Lack of funds and competing financial demands are the two major, related reasons why half of Canadians don’t plan on contributing to an RRSP, or are unsure of doing so, before next week’s deadline, according to new research from Toronto-based Canadian Imperial Bank of Commerce (CIBC) released on Monday.
Slightly more than one-third (37%) do plan on contributing to an RRSP for the 2015 taxation year and 13% stated they are unsure. Specifically, 41% of Canadians surveyed said they simply do not have the money to contribute to RRSPs and 14% say their inability to contribute to their retirement savings is a result of other financial priorities, such as paying down debt, home renovations or buying a home.
In addition, some Canadians (17%) are choosing to instead invest in a tax-free savings account instead of an RRSP.
However, those results do not indicate a carefree attitude toward retirement as 75% of Canadians state they are worried about this phase of their lives.
“Many diligent Canadians are setting aside money for retirement but there are others who worry they aren’t saving enough and those who aren’t able to save at all because they are trying to stay on top of debt and manage day-to-day living costs,” says Christina Kramer, executive vice president, retail and business banking, with CIBC, in a statement.
“It’s ironic, but for some Canadians, life is getting in the way of saving for retirement,” she adds.
Canadians between the ages of 35 and 54, often referred to as “Generation X,” struggle the most with this issue. More than one-third (39%) say they will not contribute to an RRSP and 59% attribute this to a lack of funds. An overwhelming majority (86%) state they are worried about their retirement.
“The conundrum for many Gen Xers is that they have reached their crucial saving years as well as their peak spending years,” says Kramer, “whether it’s paying down the mortgage, supporting their kids, or helping elderly parents, and they are being pulled in competing directions.”
In addition, although almost an equal percentage of millennials (38%) say they will not add to their RRSPs, 49% indicate it is because of a lack of funds. More than three-quarters (77%) of the millennial survey participants say they are concerned about their retirement prospects.
Almost three-quarters (71%) of Canadians who are 55 years old or older say they will not be contributing to their RRSPs, but only 27% state their unwillingness to contribute is due to a lack of funds. Close to two-thirds (62%) of this group state they still worry about retirement.
A possible solution for those who struggle to around RRSP season is to consider contributions as a part of a yearlong process and not a lump-sum contribution just prior to the February deadline. CIBC’s research found that 31% of those who plan to contribute to their RRSPs for the 2015 taxation year have already done so through regular savings instalments.
Angus Reid Forum conducted the online research for CIBC between Feb. 9 and Feb. 10, using a random sample of 1,501 adult Canadians.