Life milestones

 Ask any Canadian to name the life milestones they should be planning for, and chances are retirement will land in the top three. In 2020 the Aegon Center for Longevity and Retirement (ACLR) said that globally, workers expect they’ll need to replace two thirds (67%) of their current income in retirement, but just 35% of Canadians think they’re on course to hit that goal. Less than half of Canadian respondents (42%) said they constantly save for retirement; 26% said they save only on occasion, and 15% said they don’t save enough but plan to.

More recent research from Healthcare of Ontario Pension Plan (HOOPP) and Abacus suggests things haven’t gotten much better. Drawing from an April 2021 survey of 2,500 Canadians, they found that even though 46% were able to save more money during the pandemic, nearly two thirds (63%) of all respondents haven’t been saving One of our most significant findings are that Canadians, by and large, are falling short with the individual options for retirement saving and investing.

New research from Aon (a leading global professional services firm providing a broad range of risk, retirement and health solution), the average Canadian worker – defined as a 45-year-old with annual earnings of $60,000, and with a workplace retirement savings plan that has 5% employee contributions and 100% employer match – will need to accumulate 10.9 times their final pay to maintain the same spendable income after they retire. That level of “retirement income adequacy,” as defined in the report, considers changes in savings, taxes, medical expenses, and other factors.

In a report titled The Value of a Good Pension: How to improve the efficiency of retirement savings in Canada, Common Wealth and HOOPP found that compared to individual saving, a pension-based retirement arrangement creates additional value for working retirement savers through five drivers: automated and consistent savings, lower fees and costs, professional investment discipline, fiduciary governance by in-house professionals, and efficient pooling of investment and longevity risks.

The problem is that for many Canadians, deciding between an RRSP or a TFSA can be a very confusing process, and if you are making that decision to help fund your retirement then look for a certified financial planner to help.