The humble Registered Retirement Savings Plan or RRSP is one of the most important tools forlong term savings, and we’ve discussed its merits and challenges numerous times on this very blog. However, a new joint poll conducted by CIBC shows that nearly 40% of Canadians see no point in investing in this valuable vehicle for the growth of long term wealth.
This shows that there are numerous misconceptions about the retirement savings process that need to be addressed. For instance, those respondents who indicated that they saw no point in contributing to an RRSP largely said that they justified this decision because of the eventual need to pay taxes on RRSP gains once they reached retirement age. A further 19% said they were not sure whether or not to contribute to an RRSP, and the majority of respondents viewed Tax Free Savings Accounts (TFSAs) as a more valuable and attractive option for savings.
The poll also shows that 57% of respondents thought saving for retirement was excessively complicated, and yet, less than half said that they sought out expert advice on how to plan their retirement savings. This points to a fundamental shift in the way Canadians think about their finances.
Where has all the interest in long term savings gone? According to CIBC, the biggest priority on most Canadians’ financial to-do lists is to reduce their debts. One quarter of Canadians listed debt reduction as their top financial priority, compared to 13 percent and 6 percent who prioritized growing their wealth and saving for retirement, respectively.
While having a well thought out debt reduction strategy is certainly a top priority for anyone who needs a foundation from which to launch their financial goals, it’s important to balance short-term and long-term thinking. Encouragingly, twice as many Canadians in this year’s survey say they will establish an emergency fund, and prioritize savings by setting up automatic transfers into a savings or investment account; 27 per cent and 23 per cent respectively, compared to 13 per cent and 12 per cent last year.
Whether long or short term, there’s one last statistic that stands out in CIBC’s report: namely, only 19% of Canadians surveyed said that they actually accomplished their top financial goal and moved on to a new one in the past year. With the right assistance, more and more Canadians will be on the right track to accomplishing these major goals in less time and with less effort.