in nearly a decade. By comparison, seven in ten (70%) Canadians aged 35 to 54 have an RRSP, a thirteen-point increase over last year.

The silver lining in the cloud, though, is that younger RRSP holders are more likely (33%) than middle-aged (20%) or older (24%) investors to contribute their maximum allowable contribution - although this is likely a function of lower overall incomes in the below-35 age category.

Further, one in three (35%) Canadians make regular weekly or bi-weekly contributions to their RRSP with Canadians aged 18-34 making up nearly one half (47%) of this group. Similarly, one in three (34%) RRSP investors make regular contributions through a plan, 45% of whom are aged 18 to 34. This suggest that younger Canadians are more likely to be regular contributors and stick to a plan, while middle-aged and older Canadians are more inclined to make lump-sum payments, likely as the deadline approaches.

Among younger Canadians, saving for retirement appears to be lower down on the financial priority list. When asked to rank their top 3 financial priorities from a list, a plurality ranked regular payments to reduce or eliminate debt (56%) among their most important priorities, while others included general savings for a rainy day (45%), home ownership (44%), just trying to keep their head above water (34%), savings for a self-rewarding purchase (29%), and saving for children's education (27%) among their top-three most important priorities.

In contrast, just one quarter (26%) ranked saving for retirement among their top three important priorities, while even fewer said the same about home renovations (17%), supporting aging parents (12%) and building an investment portfolio (11%).

Another benefit of RRSPs for potential first-time homebuyers is the government program which allows for tax-free withdrawals to help finance a first home purchase. Despite home-ownership being the third-most-often chosen important financial priority for younger adults, the data reveal that this might be an under-utilized program as only 6% of young RRSP holders have withdrawn money from their RRSP in the last year for this purpose.

Canadians' Retirement Savings Plans

Talk of escalating debt has permeated many discussions in the news lately. On the flipside, here is where Canadians currently stand with respect to their saving.

Six-in-ten (61%) Canadians have an RRSP this year which is a 7 point increase from 2009. One-quarter (27%) of Canadians with RRSPs are planning to make a one-time contribution, with almost one-third (30%) of them contributing at the last minute and make a one time contribution in February. One quarter (24%) of Canadian RRSP holders plan on maximizing their contribution for the 2010 tax year and one third (34%) plan to contribute more than they did in 2009. Of those Canadians who invest in RRSPs, only one-in-three (34%) make regular contributions through a weekly or bi-weekly plan. Canadians are becoming less wary of stock investments as 19% invested in them compared to 12% in 2009. However, mutual funds are still the top RRSP investment choice at 42%.

These are some of the findings from the RBC 21st Annual RRSP Poll conducted by Ipsos Reid between October 29 and November 4, 2010. For this survey, a national sample of 1,457 adults from Ipsos' Canadian online panel were interviewed. Weighting was then employed to balance demographics and ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. For the older sample, a national sample of 3,226 50 to 69 year old adults including Boomers, with assets of at least $100,000 from Ipsos' Canadian online panel were interviewed. The results are based on samples where quota sampling and weighting are employed to balance demographics and ensure that the sample's composition reflects that of the actual population according to Census data. Quota samples with weighting from the Ipsos online panel provide results that are intended to approximate a probability sample. A weighted probability sample of 1,457 respondents, with 100 per cent response rate, would have an estimated margin of error of 1773 per cent, 19 times out of 20. An unweighted probability sample of 3,226 respondents, with 100 per cent response rate, would have an estimated margin of error of 1772 per cent, 19 times out of 20.