Majority of Canadians feel financially unprepared for retirement

More than 1 in 3 aged 35-54 don't have an RSP;
68% of Canadians have no financial plan in place to meet retirement goals

TORONTO, Jan. 23, 2012 /CNW/ - A new survey from ING DIRECT reveals many Canadians are not taking the necessary steps to achieve financial peace of mind in retirement. According to the Angus Reid study commissioned by the bank, more than half of Canadians (58 per cent) don't feel financially prepared for retirement and only a third (33 per cent) actually have a plan in place to meet their retirement goals.

For 31 per cent of survey respondents, retirement is not even on their radar when thinking about personal finances. That number jumps to 39 per cent for those aged 25-34 and 56 per cent for younger Canadians aged 18-24.

Currently, a top financial priority for most Canadians is to pay off credit card debt or lines of credit (41 per cent). For respondents aged 25-34 and 35-54, with children under 18 living at home, saving for retirement falls to the bottom of the priority list (21 and 30 per cent), behind paying off their mortgage (38 and 42 per cent) and saving for their children's education (41 and 40 per cent).

"Saving for retirement can't be an afterthought," said Peter Aceto, president and CEO, ING DIRECT Canada. "Despite the amount of debt people are carrying and what we keep hearing in the news, saving is still possible.  Understanding the importance of starting early, even if it means starting small, has a huge influence on the ability to meet your financial goals. Canadians should also look at the value they're getting from their existing financial products and have ongoing conversations about money with friends, family and on social networks, which can play a big role in being better informed about personal finances."

Savers are out there

The survey also found that of those who have a RSP, 21 per cent are contributing between $1001-$2500 each year, while 16 per cent are putting away between $501-$1000. Forty-three per cent plan to contribute the same in 2012 as last year while 27 per cent are planning to contribute more.

The top five financial product categories where Canadians have invested their RSPs or retirement funds include mutual funds (57 per cent), Tax Free Savings Account (30 per cent), GICs (25 per cent), savings accounts (20 per cent) and individual stocks (20 per cent).

If they had an extra $50 each month, Canadians would spend it as follows:

  • 33 per cent would pay off debt (mortgage, credit card, student loans etc.)
  • 25 per cent would put it towards a savings account (RSP, TFSA etc.)
  • 16 per cent would put it in an emergency fund
  • 15 per cent would pay bills

"What if putting $50 into a savings account each month was like a mandatory bill you had to pay? Equate it to paying a half per cent more on your mortgage, but instead you're putting that half per cent into a savings account, like an RSP, that is also giving you interest," said Aceto. "Saving $50 a month, at a 2.5% interest rate compounded over 30 years would provide more than $25,000 in savings*. If you can't find $50 to contribute, start by taking a look at the fees you pay for your financial products. In many cases, this expense can be eliminated and redirected to savings."

He added, "A saving habit takes discipline but once you start it's very easy to maintain, especially with an automatic savings plan. Our clients are always happily surprised at how much they've built in savings even with small monthly contributions. It's exciting to see your savings grow and feel in control of your financial wellbeing."

How much will you need?

Not having enough income to sustain a good quality of life during retirement is a top concern for half of Canadians (49 per cent). While the amount of income required during retirement varies from person to person, depending on the individual's financial situation, 41 per cent of those surveyed think they will need between $1001-$2500 per month and 31 per cent say between $2501-$5000.

ING DIRECT's online Retirement Calculator is an easy-to-use resource that can help Canadians calculate how much they will need to save between now and retirement. The calculator provides an estimate based on current retirement savings, monthly contributions, age and other factors.

