The past year seems to have done extensive damage to the willingness of Canadians to save for retirement, according the 20th annual RBC RRSP poll.
As its name suggests, RBC conducts an annual poll to gauge the retirement goals and savings habits of Canadians. Conducted by Ipsos Reid, this year’s national survey of nearly 1,500 Canadians saw a substantial drop in the number of Canadians saving and planning for retirement.
Just one-in-three Canadians (35%) have contributed to or plan to contribute to an RRSP for the 2009 tax year. This is the lowest percentage of contributors since 1996. Among those with an RRSP who are not contributing this year, or who are reducing their contribution, half (54%) say it is because of current economic conditions.
More troubling is the fact only one-in-three Canadians (32%) have not started saving for retirement yet, compared to one-in-four (24%) in 2008. The survey found that only 36% of Canadians are even planning or have planned for retirement, down from 42% 2008.
It’s the lucrative baby boomer and retiree demographics that are ramping down on their saving. The decline was most precipitous among those aged 55 and over, with only 53% doing any retirement planning compared to 67% in 2008.
“The oldest demographic we traced, the 55-plus group, really moved down in planning — that’s a big concern. That age group has the most to be planning for. As they were the group transitioning into retirement, they were always the ones who could be counted on to plan the most,” says Lee Anne Davies, head of retirement strategies for RBC. “Do we have a group of people who are in a bit of denial and are afraid to look around after the last couple years of volatility?”
Last year’s economic and market volatility seems to be the primary driver behind the drop in planning.
“From the savings side of this, [economic concerns] came out in the answers for sure. The economy is influencing this behaviour,” Davies says. “Clients are asking how do you save for your RRSP? The thing that came out was you should save for an RRSP on a regular basis if money is tight, saving a little bit of a time every two weeks can make a big difference to somebody’s outcome.”
Fortunately market and economic worries don’t seem to be influencing existing RRSP clients as drastically. Among Canadians who have an RRSP, 76% plan to contribute at least as much as they did in 2008.
Davies says the client uncertainty is actually an opportunity for advisors, because there doesn’t appear to be any shortage in the need for advice. If anything, client confusion about whether they can meet retirement goals would seem to suggest they could use the ear of a good advisor.
“We still see clients coming in. We still see the relationships we had built prior to all the economic volatility,” Davies says. “People are concerned about whether they can retire. They are seeking advice — they even talk in the survey about how much more advice is available to them, whether it’s from a planner or the media &151; they can really access advice more readily.”
She adds, “It’s disconcerting that this past year could change what their retirement dreams mean to them. Sometimes the solution to this is a case of having someone who is not connected to your retirement to really work with the plan you have, set the goals again, revisit where your priorities are and try to get your plan back on track.”
Davies says RBC is urging its advisors to become much more proactive in contacting people and presenting them with RBC’s “Your Future by Design” transitional retirement program. Anecdotally, Davies says clients who undertake this structured retirement planning seem much more certain about reaching their retirement goals and doing the necessary saving.
“This [uncertainty] is actually a huge opportunity and our program aligns exactly with what these statistics are telling us. We want people to come in and re-visit what is happening in their financial plan. We want them to think about all the options they have if they move into retirement. There is not just one way to get to retirement. Sometimes you’re working a little bit longer or working part-time. Maybe one spouse will be phasing retirement at a different time.”
Don’t be surprised if clients want to vary their product choices from the past. The survey found an increasing number of Canadians are abandoning mutual funds as their default retirement vehicle.
Although mutual funds remain the top planned RRSP investment choice amongst 42% of respondents, they have been declining since 2006, when they were the go-to product for 55% of investors. Younger Canadians (aged 18-34) are more likely to favour savings accounts (29%) and cash (23%) for their RRSP.
(12/16/09)