Canadians Have an Evolved Vision of 'Retirement' due to budgetary restraints, Reveals new H&R Block Survey

More than half of Canadians indicate they are behind on retirement saving

• 50% of Canadians say they plan to have a side gig when they retire
• 55% say they need to better understand tax-friendly retirement savings options
• 52% don't feel they have enough money left at the end of the month to save for their retirement
• 19% plan to rely on government-assisted retirement plans; 13% have not made retirement savings plans
• 32% believe they put away enough money each month for a retirement fund
• 46% feel good about their retirement strategy

CALGARY, AB, April 3, 2023 /CNW/ - A new survey commissioned by H&R Block Canada reveals that nearly half of Canadians are unprepared for retirement, lack enough savings, and are planning on working part-time in retirement years to make ends meet.

"Not so long ago, the traditional vision of retirement was that at around 65 years old, Canadians 'hung up their hats' and celebrated the end of full-time employment. Enjoying the steady income of their company/government pension, they were ready to embrace new life ventures in pursuit of the things they never previously had time for," said Peter Bruno, President of H&R Block Canada. "What we're seeing now is that the vision for retirement has evolved dramatically – fuelled by shifts in tax-friendly savings plan options, evolving workforce realities, the gig economy, and the prevailing economic environment."   

Evolved vision of 'semi or gig-retirement' at an earlier-than-average age.

While Canadians may still plan on hanging up their hat on their 9-5 job, half (50%) say they plan to have a gig job when they retire to bring in some income, introducing a new reality to the future of retirement. The survey also reveals that many Canadians anticipate retiring earlier than the current average age.

According to Statistics Canada, the average retirement age in 2022 was 64 years and 6 months in age. However, the survey saw 44% say they anticipate retiring before they hit the 64-year mark. Of those who've not yet retired, there's a wide range of retirement age expectations, including between 45-54 years old (5%); 55-64 (39%); 65-69 (35%); 60-64 (27%); 70+ (21%).

Surprisingly, the survey also revealed that over a third (36%) of total respondents between the ages of 18-54 believe they won't ever retire.

Canadians recognize the importance of tax-friendly savings plans – even if they don't totally understand them.

The research indicates that Canadians recognize that tax-friendly savings plans, including RRSPs and TFSAs, are a key component of their retirement strategy. There is also a heavy reliance on employer-sponsored registered pensions and government-assisted retirement plans to help fund future retirement. The survey found:

• 56% of Canadians report having an RRSP; 6% plan to set one up in the future
• 54% have a TFSA; 6% plan to establish one at some point
• 37% have an employer-sponsored registered pension plan
• 19% say they'll rely on government-assisted retirement plans

However, the research reveals there's still a prevailing lack of understanding around tax-friendly retirement savings options and strategies (55% of Canadians), including among those that already have retirement plans in place.  

More than one-in-ten Canadians (13%) report not having made retirement savings plans, and 5% say they'd rather spend any extra money on maintaining a good standard of living versus putting it into a TFSA or RRSP.

Mixed sentiment around retirement outlook.  

The current economic climate is putting pressure on many Canadians when thinking about putting money away for their retirement. More than half (52%) feel they don't have enough money left over at the end of the month to put towards retirement savings, and 65% say they'll likely put less into their TFSA or RRSP this year, given the increased cost of living. This compares to 32% who feel like they put enough money away each month for their retirement and 46% who feel good about their retirement strategy.   

"There is no one-size-fits-all retirement plan or strategy for Canadians, but regardless of your personal situation, having a good understanding of your options and how tax-friendly savings plans work is key," said Peter Bruno. "When it comes to tax filing time, it's also important you understand any changes that could impact how to maximize your tax return and minimize your taxable income."  

H&R Block Canada points to key changes this tax filing season relating to retirement savings plans:

RRSP and TFSA limits increased.

• The RRSP limit for tax year 2023 increased to $30,780. Canadians can contribute up to 18% of their earned income in the previous year, up to the maximum of the limit.
• The TFSA contribution limit increased to $6,500 for the year. To put this into perspective, if a 40-year-old Canadian contributed the maximum amount annually, they would have $162,500 (plus interest) in their TFSA by the age of 65.

Changes to Old Age Security (OAS) limits.

• Some Canadians may need to repay OAS. This year, Canadians 65 and older whose taxable income was over $81,761 would need to repay some of their OAS. If your taxable income was over $134,626, you wouldn't have received any OAS payments.
• Seniors 75+ receive an automatic 10% increase as part of the CRA's new Affordability Plan as of July 2022.

Canada Pension Plan (CPP) maximum contributions increased

• Canada Pension Plan (CPP) and Québec Pension Plan (QPP) increased by 2.7%. This means the maximum pensionable earnings are $64,900, with a basic exemption of $3,500 for 2022. The employee and employer maximum contribution is $3,499.80 for CPP and $3,776.10 for QPP.
• Self-employed Canadians must account for both the employer and employee contributions, so for this year, the maximum contribution for CPP is $6,999.60, and for QPP, it is $7,552.20

About the survey

The online survey was commissioned by H&R Block and conducted from February 14-16, 2023, among a nationally representative sample of 1,501 Canadians who are members of the Angus Reid Forum. For comparison purposes only, samples of this size would each yield a margin of error of +/- 2.5 percentage points at a 95% confidence level. The survey was offered in English and French.

About H&R Block Canada

A trusted partner of Canadians for over 55 years, H&R Block Canada is Canada's tax leader. Serving more than 900 locations across Canada, H&R Block's team of Tax Experts use the latest in technological advances combined with real-world expertise to help people file taxes in-office, remotely, via drop off or use do-it-yourself Tax Software. H&R Block Canada can support the preparation of personal, small business, corporate, U.S., rental and estate taxes. H&R Block's comprehensive education program, Tax Academy, trains new experts and ensures our Tax Experts continually update their skills. Learn more at www.hrblock.ca or 1-800-HRBLOCK.

SOURCE H&R Block Canada Inc.

Amanda Federchuk, H&R Block (c/o Ketchum), 416-505-0517, [email protected]