Canadians Believe They Need $1.7M to Retire – Up 20 Per Cent from 2020A new BMO study reveals that fewer than half (44 per cent) of Canadians are confident they will have enough money to retire as planned, while a majority (74 per cent) are concerned about how inflation and rising prices will affect their finances.
TORONTO, Feb. 7, 2023 /CNW/ – BMO’s 13th annual Retirement Study reveals Canadians are prioritizing retirement savings as both contributions and account holdings have increased from the previous year. The study found that Canadians believe they will need $1.7 million to retire, up 20 per cent from 2020 ($1.4 million). However, fewer than half (44 per cent) of Canadians are confident they will have enough money to retire as planned, a 10 per cent decrease from 2020.
According to BMO Economics, Canadian CPI inflation hit a four-decade high of 8.1 per cent in the summer of 2022 but has fallen to 6.3 per cent as of December 2022 and is expected to decline to around 3 per cent by the end of the year. The sharp increase in 2022 exceeded wage gains, resulting in a significant loss of purchasing power for most families. BMO’s Retirement Study found that 74 per cent of Canadians are concerned about how current economic conditions, most notably inflation and rising prices, will affect their financial situation, and 59 per cent believe this will affect their confidence in meeting their retirement goals.
Average Amount Held: $144,613
The average amount held in RRSPs nationally is $144,613, a two per cent increase from 2021 ($141,923). 43 per cent of Canadians have already contributed to their RRSPs for the 2022 tax year, and another 14 per cent plan to contribute before the March 1, 2023 deadline.
“While the anticipated headwinds in 2023 will understandably prompt concerns about how inflation and interest rates will affect our finances, Canadians remain resilient and are taking proactive measures to protect and invest in their retirement nest egg,” said Nicole Ow, Head, Retail Investments, BMO. “As Canadians continue to look to save for retirement, working with a professional advisor can help them understand the investment opportunities available and make progress towards achieving their financial goals with confidence.”
Painting a Retirement Portrait
The survey also provides insights into Canadians’ approaches to retirement planning, including:
- The Golden Age: Approximately a quarter (22 per cent) of Canadians plan to retire between the ages of 60 and 69, with an average age of 62.
- The Contribution Picture: Among the 60 per cent of Canadians with an RRSP, 68 per cent of them contributed to the account to save for retirement. Moreover, in addition to saving for their own retirement, 15 per cent of Canadians contribute to the account to save and leave an inheritance for their children.
- Financial Independence, Retire Early (FIRE): One fifth (20 per cent) of Canadians are contributing to their RRSPs to achieve financial independence as early as possible and 15 per cent are saving towards an unexpected early retirement. If they could retire early, one-in-five (21 per cent) Canadians would like to retire in their 50s.
- Back to the Drawing Board:
-Among the 37 per cent of Canadians who had experienced a major life event since March 2020, such as starting a family, moving homes or starting a new business, 20 per cent of them had experienced a loss of income and 9 per cent had to make a large payment.
-The majority of Canadians believe the state of the economy has affected their financial behaviors, including the amount they are saving (69 per cent) and the money they are investing (60 per cent).
- Protecting the Nest Egg from Headwinds: Among the 80 per cent of Canadians who rely on professional financial advice, more than half (57 per cent) believe receiving professional advice is important amid current market conditions and feel that their financial advisors are better equipped to help them reach their goals (53 per cent).
“Financial advisors are powerful resources who can help Canadians remain focused on their financial goals during disruptions, major life events and uncertainty. While it is a confusing and intimidating time for many, an advisor can help alleviate some of the financial pressures by helping Canadians create a personalized plan and stress test the strategies through different market conditions and situations to help them stay on track towards their immediate and long-term goals,” said Ms. Ow.