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Beyond RRSP season: Retirement reality check

A retired couple take a stroll in Enghien-les-Bains, north of Paris. (REUTERS)

For many Canadians, retirement planning ends with the latest contribution to their registered retirement saving plan (RRSP).

Even in retirement we seem to be in the dark about how we will live out our golden years. According to the 2013 Fidelity Canadian Retirement Survey, only 26 per cent of retirees say they have a written financial plan. Of those with written plans, fewer than half included future cost of living adjustments linked to health or inflation.

Study after study confirms how out of whack most of us are with retirement. Here’s a compilation of some of the surveys brought to light this RRSP season showing the yawning gap between perception and reality.

What we save

A recent survey from Investors Group finds a stunning one-third of respondents believe the Canada Pension Plan will be their primary source of income.

The maximum CPP payout for working Canadians paying the full amount into the plan for at least 40 years is about $12,000. That’s $230 a week for basics like food, shelter and clothing.

Old Age Security could help out but even at the maximum annual payout of about $6,500 that’s still only a total of $355 a week.

On the bright side, they are both adjusted for inflation - but a recent decision by Ottawa to raise the OAS eligibility age to 67 in 2029 has raised concerns that further OAS or CPP cuts are in the cards.

While many workplace pension plans post funding shortfalls, Fidelity Investments says personal savings rates through tax incentives like RRSPs and tax free savings accounts (TFSA) have fallen to less than 3.5 per cent of disposable income versus 13 per cent in 1990.

A Sun Life Financial survey finds nearly one-quarter of Canadians plan to use their homes as their primary source of income when they retire, most likely through reverse mortgages, secured lines of credit, renting or downsizing.

What we owe

Another Fidelity survey finds 31 per cent of retirees who own their homes still have a mortgage. 24 per cent say they are concerned at the amount of debt they are carrying in retirement. 32 per cent of non-retirees expressed the same concern.

Statistics Canada says the average Canadian household owes $1.64 for every dollar it takes in each year. In the 1990s we owed less than one dollar for every dollar we took in annually.

TransUnion, the credit rating agency that tracks borrowing, says the average consumer debt has risen to $27, 368. That doesn’t include mortgages.

What we need

Another recent survey from Sun Life Financial finds 28 per cent of respondents expect to be retired at the age of 66.

According to the Conference Board of Canada, 20 per cent of Canadians heading toward retirement are forced to delay it by at least a year.

Fidelity says 49 per cent of seniors left their jobs earlier than expected due to health, stress or job elimination.

Fidelity also says 34 per cent of retirees say they are not enjoying the kind of retirement lifestyle they were hoping for.

Statistics Canada says the average Canadian retiring at 65 can expect to live 20 years to 85. In 1995 the average Canadian lived to 75.

As savings diminish more retirees are finding themselves having to go back to work. The employment rate for 60 to 64 year olds has risen to about 50 per cent in 2013 from 30 per cent in 1996.

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