Canadians are worried about the possibility of running out of money in retirement, and few are familiar with the financial products that can protect against this risk, a recent survey commissioned by Mississauga, Ont.-based RBC Insurance Holdings Inc. reveals. The findings highlight the key role insurance advisors have to play in helping clients plan for a secure retirement.
In an online survey of 1,000 Canadians aged 55 to 75 conducted by Ipsos, 58% of survey participants said they’re worried about outliving their retirement savings and 94% said they would like to have guaranteed income for life when they retire.
“Outliving retirement savings and having enough income in retirement are real concerns as Canadian retirees are living longer and are more active in their retirement years,” said Parul Vora, head of wealth products with RBC Insurance.
Although annuities provide a way for clients to generate this kind of guaranteed income, the survey results show that many Canadians are unaware of this option. Of those surveyed, 61% say that they don’t understand what an annuity is and how it might help, and only 35% said they are exploring or considering annuities as part of their retirement plans.
The survey results reveal a variety of misconceptions about annuities. For example:
> 30% of survey participants said they were unaware that annuities can provide income for life;
> 29% of survey participants said they were unaware of the potential tax advantages to investing in an annuity;
> 27% of survey participants were unaware that they could use their RRSP and/or RRIF savings to purchase an annuity;
> and 60% of survey participants said they were unaware that annuities can only be purchased from a licensed insurance advisor.
“With guaranteed income for life, potential tax benefits and the ability to protect beneficiaries,” Vora said, “Canadians need to familiarize themselves with annuities and take a close look at how annuities can help them in retirement.”
However, many clients are wary of purchasing an annuity in the current low interest rate environment, the survey results suggest. Specifically, half of the survey participants said they believe annuities are not a good investment during low interest rate environments.
The results also reveal that Canadians are not counting on public or private pension plans to provide a sufficient level of income in retirement. Only 22% of survey participants said they believe their pensions will provide enough retirement income.
The survey results are considered accurate to within ± 3.5 percentage points, 19 times out of 20, had all Canadian adults aged 55 to 75 been polled.