Over half focus on immediate expenses, favoring TFSAs over RRSPs, despite plans to retire by 60
A survey by the Canadian Imperial Bank of Commerce (CIBC), as reported by Financial Post, reveals that many Canadians are delaying retirement savings due to immediate financial pressures, yet they still aim to retire by age 60.
Over half of Canadian investors are choosing to prioritize their bills over future savings amid escalating living costs.
This trend has shifted preferences away from traditional retirement savings plans, with a notable lean towards tax-free savings accounts (TFSAs) over registered retirement savings plans (RRSPs).
According to the CIBC survey, “53 percent of investors with both an RRSP and TFSA said they preferred putting their money into the latter,” highlighting the appeal of TFSAs for their flexibility and tax-free access to funds.
Conversely, RRSPs, which restrict access until a future date and tax withdrawals, have become less favored, with “one third of people with RRSPs” not planning to make contributions by the year's February 29 deadline.
The survey also indicates a shift towards more conservative financial strategies, with 42 percent of respondents seeking predictable returns rather than high growth, reflecting concerns over an uncertain economic environment.
Carissa Lucreziana, a vice-president at CIBC, noted, “The preference for short-term liquidity and stable returns suggests many Canadians are focused on today and less so on long-term accumulation of wealth or retirement.”
Amid inflation, higher interest rates, and recession fears, Canadians are reportedly spending 17.7 more hours worrying about their finances compared to the previous year, according to Bank of Nova Scotia research.
Despite these financial concerns and changing savings behaviors, “most” Canadians still aim to retire around age 60.
However, more than half are either unsure they can afford to save for retirement or are certain they can't, with 57 percent fearing they will run out of money in old age. Additionally, higher inflation has forced one-third to delay their retirement plans.
Lucreziana emphasizes the importance of balancing present and future financial needs, stating, “Planning for both short and longer-term ambitions can help individuals move beyond their immediate needs and envision how they can live for today (and) save for the future, accumulating wealth over time to support their retirement years.”
In related news, the start of the year saw a jump in US consumer prices, tempering expectations for a continued drop in inflation and likely postponing any interest rate cuts by the US Federal Reserve.
The core consumer price index, excluding food and energy costs, rose 0.4 percent from December, marking the most in eight months and maintaining a year-on-year advance of 3.9 percent. This development suggests the Federal Reserve may delay lowering interest rates, impacting the broader economic outlook and potentially influencing individuals' financial planning and savings strategies.
