Many Canadians are missing out on the benefits of an RRSP because they’re not seeking out expert advice on reaching their retirement goals, according to a recent poll conducted on behalf of Toronto-based Canadian Imperial Bank of Commerce (CIBC).
In fact, two in five Canadians see “no point” in investing in an RRSP and two-thirds believe a TFSA is a better savings account because it’s tax free. The poll suggests these misconceptions abound because 65% of Canadians are not seeking financial advise in preparing for retirement.
“Several myths about RRSPs have been circulating in recent years, which are unfairly giving them a bit of a bad rap and Canadians are asking if an RRSP is still the way to go,” says Jamie Golombek, managing director of tax and estate planning, CIBC Financial Planning and Advice, in a statement.
“While everyone’s retirement needs will be different,” he adds, “it’s important to take the time to build a retirement plan to ensure you have sufficient funds to live a lifestyle you want, cover unexpected expenses such as health or care costs, or leave a legacy for heirs.”
In a new report entitled In Defense of RRSPs: Dispelling Common RRSP Myths, Golombek debunks the top myths may lead to some misconceptions about the value of contributing to an RRSP.
Here are some key findings:
> Only half (51%) of Canadians surveyed say their RRSP is, or will be, among their top sources of retirement income or expected retirement income.
> Thirty-nine per cent of Canadians believe there is “no point” investing in an RRSP since you pay all the savings back in taxes when you retire.
> A large majority (67%) say TFSAs are a better way to save because they are completely tax free.
> More than half (54%) of Canadians surveyed don’t understand the tax consequences associated with an RRSP upon their own or their spouse’s death.
“Perhaps the biggest misconceptions about RRSPs is that they’re pointless given you’ll still pay tax in future, while a TFSA provides a completely tax-free source of income,” Golombek says.
“But, the fact, is although a TFSA may be a better choice for those currently in a lower tax bracket or early in their income-earning years, an RRSP can provide a completely tax-free rate of return and is frequently the best option for retirement savings,” he adds.
“The bottom line is that there’s no point having non-registered investments unless you have you maxed out your TFSA or RRSP room.”
The poll was conducted online among 1,523 randomly selected Canadian adults from Jan 12 to Jan 14.