Canadians start late on retirement savings

Canadians are starting to take retirement planning seriously, according to fresh research from Desjardins Financial Security, but there’s a downside: they typically put off saving until their mid-thirties, at best.

In a survey of 1,666 adults, Desjardins found that on average, the “ideal age” to start retirement was 60. But 35% of workers and partial-retirees said they did not seriously start saving for retirement until they were over 40 years old. The survey found the average age to start seriously saving for retirement is 35.

With actuarial projections suggesting life expectancy nearing 90 years, these late-starters are giving themselves only 20 years to fund a theoretical retirement that could be as long as 30 years. Perhaps less realistic was the finding that 34% of respondents over 40 would like to retire between the ages of 40 and 55.

While 69% acknowledge the importance of consulting a financial advisor before retirement, just 40% are currently working with one.

Only 9% of the workers surveyed aged 40 and over expect to have saved enough to be able to retire by age 56-65, and yet 60% of workers 40 years old and over feel they are realistic in setting their ideal age for retirement.

“Canadians need to realize that retirement is not a 20 or 30-year vacation,” says Monique Tremblay, senior vice president of savings and segregated funds for Desjardins Financial Security. “People need to change their behaviour and start planning for retirement as soon as possible — earlier than the average age of 35 years old.”

On the bright side, some of those surveyed had started retirement planning before hitting 30 — 37% of couples with children and 36% of those with savings and investments over $100,000 started early.

But other were found to have delayed starting saving until they were 50 years old. The survey found 28% of those with incomes between $20,000 and $30,000 — understandably — started late, as did 33% of pre-retirees and 20% of part-time workers.

This appears to have had a direct impact on their level of savings, as 25% of those with investments between $10,000 and $25,000 also didn’t start until they were 50.

“These Canadians still, on average, want to retire alongside their peers at age 60,” says Tremblay. “It is understandable that the extent of the planning and saving must be in relation to the needs and financial capacity, but a simple plan is better than no plan at all.”

Financial considerations may be even more important in the retirement of the future, because many respondents plan to stay active to stave off boredom and isolation. Social activities generally cost more than rocking on the porch.

Eighty-two per cent of respondents acknowledge the importance of planning a post-retirement social life, but only 55% have started making plans. Almost half said it was important to seek out advice on dealing with the emotional impact of retirement — such as the feeling of isolation from losing contact with co-workers. So far, only 23% have actually sought out this kind of advice.

Even though many have started saving late — and risk falling short of their ideal retirement — only 22% think it is important to seek advice on working during their retirement. And less than half of those (9%) have actually sought out such advice.

The survey did find that seniors are keeping closer tabs on their nest egg than in the past. Among those who are currently fully retired, 81% pay special attention to their savings, up from 72% in a survey Desjardins conducted in 2003.

The survey was conducted by SOM. The sampling plan provides proportional estimates with a maximum margin of error of plus or minus 2.6%, 19 times out of 20. The data was statistically weighted to accurately reflect the composition of Canadians by region, gender and age based on 2001 Census information.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(11/09/06)

Steven Lamb