Only four in 10 Canadians who are not retired feel somewhat capable of answering this question. Younger Canadians feel less well informed than their older counterparts about the money they should be accumulating to ensure a secure retirement. Unfortunately, not knowing what your retirement savings target should be can distract from taking a long term view and contributing to retirement plans.
I know how much money I will need…
Canadians answer this question in line with their level of knowledge about the ‘nest egg’ they will need. Only 39% of Canadians say that they feel knowledgeable about how much they should be saving each year to meet their goals. Young Canadians and those in their middle years are equally in the dark.
I know how much I should be saving…
Only 42%Only 42% of Canadians who are not retired consider themselves knowledgeable about the government’s responsibility in retiree benefits. This is particularly weak for those under 55 but isn’t exactly strong among Canadians who are still working at age 65 or older.
I know how much the government will provide me…
We know that most Canadians identify themselves as ‘savers’ rather than ‘investors’ so it shouldn’t be a surprise that answering this question is particularly challenging. 36% of Canadians feel knowledgeable about retirement investment choices but only 8% feel they have some level of proficiency (‘very knowledgeable’). Older Canadians still in the workforce feel that they are somewhat more informed, however, investing is an area where little more than one in 10 Canadians feel they have strong knowledge.
I know the investment choices I should consider…
Understanding the tax implications of retirement savings have immediate benefits to Canadians. Unfortunately, still less than half (45%) of Canadians, regardless of age, describe themselves as either very or somewhat knowledgeable – and rarely the former (11%). Regardless of the question, the pattern is largely the same. Well under half of Canadians would give themselves a ‘passing grade’ on their Retirement IQ and this self-grading improves only a bit among older Canadians on the cusp of retirement.
I know the tax benefits…
Although many Canadians are wisely contributing to registered retirement savings plans (RRSPs) and tax free saving accounts (TFSAs), four in 10 are not saving for retirement at all regardless of age – jumping to 48% among those aged 25 to 34 years old. And among those saving, accumulated savings falls far short of what they need to live on with a retirement time horizon they expect to last 25 years.
Canadians say they need an income of $47,000 per year to live comfortably in retirement, but the majority are not nearly saving enough to reach their target – even those who are closest to reaching retirement age.
Affluent Canadians* are considerably more knowledgeable about what it takes to achieve their retirement goals than others with less money, but many of the country’s wealthier investors still have lessons to learn.
Canadians find encouragement to invest in a number of ways, from meeting an advisor or speaking with family members to participating in workplace plans and visiting their local bank. Here’s how they most often got started.
Canadians widely believe the pressure of meeting daily expenses is preventing them from saving more for retirement. Many will need to find other means of support or may have to vastly reduce their retirement lifestyle.
48% of 25-34 year olds
40% of 55-64 year olds
It’s essential that investors understand the income they will need to live a comfortable retirement and whether their current savings and ongoing contributions will get them there.
See how “to close the gap” between your current investments and what they’ll earn in retirement. Online retirement income calculators may be a good place to start.
Make sure your current mix of savings and investments – including how much cash you hold – will help you reach your goals.
Talk to a financial advisor about the best ways to manage the cost of living today and still save enough for the future.