TD report urges early start for RRSP

By Steven Lamb | February 24, 2004 | Last updated on February 24, 2004
3 min read

(February 24, 2004) Canadians who put off retirement planning could find themselves short on cash when they finally do leave the workforce, according to a report from TD Economics, supporting the mantra of “save early, save often.”

“With the baby boom generation approaching retirement, concerns about the adequacy of personal savings will only intensify in the coming years,” noted Don Drummond, senior vice-president and chief economist at TD Bank Financial Group.

The report says Canadians are spending fewer years working, compared to their parents, because they spend more time in school and plan to retire earlier. Not only is a post-secondary education delaying entry to the workplace, but it also usually leaves the graduate with student debt that may take precedence over retirement savings.

R elated Stories

  • RRSP reality: Are Canadians saving enough?
  • Clients down on RRSP investing?
  • Unfortunately, such late planning is all too common.

    “I often see a situation where a client has a pension plan at work and believes that this plan will look after her retirement income needs,” says Michele Yergens, a planner at Assante Capital Management in Estevan, Saskatchewan. “Once we complete a retirement plan, most often they are completely shocked by the apparent shortfalls.”

    She says that often clients will neglect to consider inflation. Even at historically low rates of 2% to 3%, over a 15-year time horizon, the effect can be devastating.

    “As part of our approach, we look at various alternatives and options available in an attempt to accumulate adequate capital to meet their goals,” says Yergens. “That being said, once the shortfall has been identified, the client must then be comfortable with any so-called ‘radical’ attempts to getting them back on track.”

    Yergens stresses that with a proper financial plan in place, it becomes much easier to prove the merit of starting early on retirement savings.

    “Once the retirement goals have been identified, it is much easier for the individual or family to stay focused toward meeting their goals,” Yergens says. “For a 30-year-old, showing them the amount they need to save at 30 versus an amount required at 40, should be enough to encourage them to start saving sooner rather than later.”

    The report, entitled The Retirement Savings Challenge, lays out retirement models which demonstrate the benefits of starting early. One scenario shows a 30-year-old, earning $30,000 will need to stash about $3,776 a year into their RRSP to reach the rather modest retirement earnings goal of $20,000 a year (the models use dollar values which are not adjusted for inflation).

    Using a similar set of assumptions — including a conservative 6% rate of return and an income of $30,000 — a second scenario shows a 45-year-old will need to contribute nearly $10,000 to their RRSP each year to generate an annual retirement income of $15,000.

    “These scenarios are only illustrative, but the message is clear. Every Canadian should have a financial plan and should start saving now,” said Drummond. “The main message is that Canadians need to have a good idea of what their financial requirements will be and how budgets can be shaped to satisfy those goals.”

    To view TD’s report, click here.

    Are your clients worried about their retirement? Will you use the results of this report to encourage clients into saving more and sooner? Share your thoughts and opinions about this issue with your fellow advisors in the Talvest Town Hall on

    Filed by Steven Lamb,,


    Steven Lamb