Many Canadians are not taking the necessary steps to achieve financial peace of mind in retirement, according to a survey released by ING DIRECT Canada. More than one-half (58 per cent) don't feel financially prepared for retirement while only one-third have a plan in place to meet their retirement goals.
For 31 per cent of the 2,002 survey respondents, retirement is not on their radar when thinking about personal finances. That number jumps to 39 per cent for those aged 25 to 34 and 56 per cent for those aged 18 to 24.
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 to 34 and 35 to 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).
Of those who have a retirement savings plan (RSP), 21 per cent are contributing between $1,001 to $2,500 each year, while 16 per cent are putting away between $501 and $1,000. 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 accounts (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 (such as mortgage, credit card or student loans)
•25 per cent would put it towards a savings account (such as an RSP or tax-free savings account)
•16 per cent would put it in an emergency fund
•15 per cent would pay bills.
"Saving $50 a month, at a 2.5 per cent interest rate compounded over 30 years, would provide more than $25,000 in savings,” said Peter Aceto, president and CEO, ING DIRECT Canada. “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."
Not having enough income to sustain a good quality of life during retirement is a top concern for 49 per cent of respondents. Depending on the individual's financial situation, 41 per cent think they will need between $1,001 to $2,500 per month and 31 per cent say between $2,501 and $5,000.
One-third (35 per cent) of Canadians over 55 don't have an RSP. Of those Canadians with RSPs, 29 per cent are currently not making any contributions towards their RSP. Fifty-nine per cent of respondents who have an active RSP contributed about the same amount in 2011 as they did in 2010.
Twenty-nine per cent expect to retire between 61 and 65 while 22 per cent said between 55 and 60, found the survey. However, 71 per cent of women don't have a financial plan to meet their retirement goals compared to 66 per cent of men.
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