June 2001

RRSP Statistics a Wake-Up
Call to Save More

© Talbot Stevens

A recent report should serve as a wake-up call to many who are hoping to enjoy a long and secure retirement. Based on the low levels of retirement funds accumulated so far, many Canadians will have to plan on living on less or dying sooner.

The financial industry is admittedly guilty of "fear mongering" to encourage us to save more for retirement. At the same time, the industry does not educate us enough on the realities of how much money is required to ensure a secure retirement.

My goal as an educator is to help Canadians achieve their own financial freedom. Thus, at the risk of being labeled a fear mongerer, it is important for me to help investors understand what the latest statistics mean for their retirement plans.

The table highlights some findings from a report by Statistics Canada, showing average RRSP values, and median values. The median is the middle figure when values are sorted from highest to lowest. It is a better indication of the typical amount in RRSPs than the average, which can be skewed by a few people with large amounts.

Note that the results shown in the table do not account for those without a penny in RRSPs. For example, for those who are 55 to 64, only 67% or two-thirds have an RRSP. Of those who do, the median is about $50,000, meaning that half of those with RRSPs have more than $50,000, and half have less. In other words, for Canadians less than 10 years from the retirement age of 65, one-third have more than $50,000 in RRSPs, one-third have less than $50,000 in RRSPs, and one-third have nothing in RRSPs

RRSP Values, For Families with RRSPs
Age of High-Income Spouse % with RRSPs Median Value Average Value
< 25 24 2,200 9,000
25-34 59 8,000 19,100
35-44 66 17,000 35,800
45-54 71 30,000 65,200
55-64 67 50,000 97,000
65 + 20 37,600 83,500
Total 55 20,000 51,200
Source: Statistics Canada  

Less than half of Canadians have any form of pension plan, making individual retirement savings even more critical.

True financial freedom is when you have enough investments to produce a "never-ending" income that exceeds your needs, accounting for taxes and inflation. Even $100,000 of RRSPs growing at 10% would only produce a “never-ending” income of $10,000 per year before-tax, or $5,000 to $7,500 after-tax. Is this enough for your goals?

Don't be scared by these numbers. Use them as a wake-up call before it's too late. Figure out where you are, where you want to be, and how you're going to get there.

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