Retirement Polls And RRSP Season

When I worked in banking, January and February were known as the dreaded “RRSP Season”.  It was the approximate equivalent of the retail “Christmas season” with long extended hours, lines of desperate people wanting a quick RRSP purchase, and the inevitable sales quotas.

Related: How an RRSP loan turned my $12,000 contribution into $20,000

With the said line-ups, there was no time for proper planning or consultation, it was a quick “sign the loan document here, park your funds in a savings account or money market mutual fund, and we’ll get back to you later.”  Next!

Since my experience was several years ago, I assume that most people now have a retirement plan that they contribute to regularly, thereby avoiding the last minute rush to the bank.  However, there are still the procrastinators who have to wait until the last minute.

Retirement polls and surveys

Financial institutions tend to commission surveys on retirement at this time of year.  Are they aimed at those procrastinators – a type of scared-straight approach?

“Look at these seniors who don’t enough money to retire and now have to keep working until they’re 90 years old!  START SAVING NOW or you’ll end up in the same situation!  We can help you.”

Related: How to overcome financial inertia

Personally, I have a love/hate relationship with surveys.  On the one hand, I like to see other people’s opinions (do we agree, or am I the only strange one?).  On the other hand, I suspect that answers can be biased from:

  1. How the questions are worded and,
  2. Respondents often give answers they think are expected.

When do we expect to retire?

Back in the late 80’s, London Life had a great advertising campaign promoting “Freedom Fifty-Five.”  The ad showed a man in a business suit running for the bus, suddenly transported to the year he will turn 55 and running down the beach with his future self.

“We look pretty good,” he says to his handsome, silver-haired and trim self.

People still strongly associate Freedom 55 with early retirement even though an Ipsos Reid survey indicated that Canadians have not seen age 55 as a realistic benchmark for some time.

The odds of retiring earlier are not as good as they used to be.  In 2008, 51% expected to be fully retired by age 66.  Now it’s down to 27%.  The younger the respondent, the lower the age, while those 55+ find they will likely not be in a position to stop working until at least age 67.

Related: What’s all this retirement planning for, anyway?

At what age do you expect to retire from your main employment?

Retirement Income

The average retirement income desired is $59,000, with 36% wanting $25,000 – $50,000 and 31% desiring $50,000 – $75,000.

Many Canadians are surprised by how much they need to save to fund their desired income and that their income is going to plummet.  Is this because the financial institutions (and media) highly promote a retirement portfolio of at least $1 million?  Is the desired income unrealistic considering most expenses will be reduced or eliminated in retirement?

The reality, according to Sun Life Financial, is that six in 10 Canadians expect to retire with less than $250,000 in savings, while 38% will retire with less than $100,000.

Nearly 25% feel there is a serious risk of outliving their savings.  Over 58% feel they are not prepared financially.  A mere 26% think they are saving enough.

Related: Are you counting on an inheritance?

Have you prepared a realistic retirement budget?  How much do you really need?

Hi Ho! It’s off to work we go.

Retiring used to mean working until age 65, then spending your free time working on your hobbies, or sitting on your deck with a beer in one hand and the latest best seller in the other.

Some retirees choose to re-enter the work force.  Two friends of mine work part-time in a big box retail store.  One uses the funds and extended vacation time to travel with her seniors’ club.  Since retiring she has enjoyed her dream of visiting China, Africa and New Zealand.  The other works to fund her expensive sewing hobby.

A recent survey found that more than half of boomers are considering or have started a small business – for extra money, but also to keep themselves engaged.

An ING Direct survey, however, shows that 48% of retirees are being forced back to work due to financial reasons.  One-third of respondents did not have enough money saved and 31% faced increased living costs.  31% had to return to work full time!

Related: 16 habits that helped me retire wealthy

Have you considered a “second act” career?

Final thoughts

Are the surveys successful for their intended purposes?  Are Millennials (those aged 18 – 34) preparing for retirement?  ING Direct shows that 64% contribute regularly to their retirement savings and are confident they will retire when expected.  They intend to avoid debt and save more, and stick to a financial plan.

