Despite the financial challenges brought on by COVID-19, Canadians increased the amounts they are holding in their RRSPs. But a study by BMO Financial Group also shows a drop in knowledge of the benefits and features of an RRSP.
According to BMO, the average amount held in RRSPs nationally is $112,295, a 3.3 per cent increase from 2019 ($111,929) and a 41 per cent increase from 2015 ($79,492). The overall amounts Canadians have contributed or plan to contribute has decreased by 15.5 per cent since 2019; however contribution amounts for this year are 15.8 per cent higher than the survey found in 2018. About 12 per cent of Canadians did not contribute to their RRSPs this year because of the pandemic.
Investors must learn to think long term
"Investors need to consider long-term factors, such as increasing cost of living and longer average life expectancies, when planning for retirement," said Robert Armstrong, director, Multi-Asset Solutions, BMO Global Asset Management. "With these challenges in mind, it's encouraging to see a national increase in RRSP holding amounts."
At the same time, the study found knowledge levels about RRSPs have steadily declined over the past five years:
- 71 per cent of Canadians know how to contribute to an RRSP, but that’s a drop from 2015
- only half (50 per cent) of Canadians are aware of what investments are eligible to be held in RRSPs, a 10 per cent decrease from 2015
- fewer than half (44 per cent) of Canadians are aware that RRSPs can hold ETFs, while 79 per cent are aware that RRSPs can hold mutual funds
The study also found a gender gap in retirement planning and RRSP knowledge. For example, among those surveyed, women are nine per cent less likely to know how to contribute to an RRSP and 10 per cent less likely to know the difference between RRSPs and TFSAs compared to men. As well, women are 18 per cent less confident than men in their retirement plans, and 18 per cent less likely to know how much money they will need for retirement.