Cash flow, debt keep Canadians out of RRSP season

It was only about a decade or so ago that it wasn’t uncommon to see line ups stretching outside bank branches across the country this time of year.
February is the height of registered retirement savings plan (RRSP) season.

This year, Canadians eager to defer taxes from 2014, and sock some money away for the golden years while they’re at it, have until March 2 to make a contribution.

But, lately, it seems we aren’t as keen on RRSPs as we used to be. A new survey by TD Bank found that nearly half of all Canadians don’t contribute to one.

A staggering statistic, really, when you consider that the same survey found that 45 per cent of us plan on using our RRSPs to finance our post-career dreams of travel, starting a small business or volunteering with a favourite charity.

Still, it’s perhaps a more comforting picture of our collective retirement savings’ effort than recent data served up by Statistics Canada. In a paper published last March, the national statistics agency found slightly less than six million taxfilers contributed to an RRSP in 2012, virtually unchanged from 2011. That translates to only about 23.7 per cent of contributors in 2012, down from 24 per cent in 2011.

Why aren’t we saving?

The reasons people choose not to contribute to an RRSP can vary. Jason Abbott, a Toronto-based certified financial planner, says negative market news like the kind we’re seeing now in relation to oil and gas, often have a dampening effect on overall investment levels.

Meanwhile, those who are inclined to investigate options for their money can easily become paralyzed by the options and vast array of information available to them over the Internet.

“Ten years ago, investing was a lot simpler,” Abbott said. But, there’s no doubt, the biggest impediment to retirement savings these days comes down to cash flow.

“Those people who make it a priority to pay themselves first find a way to do it,” said Abbott.

For too many others, he added, “It just falls through the cracks.”

According to a 2014 TD survey, the majority of Canadians (82 per cent) feel so burdened by debt that saving for the future was no longer a priority. Keeping up with everyday financial demands – from paying the mortgage to covering the costs of childcare — was the top impediment to saving.

Half of Canadians surveyed said they don’t feel like they can afford to put aside part of their paycheque every month to savings. Slightly more (53 per cent) said they can’t afford to lock their money away for the long term.

Where to start

Linda MacKay, senior vice president, TD retail savings and investing, says there are steps people can take to get started on the road to saving. Talking to a financial planner is a great way to work out how much money we’ll need in the future and how we are going to make that a reality.

Mackay also recommends people consider setting up a series of regular payments into an RRSP, noting it’s one of the easiest ways to save money and less painful than trying to gather the money together at the last minute to meet the annual deadline.

Another tip? Why not turn tax returns into ongoing returns? An estimated 70 per cent of Canadians expect to get a tax return this year and many of them plan to save at least part of it in an RRSP, tax-free savings account (TFSA) or other savings account, according to TD.

MacKay suggests increasing the amount of the refund saved, as well as putting aside any bonuses or monetary gifts received during the year.

“It is never too late and no amount is too small,” she says. “If you can afford to get a Tim Hortons’ coffee every day … how about paying yourself the equivalent instead?”