With the looming increase in the cost of mortgages, household bills and kids’ tuition, life is expensive for Canadians hitting the big 4-0. According to the TD Retirement Savings Poll, Canadians in their 40s admit that they are not properly preparing for retirement, and 32% haven’t even opened a registered retirement savings plan (RRSP).
“Your 40s can be the toughest decade for your finances, but at this important milestone it is key to reassess your financial plan to ensure you are on track for a comfortable retirement,” says Andrea Phillips, vice-president, retail savings and investing, TD Canada Trust.
The survey also revealed that while men (36%) are more likely than women (29%) to start contributing to an RRSP, less than half of the entire population of mid-life Canadians (46%) contribute annually. Only 12% say they make the maximum contribution every year, and as a result, 38% are concerned they aren’t saving enough for retirement.
“For many 40-somethings, it can be hard to find money to start building an RRSP. But the reality is you can’t rely on just one asset, like your home, because you’ll still need sufficient cash-flow to replace your regular income,” says Phillips. “An RRSP is one of the best saving and investment vehicles available today, so you should take advantage of the benefits of tax-deferred and compound growth that an RRSP offers.”
Phillips’ advice for Canadians in their 40s includes making a plan with a financial planner and sticking to it, contributing as much as you can to your RRSP while in your peak earning years, automating regular RRSP payments with your bank to facilitate regular contributions and making sure they are comfortable with the amount of diversification and level of risk in your portfolio.
In addition, TD has developed a retirement tracker (www.tdretire.com) to encourage Canadians to start thinking about their financial future. Through three simple questions, Canadians can determine if their retirement plan is on track. It weighs factors such as the number of years until retirement, value of current savings and the amount of regular contributions.