The old adage is that death and taxes are the only permanent thing in this world. Unfortunately, due to vacuous monetary policies presented by central banks and questionable decisions made by governments, inflation is the other item that is just as permanent as one’s ultimate demise and visit from the taxman.
Since the economic collapse a few years ago, the retirement savings of millions of people have essentially eviscerated. Many seniors have postponed their winter years in favor of working more, while millennials have wiped out the concept of retirement altogether.
For those who are on the verge of retiring, a new poll shows that they are frightened by the prospect of a higher cost living that could diminish the quality of their retirement. In addition to this, many people are not saving at all or are putting aside very little for those days of wine and roses.
BlackRock Canada’s second annual Investor Pulse survey suggested that 42 percent of Canadians concede saving for retirement should be one’s top priority. However, 41 percent of respondents aren’t doing it. Individuals that are saving say they aren’t doing it effectively and about one-third believe they won’t be able to retire comfortably.
Study authors say the fear of a rising cost of living is what is deterring Canadians from saving more. At the current time, Canadians spend close to half (43 percent) of their income on housing costs (mortgage/rent and utilities) and less than one-quarter is available for savings and investments (on average).
The poll further highlighted that Canadians maintain a bulk of their money in cash as opposed to investing in the markets, though studies have noted time and time again that most admit about one-fifth should be held in cash.
“The seeming contradiction between how much cash people think they should hold compared to how much they actually do suggests that many Canadians know what they should do, but feel unable to act when it comes to their investments,” said Noel Archard, head of BlackRock Canada, in an interview with Yahoo! Finance. “Volatile market make people uneasy, but when you have a [long term] horizon, time is on your side.”
Canadians currently have several retirement vehicles to choose from, including the TFSA and the RRSP. The federal government is now discussing introducing the Target Pension Plan that allows both the employee and the employer to share investment risks. Meanwhile, Ontario is in the preliminary stages of introducing its own Ontario Pension Plan.
In the meantime, what’s the solution for Canadians? Realistic objectives.
“Setting realistic goals is the important first step in financial planning, but our survey reveals that Canadians have conflicting attitudes and behaviors when it comes to retirement, and conflicting perceptions of how well prepared they are. Younger people in particular have less clarity about their after-work years,” added Archard. “Canadians realize that they are not adequately putting their money to work, but they don’t know how or don’t feel equipped to explore new options. The survey illustrates that sound financial guidance is, at least, a partial solution to this problem.”
With that being said, the average Canadian pays close to half of their income to the government in the form of taxes, more than housing, food and clothing. Why not give all Canadians some tax relief?
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