Globe and Mail Update
Former Bank of Canada governor says in report that many Canadians are unaware of the high savings levels they need for their retirement years
Canadians need to save between 10 per cent and 21 per cent of their pretax incomes each year – if they save consistently for 35 years – to have comfortable retirement incomes, according to a new report by former Bank of Canada governor David Dodge.
The report says many Canadians are unaware of the high savings levels they need for their retirement years, and may believe they are saving adequately when they are not.
The report, co-authored by Alexandre Laurin and Colin Busby and published by the C.D. Howe Institute, calculates various savings scenarios based on assumptions that Canadians aim to have annual retirement incomes between 50 per cent and 70 per cent of their preretirement incomes.
“Our findings provide Canadians with a ‘reality check’ about the saving rates required to meet their retirement goals,” Mr. Dodge said in a release Thursday.
” Our findings provide Canadians with a ‘reality check’ about the saving rates required to meet their retirement goals. “- David Dodge
The study said a broad debate about retirement incomes in recent years has mostly focused on potential reforms to rules for corporate pension plans or the possibility of expanding public pension coverage through a new national supplementary plan.
But there has been little public information about required savings rates for individuals, it says, even though many baby boomers are nearing retirement age and are concerned about whether they are saving adequately.
“The required level of personal saving is unknown to most individuals, leaving them to their own devices for a large part of retirement planning,” the report says.
It also says registered retirement savings plan (RRSP) maximum contribution levels do not allow higher income higher earners to save enough to replace 70 per cent of their incomes in retirement.
And it says many companies’ group RRSP plans, defined contribution pension plans and even traditional defined benefit pension plans do not set aside enough income annually to provide “adequate or reasonably assured retirement incomes.”