So far, more Canadians have made an early start with contributions to their registered retirement savings plans for the 2013 tax season, according to a study released by Toronto-based BMO Financial Group on Friday. However, the final number of Canadians contributing to RRSPs is expected to be down from 2012.
Results from BMO’s fourth annual RRSP study show that 35% of respondents have already contributed to their RRSPs, compared to the 30% who said the same thing last year.
Of those people who have contributed 64% have put at least $2,000 into their accounts and 40% say they have saved $5,000.
Overall the amount of contributions is also down year-over-year, Chris Buttigieg, senior manager, wealth planning strategy, BMO, with the average contribution in 2013 being about $3,500 compared to the roughly $4,600 made in contributions in 2012.
BMO reports that 43% of Canadians with an RRSP intend to make a contribution by the March 3, 2014. Last year, 50% of surveyed Canadians said they intended to make a contribution to their registered accounts by the March deadline.
This decline in the number of Canadians contributing to RRSPs is in keeping with another study completed by the Toronto-based Bank of Nova Scotia earlier this week. (See Investment Executive, Fewer Canadians making RRSP contributions, January 6, 2013.)
Next: How advisors can help
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How advisors can help
Advisors can help get more clients focused on contributing to their RRSP, says Buttigieg, by emphasizing the tax benefits both for this year and in future. For example, many people don’t realize they can delay deducting an RRSP contribution to another tax year. Says Buttigieg: “That’s something advisors can certainly raise awareness [about] with their clients.”
As well, advisors with clients who consistently wait until the last minute to make a contribution should start talking about how to be less rushed in 2014. Set up a second meeting with clients making a last-minute RRSP contribution, says Buttigieg, to talk about the investment strategy for that money as well as the benefits of setting up an automatic savings program for 2014.
Furthermore, while RRSPs and retirement savings may seem like topics to focus on with Baby Boomer clients, Buttigieg reminds advisors not to ignore their younger clients as the March deadline approaches. “When we look at generations other than the Boomers, the Gen X and the Gen Y,” he says, “retirement is still one of the main financial priorities among these generations.”