“Culture of now” hindering view of retirement planning as a priority: study

When a friend asks if you want to book a vacation for the next long weekend, there’s a good chance you’ll say yes, as would many of us. Why? Because living in the moment often takes precedence over something that could be considered a future task, like retirement planning.

In fact, 85% of financial professionals in the banking and wealth management sectors across Canada feel this “culture of now” is hindering people from seeing retirement planning as a priority, according to a national study commissioned by leading financial services co-operative — Co-operators — and conducted on the Angus Reid Forum Panel.

The study, titled “Canadian Attitudes on RRSPs,” resulted in findings that may come as a surprise. Some 92% of advisors report that because most Canadians aren’t saving enough for retirement, concepts like early retirement are becoming more elusive.

Over half of advisors surveyed (57%) feel Canadians view registered retirement savings plans (RRSPs) as “an investing tool of the past” and one that’s not appealing today. At the same time, 83% of respondents think a lot of people pretend to know more about investing basics than they actually do.

As the annual RRSP deadline for contributions is coming up on March 1, we’re taking a closer look at the findings to emerge from this study and the investment options available to Canadians.

Understanding RRSPs and TFSAs

“This RRSP season promises to be unlike any other in recent history and Canadians’ actions may very well look different compared to years past. Many are searching for immediate solutions, researching online, and using DIY investment strategies,” said Jennifer Cook, financial representative at Co-operators.

“Most Canadians aren’t seeing the full potential of RRSPs and TFSAs [tax-free savings accounts] right now, especially when so many others around them seem to be pursuing quick wins,” she added. Referring back to the study findings, this makes sense: 90% of financial professionals believe most Canadians have a lot of confusion in their understanding of RRSPs and TFSAs.

Both RRSPs and TFSAs can help you build on your savings, but before you choose one of these investment options, it’s vital to know the purpose of each and whether it aligns with your own personal savings goals. For instance, if planning for retirement is your long-term objective, an RRSP could be the right fit.

The benefit of having an RRSP as an investment vehicle is that you can choose either mutual or segregated funds to include, and each contribution you make into your account concurrently lowers your income tax today — while growing your savings for the future. It’s easy to set up a pre-authorized payment and allow the ‘set and forget’ model to do its work.

A TFSA could also be used to save more money for retirement, but this investment option is more commonly utilized for immediate savings goals (a downpayment for your first home or buying a new car, for example). Like an RRSP, you can include segregated or mutual funds in your TFSA, but there is one key differentiator: with a TFSA, you can withdraw money at any time (tax-free) and build your savings up again thereafter.

Exploring investment strategies

Of the financial advisors who participated in the Canadian Attitudes on RRSPs study, 70% say they see Canadians declining in their ability to differentiate between saving and investing. Beyond this, 76% say many Canadians living in urban centres are looking for DIY investment strategies as homeownership is increasingly feeling out of reach.

The most-asked topic over half of financial advisors in Canada (52%) say clients wish to discuss? Cryptocurrency. With business and individual success stories emerging in the crypto space, this comes as no surprise. Individuals are hoping to use this as a replacement for their long-term financial security.

But here’s the thing: RRSPs and TFSAs are practical investment options for Canadians, so what is really preventing people from pursuing them?

“I believe a key part of what’s holding many Canadians back from seeing the full potential of RRSPs and TFSAs is the social pressure to be financially savvy and the self-judgment they put on themselves when financial circumstances are not realized,” said Vanessa Bowen, a holistic money coach and the founder of Mint Worthy.

In the study, this showed up with 80% of finance professionals saying many people feel overcome with doubt when they experience financial mishaps or losses — something that often leads to indecision and inaction.

Finding a workable solution

While it’s never too late to educate yourself and get a start on retirement planning, the process is always easier if you have the assistance of an expert.

Cook echoed the importance of having conversations about investment planning. “Now more than ever, we’re encouraging Canadians to connect with their financial representative and explore together how to create an investment plan that will fit their unique and individual needs.”

Working with a financial advisor at Co-operators allows you to receive holistic, personalized, and judgement-free advice on RRSPs, TFSAs, and insurance protection, helping you prepare for today and the future.

If you’re ready to embark on your financial planning journey, visit cooperators.ca to find a financial advisor in your area.

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