People are living longer than ever before and while investors recognize their retirement savings may now need to last 25 years or longer, an alarming number of Canadians believe they are better prepared for a long retirement than they actually are, according to a survey by BlackRock Asset Management Canada.
Seventy per cent believe government pension plans will be there for them in retirement, found the survey of more than 1,700 people.
And while 61 per cent of investors with a defined contribution (DC) plan or group RSP said they take an active role in understanding their workplace retirement plans — and 59 per cent make the maximum contribution every month — 70 per cent admitted they hardly ever, or never, adjust their allocations — even though most know (57 per cent) that they should make yearly adjustments.
Nearly one-half of investors (45 per cent overall) said they have chosen to invest less in the stock market over the past few years, and one-third (including 37 per cent of non-retirees and 41 per cent of non-retirees with less than $100,000 savings) admitted they missed out on the post-2009 market rally.
Time for action
Nearly one in five investors (18 per cent) say they don't save anything for retirement on a monthly basis, and one in 10 (11 per cent) don't know what they save, found the survey. The biggest barrier to saving more is "making ends meet month-to-month" (59 per cent), but many (40 per cent) also cite "a decrease in salary" and the cost of education (44 per cent).
Nearly one-quarter (24 per cent) of all investors surveyed don't have an RRSP.
Nearly two in five investors have no workplace retirement plan, including one-quarter of currently employed investors. Overall, 35 per cent are in a defined benefit (DB) plan, 18 per cent are in a DC plan and only 15 per cent are in a group RSP.
More than one-half (56 per cent) of non-retired investors believe their savings will need to last at least 25 years. And one-quarter of investors aged 45 to 65 — and more than one-third of younger investors — think they'll need 30 years or more worth of retirement savings.
Non-retired investors are generally confident (62 per cent) they have planned well for retirement, but not all of those people actually have a plan (59 per cent) and fewer than one-half (49 per cent) of those with less than $100,000 in retirement savings have a plan.
Only 15 per cent of non-retired investors said they were very knowledgeable about how much they will need to save each year to meet their retirement goals, found the survey.
"The paradox is that investors recognize that their retirement savings will need to last longer than ever before but they aren't making plans to ensure they will actually have the money they need," said Noel Archard, head of BlackRock Canada. "There tends to be a false sense of security when it comes to planning for retirement. We hope that the money will somehow be there when we need it but we're not taking the action required to ensure it is. This is a serious problem, and addressing it must become an urgent priority."
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