Canadians in their mid-30s to early 40s fretting over having never contributed a cent to an RRSP need not worry, financial analysts say. They still have a lot of time to plan for retirement.

"You're still 20 or more years away from the age at which you're likely to retire," said Toronto-based actuary Malcolm Hamilton. "And you can move mountains in 20 years of focused savings."

Whether it's the accumulation of school debt or coping with the expenses that come with having a young family, there are a number of reasons why someone in the Gen X and Y demographic may have put off saving for retirement.

"Of course, it's never too late to start," said Marlena Pospiech, senior manager of the wealth planning group at BMO Financial Group. "On the bright side, maybe they're in a better financial situation now to take advantage of their [RRSP] contribution limit.

"The sooner you start, the better, whether you're 40, 45, 50, 60. You should still contribute, because you can have [an RRSP] until you're 71. When you're 71, you have to convert it to a [Registered Retirement Income Fund], and that's the time you have to make withdrawals. Until you have to make those withdrawals, there really isn't a concern."

Misconceptions, ignorance scare off savers

Amalia Costa, head of retirement strategies at RBC, said there are usually three main reasons why people neglect RRSPs.

"First is the belief that I can't afford to," she said. "The second one is the belief that I don't have enough saved up yet to get started. So, the perception that you need a large amount to get started, that seems overwhelming. The third one is I just really don't know what to invest in."

Demographer and economist David Foot, author of the best-selling book Boom Bust and Echo, suggested that many within this demographic have yet to plan for their retirement savings and with good reason — they have been too busy starting a family, buying a home and paying off debts.

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Demographer and economist David Foot, above, suggests that many in the Gen Y demographic have yet to plan for their retirement because they have been too busy starting a family, buying a home and paying off debts. (Jeff McIntosh/Canadian Press)

The average Canadian follows a similar financial path, Foot said. Those in their 20s aren't saving, because they're still grappling with debt, getting their career started and think they're never going to get old. Once they reach their 30s, they have often bought a house, started a family and are "up to their eyeballs in debt," Foot said, meaning there's no spare cash to save for retirement.

At 40, Foot said, "the teenage kids are eating you out of house and home," but the student loan is probably paid off, and headway is being made in decreasing the mortgage.

By their late 40s, they may have a little spare cash available for investing, and finally, when their 50s roll around, the kids have left, the mortgage is nearly paid off and they say: "Geez, I have to seriously save for retirement."

Bad job market makes saving difficult

But Foot said the unstable job market has made it very difficult for people to plan or save for their senior years.

'This hiring and firing, short-term approach in the job market is disastrous for people planning their lives.'— David Foot, economist

"This hiring and firing, short-term approach in the job market is disastrous for people planning their lives," he said.

"You may have a series of contracts over 10 years, so it may become a permanent lifestyle. But they're essentially temporary jobs, and you can't expect people to think long term if they can't think long term regarding their income and employment opportunity."

According to some studies, RRSP average contributions as a percentage of income among 35-44 year olds has trended downward. Paul Ferley, assistant chief economist with RBC Economics, said the percentage peaked at around 5.3 per cent of total income in the late 1990s but has dropped to around 3.1 per cent.

"Some analysis we've done suggests that more monies may be getting devoted to real estate," Ferley said. "So, what could be happening is that 35-44 year olds are contributing more towards either a down payment or paying off a mortgage and therefore have less income to make an RRSP contribution."

But Hamilton said he believes too much pressure is put on getting people in that age range to contribute to an RRSP when, instead, the focus should be on minimizing debt.

'The correct question for most 35-year-olds is never: Is it too late to start? It's whether it's too early to begin [contributing to an RRSP].'— Malcolm Hamilton, actuary

"The correct question for most 35-year-olds is never: Is it too late to start?  It's whether it's too early to begin," he said. "If you're sitting at 35, supporting two or three young children with a big mortgage, I have a hard time making the case that you should be throwing large amounts of money into an RRSP when your disposable income is under pressure and you're carrying large debt.

"I think the more sensible approach for most of them is to work hard on getting the debt down and eliminated and then save for retirement once you've accomplished that."

Hamilton said those moving into their 40s who still have a lot of debt and still no prospect for saving for retirement in the foreseeable future have taken on too much debt.

"You have to make sure you're not taking on so much debt that you can't get out of it by your mid- to late 40s and still leave yourself 15 to 20 years to save for retirement," he said. "If you have so much debt that you can't accomplish that, frankly, you're in trouble."