Additional survey findings:

General

  • Of those Canadians with RSPs, 29% are currently not making any contributions towards their RSP
  • For 44%, retirement plans have not been impacted by the past year's economic and/or stock market performance
  • Fifty-nine per cent of respondents who have an active RSP contributed about the same amount in 2011, as they did in 2010. One in five (19%) contributed more, and one in five (22%) contributed less
  • Twenty-nine per cent expect to retire between 61-65 years of age, 22% said between 55-60
  • The performance of the economy and/or stock market in 2011 has delayed the expected time of retirement for 18% of Canadians

Age & Gender

  • Majority of Canadian women (71%) don't have a financial plan to meet their retirement goals vs. 66% of men
  • Comparing 2011 RSP contributions to 2010, Canadians aged 25-34 (25%) are much more likely to have contributed more in 2011 than Canadians aged 35-54 (16%) and those over 55 years (12%)
  • One-third (35%) of Canadians over 55 don't have an RSP
  • For 53% of Canadians 18-24, saving for a big purchase is their top priority, followed by paying off student loans (31%)
  • A quarter of Canadians (26%) aged 35-54 with kids expect to retire later than planned
  • Men (25%) are significantly more likely than women (19%) to feel financially prepared for retirement

Regional

  • Fifty-eight per cent of Atlantic Canadians don't have an RSP - the highest among all regions
  • Residents of Manitoba/Saskatchewan (64%) are significantly more likely to have an RSP than Canadians from other provinces
  • Mutual funds are particularly popular in Ontario (63%), compared with Manitoba/Saskatchewan (48%) and Quebec (53%)
  • Albertans (30%) and Ontarians (27%) are much more likely than British Columbians (19%) to intend on contributing more to their RSP in 2012 than they did in 2011
  • Quebecers (48%) are much more likely than those from Alberta (37%) and Manitoba/Saskatchewan (35%) to be considering their financial well-being when thinking about retirement

ING DIRECT offers Canadians a range of retirement investment options, including RSP Mutual Funds, GICs, TFSAs and savings accounts. All new clients who open a RSP or TFSA will receive a $25 sign-up bonus (limited time offer). Visit ingdirect.ca/peaceofmind to learn more.

About ING DIRECT
ING DIRECT is Canada's leading direct bank with over 1.8 million Clients and more than $37.6 billion in total assets. ING DIRECT gives the power of saving to all Canadians by offering high-value, simple products such as high interest Savings Accounts with no fees or service charges, low rates on mortgages and a no-fee daily Chequing Account that actually pays interest. Low cost, index based mutual funds are sold through ING DIRECT Funds Limited. ING DIRECT has been operating in Canada since 1997 and paid more than $5 billion in interest to Clients. ING DIRECT is open for banking 24 hours a day, 7 days a week, at ingdirect.ca, on mobile devices at m.ingdirect.ca or by calling 1-800 ING DIRECT (1-800-464-3743).

About the Survey
From December 21-28, 2011, an online survey was conducted among a sample of 2,002 Canadian adults who are Angus Reid Forum panel members. The margin of error — which measures sampling variability — is +/- 2.19%, 19 times out of 20. The sample was balanced by age, gender and region according to the most recent census data. Discrepancies in or between totals are due to rounding.

*For illustrative purposes. Based on interest calculated daily and paid monthly.

®The Streetwise Funds are a registered trademark of ING Bank of Canada, used under license.

ING DIRECT Streetwise Funds are exclusively offered by ING DIRECT Asset Management Limited. ING DIRECT Funds Limited is the principal distributor of ING DIRECT Streetwise Funds. ING DIRECT Funds Limited offers mutual funds across Canada.  ING DIRECT Funds Limited and ING DIRECT Asset Management Limited are wholly-owned subsidiaries of ING Bank of Canada.  Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual funds are not insured by the Canada Deposit Insurance Corporation or any other government deposit insurer, and are not guaranteed by ING Bank of Canada, or any other Canadian financial institution. 1.07% Management Expense Ratio (MER) as at June 30, 2011.

SOURCE ING DIRECT

For further information:

or to arrange an interview, please contact: 

Buket Oktem
ING DIRECT
416-906-3164
boktem@ingdirect.ca

Teresa Cugliari
Fleishman-Hillard
416-645-8201
teresa.cugliari@fleishman.ca

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