Canadians underestimate retirement costs: study

Canadians aren’t saving as much for retirement as their global peers and are underestimatimg the costs of retirement, says a report from Schroders.

The Global Investor Study surveyed 22,000 people from 30 countries to ask about financial expectations for retirement and how the expectations compare to what retirees are experiencing.

The study found that Canadians are saving an average of 11.9% of their incomes for retirement, which is less than the savings rate in the Americas (average of 13.9%) and globally (average of 12.2%), a Schroders release says.

Highlights from the Canadian part of the survey include:

On average, Canadians who aren’t retired think they should be saving 13.6% of their annual incomes for retirement. While non-retirees expect to spend 42% of their retirement incomes on basic living expenses, Schroders says Canadian retirees actually spend 59% of their retirement incomes on living expenses;
88% of retirees say their retirement income is sufficient; 12% of retirees say they don’t have enough income to live comfortably;
Canadians aged 55 and over think they will need 71% of their current annual income to live comfortably in retirement. The survey found, on average, retirees actually receive 61% of their final salary annually in retirement; and
Canadians are investing more in retirement than planned. Those not yet retired expect to allocate 8% of their total investments and savings for retirement to investments once they retire, while that figure is 20% for actual retirees.

Read: Retirement planning cheaper if CPP and QPP deferred longer: C.D. Howe

When it comes to level of investment knowledge and savings, the survey found:

those with a beginner/rudimentary level of knowledge say they are saving 10% of their annual income for retirement and feel they need to be saving 14% to live comfortably;
those with an intermediate level of knowledge say they are saving 12% of their annual income for retirement and feel they need to be saving 14% to live comfortably; and
those with an advanced level of knowledge say they are saving 13% of their annual income for retirement and feel they need to be saving 13% to live comfortably.

Canadians surveyed say their top three sources of information about investments are: