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.