The decline of the RRSP -

The decline of the RRSP

Contributions are falling to levels not seen since the 1970s


Contributions to registered retirement savings plans (RRSPs) are falling to levels not seen since the 1970s, says a new report from the Royal Bank of Canada. The decline in contributions is expected to continue through to 2020, hitting a low of under two per cent of personal disposable income—down from a high of five per cent in 1997 and the lowest rate in over 35 years.

The aging population is one major reason for this shift. Not only are boomers exiting their peak earning years (of between 45 and 54 years of age), but they’re entering retirement having saved relatively little in recent years. In a new poll from Sun Life Financial, only 30 per cent of Canadians say they plan to fully retire by 66, while in a survey from BMO Financial Group, 42 per cent of boomers say they wished they’d started saving for retirement at an earlier age.

But the RBC report suggests there is more to the historically low RRSP rates than reduced household savings. It notes that rising house prices are also playing a key role, as more and more Canadians sock money into real estate rather than into their RRSPs as a nest egg. That’s well and good—so long as the hot housing market avoids a painful crash and, against all odds, keeps booming for many years to come.

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The decline of the RRSP

  1. Another reason is probably the negative rate of return. I lost 10% last year; why would I want to continue to throw my money way?

    • That depends on what you invest in in your RRSP.
      RRSP is a tax shelter, not an investment on it’s own.

      • Oh, I know that. My point is most people probably don’t see much point in investing when, at best these days, they can hope for a 1 or 2% gain with something like a GIC or bond. Many people (me being among them) don’t have a lot of hard-earned cash available to set aside, and the up-front tax break on what they can set aside isn’t huge – so if they also see no gains on the investment itself, the sacrifice they make to set it aside is too great for such a poor ROI.

        • The lack of gains or loss of principle on any investment whether they are in RRSP, TFSA or non-registered shouldn’t deter people from sacrificing today to hold out for a better tomorrow.

          I personally see my RRSP investments as my personal pension plan and I believe that’s what the government intended them to be.
          (RRSP conversion to RRIF, forcing you to increase your net income thereby affecting your CPP).