There’s a disconnect happening in Canada. A large number of Canadians are looking forward to retirement – a time in their lives to be filled with travel, hobbies and quality time. But nearly half aren’t saving for it.
That’s according to a recent TD study that highlighted a shift in thinking about retirement.
“The idea of retirement has changed dramatically as people are living longer and want the freedom to do meaningful things in their later years,” said Linda MacKay, Senior Vice President of TD Retail Savings and Investing.
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Dubbed “freetirement,” MacKay said more and more Canadians view retirement as a jumping off point, a new phase in their lives, rather than an end goal.
“People still want to travel and spend time with family, but a significant number also want to stay productive and engaged during their retirement and are looking for the financial means to do it,” said MacKay.
One third of those surveyed want to work casually doing something they love during their retirement, one in five want to volunteer. One in ten want to open a small business.
The problem? Many of those people dreaming of their golden years aren’t actually saving for it.
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The survey found 47 per cent of those polled aren’t contributing to a Retirement Savings Plan (RSP), one of the most popular tools for saving for retirement.
According to Statistics Canada, in 2012 just 23.7 per cent of Canadian taxfilers contributed to an RRSP.
What experts are seeing is an idea of retirement that is at odds with the actual rate of savings.
“Optimism is a great thing, and it can be very motivating,” said Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada. “But we are seeing a disconnect between dreaming big and saving big,” he said.
“The only person who can make your ‘freetirement’ a reality is you.”
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TD recommends seeking the help of an expert. “For many Canadians, saving for retirement — and goals beyond retirement — may seem daunting and talking to an expert can help to make it feel more approachable,” said Lee Bennett, Senior Vice President, TD Wealth Financial Planning.
TD also recommends contributing regularly to an RRSP and Tax-Free Savings Account (TFSA). The bank’s survey found that of those who do contribute to an RSP, more than a third of them wait until the annual contribution deadline.
“While every contribution is a step in the right direction, making it a regular habit every week or month can help people reach their ‘freetirement’ dreams even faster,” the bank said in a release.
Consolidated Credit urges Canadians to shop around when looking for the right savings vehicle for you. “There is a range of ways you can fund your retirement, including public and private funds,” the non-profit charity said in a release. “Put your eggs in different baskets.” The Financial Consumer Agency of Canada (FCAC) has a list of possible retirement income sources that may be available to you.
When it comes to taking your retirement goals from dream to reality, Consolidated Credit also recommends using tools such as the Canadian Retirement Income Calculator to determine how much money you’ll need to save to retire comfortably.
The charity also urges future retirees to start saving as early as possible to take advantage of time and compound interest. “Adding small amounts to an RSP in your 20s gives your money 40 years of growth. Starting later would require much bigger investments to get the same results.”
This year’s RRSP contribution deadline is March 2, 2015.
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