Most Canadians are unaware of how much income potential their retirement portfolio can generate, a recent survey by Russell Investments Canada Limited suggests.

The poll by Russell and Harris/Decima of investors aged 42 years and over, with a household income of $50,000 or more, revealed that 88% of investors don’t know that the bulk of their investment income in retirement can be generated from growth that occurs during retirement.

“Many Canadians still believe that once they retire, their investments retire as well,” said Fred Pinto, managing director of distribution services at Russell Investments Canada Limited.

According to Pinto, up to 60% of retirement income can be generated during retirement. He helped develop a previous Russell retirement report, entitled ‘The Russell 10/30/60 Retirement Rule’. The rule concludes that investment earnings during retirement could come from 10% initial savings during the working years, 30% pre-retirement investment growth, and as much as 60% from growth after retirement. This depends on having the right asset mix of bonds and equities, Pinto said.

The retirement report found that investors believe that half of their retirement income will come from money saved during their working years. They believe that the growth of their pre-retirement savings will provide for 31% of their spending in their golden years, and investments would only account for 20% of their potential income during retirement.

“If investors continue to underestimate the need for investment growth during retirement, they could become too conservative with their investments and potentially miss out on generating that very important 60% of their investment income during retirement,” Pinto said.

He said it’s critical for retirees to remain invested in some allocation of equities, to continue to grow their portfolios to protect against inflation and rising costs such as health care.

Despite greater market and economic volatility recently, Russell’s recent survey showed that only 37% of Canadians report some loss of confidence in their retirement finances. In comparison, 53% of Canadians surveyed say their confidence level has not been impacted and 10% are even more confident that they’ll have enough in retirement.

Of the pre-retiree respondents, 29% still plan to retire at 65 years of age, while 49% expect to retire before age 65. Only 22% of those surveyed expect to retire after age 65.

Throughout the recent market downturn, a remarkable 78% of Canadian investors have kept their investments unchanged as they wait for economic improvements to take hold. Another 16% have taken advantage of market volatility to increased their investments and seize new opportunities. Only 7% said they sold their investments and retreated from uncertain markets.

“Retirement remains at the forefront of many Canadians’ minds, especially in light of the market events that we’ve experience over the past two years,” said Pinto.

IE