As we contend with a decline in traditional sources of retirement income, coupled with global populations living longer, understanding the gaps and taking meaningful steps to address them is both a challenge and an opportunity. Whether it’s starting early, engaging in a workplace plan or simply understanding how much annual income you’ll need, just getting started is a powerful first step that everyone should be taking.
BlackRock polled 2,000 Canadians as part of a larger international study and found that while 60% of Canadians are actively saving for retirement, including 52% of 25-to-34-year-olds, there’s a clear discrepancy between retirement income expectations and savings habits.
Respondents said on average they expect an annual income of $46,900 for 25 years in retirement. But those who’ve started saving have amassed on average just $70,700 in total, barely enough to cover 18 months of expenses. That number is little higher among pre-retirees aged 55 to 64 at $125,000, still likely not enough even if expertly invested.
Retirement is one of the most important global issues that we face today, this survey reinforces that point. As we contend with a decline in traditional sources of retirement income, coupled with global populations living longer, understanding the gaps and taking meaningful steps to address them is both a challenge and an opportunity. Whether it’s starting early, engaging in a workplace plan or simply understanding how much annual income you’ll need, just getting started is a powerful first step that everyone should be taking.
The survey shows that while 47% and 42% are contributing to Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts, respectively, only 40% said they have some idea of how much money they need to retire and a full one-third said they had no idea at all.
The Investor Pulse also revealed a troubling lack of investment knowledge. One-in-four said they are clueless about their current investment options and only 36% said they are at least somewhat knowledgeable about what types of investments they should consider to maximize their retirement savings.
Nothing illustrates this skills problem better than the actual makeup of Canadian portfolios. A whopping 60% of the typical portfolio is being held in cash–far too much to meet most retirement needs when you factor in record-low interest rates and inflation. What’s more, nearly half of survey respondents (45%) said they plan to increase their cash holdings next year. The average Canadian portfolio holds just 19% in equities, 7% in bonds, 4% in property, 3% in alternatives and the rest in other asset classes.
When asked why they’re sitting on so much cash, the majority cited accessibility and/or convenience while 25% admitted to a fear of losing money and 10% said it was because they didn’t understand their options.
Skepticism about the stock market abounds, the study suggests. Less than half of Canadians (44%) agree with the statement “Investing is for people like me” and a full 51% believe investing is like gambling.