An increasing number of Canadians — about 59 per cent — have RRSPs, including young adults age 18 to 34, half of whom say they have contributed to a retirement savings plan, according to an RBC survey.
The bank’s annual poll of Canadians about retirement savings suggests 59 per cent of Canadian adults have an RRSP, up from 55 per cent in 2012 and much higher than Statistics Canada figures, according to which only 5.95 million Canadians contributed to RRSPs in 2011, the latest year for which official data is available.
The heightened awareness of the need to save for retirement suggested by the RBC poll might be a reflection of Canadians anxiety over their finances — fuelled by the provincial and federal governments' recent debate over an expansion of the Canada Pension Plan and Finance Minister Jim Flaherty's admonishment of middle-class Canadians to save more.
The increase might also reflect the improved performance of equity markets in 2013, as the better results might have encouraged those who lost a bundle on their RRSP portfolios in 2008 to start investing again. Investor Economics estimates that Canadians had a total of $877 million in RRSPs as of June 2013.
Mutual funds are the preferred investment choice for 43 per cent of those surveyed by RBC.
The number of young adult Canadians contributing to an RRSP jumped 10 percentage points to 50 per cent, the highest level in five years.
Saving more in RRSP
On average, those age 18 to 34 said they had put $4,329 in an RRSP, up by $1,200 from last year, while the overall average contribution was $4,653, up by $500. That rising figure may represent increased economic security for many Canadians, after a period in 2010 to 2012 when many jobs were lost and they may have been unsure of their earnings.
RBC’s poll was conducted by Ipsos Reid from Nov. 6 to Nov. 20, 2013, via a random sample of 2,062 Canadian adults and is considered to have an estimated margin of error of ±2.2 per cent, 19 times out of 20.
The red flags in RBC’s poll were the very low number of Canadians who will put the maximum contribution in an RRSP — just 23 per cent — and the news that only 34 per cent of Canadians make regular contributions.
While younger workers are unlikely to have sufficient income to make the maximum contribution, only 25 per cent of those over age 55 and 20 per cent of those aged 35-54 made the maximum contribution.
Make regular contributions
Richa Hingorani, senior manager with RBC Financial Planning, said establishing the habit of saving regularly can make an RRSP more affordable.
"By making regular contributions to your RRSP, you ensure that time and compounding growth work to your advantage. And the best part is you don’t have to scramble for cash as the holiday bills are arriving," she said in a news release.
According to Caroline Dabu, head of BMO Wealth Planning Group, about 43 per cent of Canadians over 65 will end up having to support themselves in retirement, either because of loss of a partner,a divorce or because they are single by choice.
"Singles do not have the advantage of having dual incomes and will not be splitting the basic costs of living in retirement, such as housing, groceries and transportation, with a spouse," she said.
"While everyone should start saving for retirement as early as possible, there is extra pressure for singles to focus on saving enough to be able to support themselves on their own in retirement."