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BMO Financial Group

December 08, 2011 06:00 ET

BMO Annual RRSP Study: Majority of Canadians Planning on Contributing the Same-or More-This Year Despite Market Volatility

- One-in-three lack confidence in their ability to save for retirement - twice as many as last year

- More than two-thirds express concern over the performance of their RRSP, given market volatility and the state of the economy

- Almost 70 per cent of Canadians plan on contributing more or the same amount to their RRSP this year compared to last year

- In 2010 the average RRSP contribution was $4,700

TORONTO, ONTARIO--(Marketwire - Dec. 8, 2011) - BMO Financial Group today announced the results of a national survey which shows that more than two-thirds (69 per cent) of Canadians will be contributing the same amount or more to their Registered Retirement Savings Plan (RRSP) this year versus last, despite a challenging market environment in 2011. Last year, Canadians contributed an average of $4,700 to their RRSPs.

However, the survey, conducted by Leger Marketing, also found the following:

  • Seventy-one per cent of Canadians are concerned about the performance of their RRSP, given the current state of the economy and volatility of the financial markets
  • More than one-third (36 per cent) are not confident in their ability to save for retirement, compared to half that amount last year (18 per cent)
  • Forty-two per cent of respondents are less optimistic about the financial markets this year compared to last year; this sentiment has doubled since last year (21 per cent)

"The volatility we have experienced in the financial markets over the past year has increased concern among Canadians about their ability to save for retirement," said Caroline Dabu, Vice President, Retirement and Financial Planning, BMO Financial Group. "The current financial climate has made saving more of a priority for Canadians than ever before. It's encouraging that the vast majority of Canadians who will be contributing to an RRSP will be contributing the same amount or more than last year. However, given the market uncertainty over the last several months, it's critical that Canadians have a financial plan that includes a retirement saving strategy."

Other Key Findings:

  • More than one-third (37 per cent) of Canadians have made or are planning on making a contribution to their and/or their spouse's RRSP before the February 29, 2012 deadline
  • Of those who are not making a contribution this year, or are contributing less than last year, 38 per cent said they have other expenses, while 20 per cent said they do not have enough money to match or exceed last year's contribution
  • Overall, 61 per cent of Canadians have an RRSP; however many younger Canadians (aged 18-34) have not opened an RRSP yet, with 62 per cent stating that they do not have one in place

"It's understandable that, for many Canadians, it's a challenge finding the money for their RRSP. However, accumulating a retirement nest-egg doesn't have to happen all at once," said Ms. Dabu. "Small contributions made on a regular basis over a period of time can lead to significant savings down the road, especially when you take into account the impact of compound interest."

Looking to maximize your retirement savings with minimal impact to your wallet? Ms. Dabu offers the following advice:

Invest small amounts often - A little really does go a long way with an RRSP. Even small amounts, if invested on a regular basis, can grow significantly, especially when you take into account the effect of compound interest. Consider a pre-authorized payment plan, which takes a small amount out of your bank account every pay day and deposits it into your RRSP.

Don't panic - Although it is tempting to make drastic moves during times of market volatility, resist the temptation to liquidate all of your investments or do anything major. If you have a well-diversified portfolio that is appropriate for your life stage, there is no need to make impulsive moves.

Choose investments that meet your needs - For investors who prefer to take a less active role in investing, target date products such as BMO LifeStage Class Funds allow investors to select the fund that best matches their retirement target date and watch their investments automatically evolve. Each Fund shifts its asset mix on an annual basis so that the percentage of equity investments in the fund decreases as it approaches its target end date. The Funds are intended to provide growth in the early stages and to become progressively more conservative over time.

Borrow to come out ahead - Borrowing money to invest in your RRSP can make sense in some cases, with the resulting tax savings often enough to cover the amount borrowed. Many financial institutions offer low-interest RRSP loans for the current year or to "catch-up" on unused RRSP contribution room. For example, BMO's RRSP Readiline gives you access to a line of credit to maximize this year's RRSP contribution and potentially increase your income tax refund. Speak with a financial professional to determine if this is right for you.

Take advantage of professional help - A financial professional can provide advice on how to grow your investments and assist you in developing a financial plan. To meet with a financial professional, contact a BMO Bank of Montreal branch near you or visit www.bmo.com.

The online survey was conducted by Leger Marketing from November 21 to November 24, 2011, with a sample of 1520 Canadians, 18 years of age or older.

For 2010 results, an online survey conducted by Harris/Decima among 1,002 Canadian adults, between November 15-24, 2010 was used.

BMO LifeStage Class Funds are offered by BMO Investments Inc., a financial services firm and separate legal entity from Bank of Montreal. Commissions, trading commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus of the mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

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