Retirement Advice Key as Canadians Fall Short on Savings Goals

Three-quarters of Canadians say they have saved 25 per cent or less of what they feel they need to retire, according to a Canadian Payroll Association survey. Financial advisors are well-positioned to help.

About half (46 per cent) of the 4,766 employees across Canada who responded to the annual online survey say they will now have to work longer than they planned five years ago, mostly because they aren’t saving enough. Even among those closer to retirement (age 50 and older), 47 per cent are still less than a quarter of the way to their retirement savings goal.

The overall picture the survey portrays is bleak: four in 10 working Canadians spend all or more of their net pay each month and another 42 per cent save just five per cent or less of their earnings. More than one-third feel overwhelmed by their level of debt and 12 per cent can’t imagine ever being debt free.

Even more alarming is that 47 per cent of respondents report it would be difficult for them to meet their financial obligations if their paycheque was delayed by even a single week — and this survey was conducted before the Bank of Canada raised its benchmark interest rate by a quarter percentage point on Sept. 6 (with another raise expected to follow in October).

A closer look at the results, however, shows that mortgages are the most common debt respondents are carrying (28 per cent), as compared to credit cards (17 per cent), car loans (18 per cent) and lines of credit (17 per cent). This means that, even if Canadians aren’t managing to sock away much, they are building capital — albeit in non-liquid assets such as real estate.

Another telling finding is that nearly half of respondents (46 per cent) think they need a retirement nest-egg of at least $1 million. Is this estimate accurate? An advisor who takes a tax-efficient approach to retirement income planning — one who looks at all forms of retirement income and potential clawbacks — may suggest that for many, that figure is high.

Advisors are poised not only to show clients how much savings they realistically need for retirement, but also to suggest ways to find new saving strategies and tax efficiencies.
 

Additional Educational Resources:
Tax-Efficient Retirement Income Planning course
Knowledge Bureau Tax Efficient Retirement Income Calculator (free trial available)
Debt and Cash Flow Management course
November CE Summits – Family Debt Management; Managing Specific Debt Sources
 

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