Retirement savings a priority for Canadians

Not deterred by inflation, rate hikes, or stock and bond bears

This may come as a bit of a surprise, but more Canadians say they are saving for retirement this year than in 2022.

It’s a small difference: In a recent survey, 75% of the 1,521 respondents said they are putting money aside for retirement compared with 72% a year ago. But it’s significant that the percentage is up in the face of a range of headwinds that include high inflation, rising interest rates, the worst bond market in 40 years, and falling stock prices.

The poll was conducted in November by Leger on behalf of Questrade. It found that 75% of Canadians are saving for retirement in one form or another, up from 72% last year. RRSPs remain the most popular way to do this, at 42%, but Tax-Free Savings Accounts are a close second, at 40%.

Most of the people surveyed said they plan to invest about the same amount in their retirement plan as last year (67% for RRSPs, 69% for TFSAs). But almost one in five expect to invest less in RRSPs, while 16% said the same about TFSAs.

It’s surprising those numbers aren’t higher. It costs more to fill the gas tank, service the mortgage, keep the heat on, and put food on the table. People are being squeezed but the retirement saving commitment remains high, despite the fact that 35% of respondents said inflation has impacted their ability to save.

Where’s the money going? This was a bit of a shocker. Despite the sharp drop in the markets last year, the most popular choice among RRSP investors was exchange-traded funds (ETFs). The report found that 41% planned to invest directly in stocks while 39% named mutual funds. (Respondents were allowed to select more than one option.) Conservative choices ranked at the bottom of the list with 38% naming Guaranteed Investment Certificates (GICs) and 33% preferring high interest savings accounts.

These results suggest a deemphasis on safety that could spell trouble down the road for some retirement plans. The first rule of investing according to Warren Buffett is “Don’t lose money.” Even if your assets underperform the market, the fact RRSPs and TFSAs are tax-sheltered for decades can push the value of a plan into six- or even seven-figure territory.

The final take-away from the report is that 41% of retirement savers use the services of a bank financial advisor. That’s not always bad, but it’s important to be aware that these folks are motivated to push the bank’s own products, which may not always be the best choice for the client.

The study found that 32% of respondents were do-it-yourself investors or used robo-advisors. That could be good or bad, depending on your knowledge level and your sources of input. Just remember Buffett’s cardinal rule: “Don’t lose money.” A retirement plan isn’t a roulette wheel. Choose securities that will almost certainly profit over time and stick with them.

Next time: Three stocks for your retirement plan.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website. To take advantage of a 50% saving on a trial subscription and receive the special report “The Tumultuous Twenties,” go to https://bit.ly/bwGP20s.

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Notes and Disclaimer

Content © 2023 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.