Many want to fund retirement with RRSPs but not contributing

VANCOUVER (NEWS1130) – New numbers show most Canadians are planning to fund their golden years with RRSPs, but they may run into big trouble if they don’t start contributing to them.

If you hope to retire — and that is a big “if” for many people — Scotiabank’s annual Investment Poll has found 65 per cent of respondents expect to rely on RRSPs but about half also say they will not be contributing to their RRSPs this tax season.

A third of Canadians have already pushed back their planned retirement age and two thirds are afraid they just won’t have enough money to support themselves after work.

“It’s a real disconnect. You are relying on this pool of money for retirement but there is no money coming in,” says Winnie Go, a senior wealth advisor at ScotiaMcLeod.

“The worry is not having enough and out-living your money in retirement. There are obviously government benefits but that’s not going to give you a retirement lifestyle similar to the one you had while working,” she tells News1130.

“You need to contribute enough. The key is to find out the dollar amount that you will need for your retirement because every person’s idea of retirement is different. Make a plan and work backwards with your financial advisor on what your ‘magic number’ is and then try to invest that amount. The most important message is the need to save, to start as early as you can, and invest whatever amount you can because that’s going to create the discipline.”

Other polls have shown Canadians are managing to put some money aside but are quick to spend it on things like vacations and home improvements. Go says that’s not all bad.

“When you are building your plan, there are always short and long term goals and everything is going to be subject to your cash flow,” she explains. “It’s good to have those vacations and make those renovations. Sometimes it’s education goals or you need to help out elderly parents; but somewhere along the line, you need to have an idea where your retirement is going to fit into your bigger plans.”

“Sometimes we all get squeezed a little bit or want to pay down our mortgage but if you make an RRSP contribution and you get a refund from that, turn around and take a bit of that money to pay down your mortgage or use a bit of that to fund a renovation. If you get a bonus, make sure you earmark a piece for that retirement each time,” says Go.

The Scotiabank poll suggests Canadians have saved an average $24,469 over the past five years, way down from the almost $31,824 reported in 2011. Other top sources of retirement funding for Canadians include savings, government and work pensions and selling their home.