Canadians have pared back their retirement savings goal by more than $200,000, finds the 23rd Annual RBC RRSP Poll.
The study, which polled 1,225 Canadian adults, found almost half 46% of retired Canadians and only one-in-four (23%) Canadians who are not yet retired have determined the amount of money they will need for a comfortable retirement.
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Those who are not yet retired have significantly reduced their retirement savings goal by more than $200,000 to an average of $564,000 in 2012 from $778,000 in 2011. Prior to retirement, retirees estimated that they would only need an average of $347,000.
“When looking at your percentage of pre-retirement income needed in retirement, some say 75%, some say 85% and some even say 110% – we say everyone is different,” says Jason Round, head, financial planning support, RBC Financial Planning. “While it’s important to have a retirement savings goal, there isn’t one number that’s right for everyone. Your goals and dreams for retirement deserve a plan that’s personalized to you and takes into account many other relevant factors.”
The gender gap has significantly narrowed between men’s and women’s retirement savings goals, from a difference of $280,000 in 2011 down to $86,000 in 2012.
Men had an average retirement goal of $732,000 in 2011, which fell 42% to $424,000 in 2012, while women had an average retirement goal of $452,000 in 2011, which increased 13% to $510,000 in 2012.
The poll also found that Canadians have had a relatively consistent view of how they are doing with their retirement savings over the past four years. More than half of Canadians (53% in 2012) say they are at or ahead of where they should be in terms of retirement savings.
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Round notes that using a rule of thumb approach in planning can be useful in getting started when retirement is many years away but, as retirement nears, averages are less helpful.
Consider the following factors that help dig a little deeper and create a personalized retirement plan.
Longevity: According to Statistics Canada, Canadians aged 65 in 2012 can expect to spend more than 20 years in retirement. The average male retirement expectancy is 18 or more years; for women it is 21 plus years. Retirement is not a single phase of your life but a series of stages and living longer does not necessarily mean living the same. How will your time horizon impact your retirement savings?
Health: Your personal health can affect your enjoyment of your retirement years as well as your income. Almost one third (30%) of retirees say the cost of healthcare is among the top concerns in retirement. Do you have health concerns? Have you planned to ensure healthy aging? Have you considered the costs associated with potential or real health concerns?
Inflation: One-third of retired Canadians (32%) state that inflation and the effect it might have on their retirement finances is among top concerns. What measures have you taken to manage inflation? How will you maintain a sustainable level of income in retirement amidst unforeseeable circumstances?
Work: Canadians are increasingly choosing to continue to work or return to work after retirement. The poll found 27% of Canadians say they will never retire and 23% plan to open a business in retirement. Have you considered whether you would choose to fully retire or return to work during retirement?