A number of recent -surveys and statistical data are showing that we’re taking our retirements more seriously than ever before and, despite rumours to the contrary, many Canadians are indeed savers.
From a socio-economic point of view, an increase in the amount of wealth Canadians put aside for their futures may reduce the stress on governments and our children/taxpayers to come up with funding or programs so that the next group of retirees — baby boomers — can live decently after they stop working full-time.
From a personal finance viewpoint, these new statistics prove that Canadians are taking the time to think about their future and the kind of satisfied retirement they want to live. One of the primary ways we can see this happening is through the growth in the number of people investing in RRSPs or some other kind of pension.
According to Statistics Canada, the number of tax filers making contributions to RRSPs rose to 6.2 million in 2006, up 60,000 from a year earlier — and the highest level in five years. The amount contributed increased in 2006 for the third straight year to $32.4 billion (the highest amount ever reported), up 5.9% from $30.6 billion in 2005.
In addition, the growth in the percentage of families that had assets in RRSPs, LIRAs and RRIFs rose 7.7% in 2005 over 1999. The median amount of those assets rose 18.1% over that time.
And investors say they hope to continue along this route. A recent survey from Investors Group Inc. of Winnipeg shows that among Canadians who already have an RRSP or plan to start one over the next year, three-quarters plan to contribute the same or more to their RRSPs in the 2007 tax year than they did in 2006.
Although there are signs that some younger people are beginning to save more, the bulk of those doing the heavy investing are around age 55. That’s pretty close to the rule of thumb that people tend to increase their savings around 10 years before retirement.
According to the IG survey, contribution intentions were strongest among those aged 45 to 54 at 84%. About 60% of those aged 25 to 34 indicated they already have an investment portfolio. Toronto-based Investor Economics Inc. says that over the next 10 years, the number of prospective retirement savings-product consumers in the 45-plus age group will expand by about 21%, or 2.8 million individuals.
This will provide tremendous opportunities for financial services providers. Investor Economics predicts that the number of households in the 45-plus group will grow to 10.5 million in 2016, up from the current 8.6 million. As well, the amount of wealth they control will increase from 80% of Canada’s financial wealth (or $1.9 trillion), to 87% ($4.8 trillion) by 2016.
The first wave of baby boomers will start to retire around 2011, and that’s considered a pivotal year by Investor Economics. From now until then, there should be a strong upward trend in demand for investment products; after that, there will be a shift into “dissavings.”
The industry has started to provide products the future dissavers will be looking for — those that involve some kind of conservative income-related products that won’t run out before they do.
It is this focus on developing and delivering the right products to aging investors that has the attention of the industry right now. Stay tuned for some innovative products to help meet those needs. IE
Joanne De Laurentiis is president and CEO of the Investment Funds Institute of Canada.