WOW!  I’m impressed!


12 Responses to Retirement Polls And RRSP Season

  1. I am saving for retirement but at this point I don’t think I could ever fully ‘retire’. I plan on keeping busy even when I do end the 9-5. Odd jobs, contract work and volunteer work are all things I plan on doing to keep my mind busy. The difference is that I don’t ever want to be forced back to work due to financial reasons, which apparently seems to be more common these days

  2. Whoa whoa whoa, there’s no regulatory body or ISO standard for what birth years a “millenial” came from, but 34 is up into the tail end of GenX. I personally use the definitive year of 1982: those born in that year or later were too young to remember the formative experience of watching Orson Welles’ greatest and final film in the theatre: Transformers the Movie.

    These are usually trivial matters, but I would have expected them to be front-of-mind for a blog based on generational labels.

      • I have to admit that until today I thought a Millennial was someone born in or after 2000. So I learned something new.

        I’d like a survey that asks how much people expect they will get from CPP. I’m pretty sure there are large numbers of people who think they will get about $20,000 a year, or more.

        • @Bet Crooks: That’s because FI’s routinely plug in the maximum benefit into their retirement calculators.

          Maximum for 2014 is $1038.33/month. Even with maximum OAS that’s still less than $20,000/year.

  3. As an ‘Echo’ I am planning on being FI at 45, but plan to continue working after as I see fit. Currently I put only small amounts into RRSP’s, as I choose to focus the bulk of my disposable income on paying down my mortgage. Once that expense is done (hopefully 2018) then the disposable income will be directed to maxing out RRSP’s, TFSA’s and building a taxable account.

    I will consider myself FI when my passive income exceeds my expenses by 20%. Which based on current projections means about $28,800/year.

    Haven’t given much thought to a second act career, but I would like to venture into money coaching as a side gig.

  4. Great post Marie. Financial planning seems to get more complicated every year. I think a lot of young people get overloaded with information and stick their heads in the sand. Your blog is mostly simple information and easy to understand. Too bad it’s not required reading in our high schools. Keep up the good work.

  5. I’m shooting for retiring around 45. I can’t imagine having to work until you’re 90 (most of us won’t make it that far)!

    Also, I want to try and monetize my hobbies to produce additional income vs. sitting around on the porch drinking beer all day :-)

    It’s so surprising that people don’t think more about the future until it arrives!

    • I’m surprised there are people that want to retire at 45. I’m 44 and I can’t imagine not working – ok, if I won the Lotto Max, I think I could manage. ;)

  6. Instead of a retirement date, I like “findependence day”, a term coined by Jonathan Chevreau. Briefly, this is the day when your income from all other sources exceeds the income you get from your employer.

    This doesn’t necessarily mean you will stop working. Instead you will have the freedom to pursue other appealing opportunities that may arise in the future without worry.

    Contrast this to someone who is working at a job they hate, but can’t quit because they need the money and think they have no other options.

    Findependence day – a worthwhile goal to aim for.

  7. Paying off your mortgage at an accelerated rate is always interesting… especially with people that understand their risk tolerance and market volatility. In essence, you are simply getting a fixed and low guaranteed ROR on you dollars when you pay down your mortgage sooner. This is great if you have a huge mortgage, no margin of error built into your financial plan, or a very high interest rate. Given that my mortgage is only 2.6%, my mortgage payment is manageable, and I understand cash flow; it makes no sense for me to pay down my mortgage at an excessive rate as I can do better with the dollars elsewhere. Every situation is different but debt and leverage are amazing tools for wealth creation if risks are understood and margins of error built in.

  8. I agree that you can typically get more return investing your money elsewhere compared to paying down a mortgage with today’s low mortgage rates. That being said, I do try and put a bit of extra money towards my mortgage because if rates ever did climb to a scary high rate, it may be too late to try start focusing on paying it down.

    If you had a few hundred thousand dollars on a mortgage and the rate went up past 10% it would be hard to manage. The low rates won’t last forever.

    I still put most extra cash to RRSPs but a high mortgage can be a risk.

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