Total unused retirement savings plans contribution amount to exceed $1 trillion by 2018
An increasing number of Canadians are taking the important step of investing in Registered Retirement Savings Plans to help support themselves in their retirement, according to BMO Financial Group.
However, the study also found that most Canadians are not maxing out their annual contribution.
According to the study, sixty-seven per cent of Canadians have retirement savings plans, up six per cent from 2011. Of those who do not have savings plan, 49 per cent say they intend to open one within the next five years.
72 per cent of Canadians expect to contribute the same amount or more to their savings plan than they did last year.
74 percent of Canadians with a savings plan has already made or plans to make a contribution towards a savings plan before the 2012 deadline; last year at the same time, 69 per cent of Canadians planned to make or had made a contribution.
Last year’s average contribution amounts to $4,670.
However, the study also found that many Canadians are worried about the health of their retirement savings plans given the volatility that has characterized financial markets over the last two years; 68 per cent report that they are concerned about the performance of their retirement savings.
“It’s encouraging that a growing number of Canadians understand the important role an RRSP can play in preparing for retirement,” says BMO Financial Group Wealth Planning Group Senior Manager Marlena Pospiech. “But it’s sobering that so many are worried about the performance of their investments within their RRSP.”
“During times of market volatility, it’s critical that Canadians have a financial plan that includes a retirement component and that they review their investments regularly and seek out the assistance of a financial professional if needed,” explains Pospiech.
Pospiech adds that it is also important that people choose investments that match their current age, life stage and risk tolerance.
For example, BMO SelectClass Portfolios come in four portfolios options designed to align with different risk profiles, so whether an investor is conservative, bold or somewhere in between, there is a portfolio tailored to them.
This type of portfolio design can give investors confidence that they are on track to achieving their long-term goals- such as being financially prepared for retirement.
The study also examined Canadians’ awareness around savings plan contribution limits; the results showed that only one-third are aware of their annual contribution limit while more than 60 per cent either rarely or never contribute the maximum amount to which they are entitled.
Only 13 per cent report that they hit the maximum each and every year.
As of 2011, the total unused savings plan contribution amount stood at about $500 billion; the figure is estimated to exceed $1 trillion by 2018.