The proportion of Canadians who have made or plan to make a contribution to their Registered Retirement Savings Plan has increased by 35 percentage points in 2013, according to a new a report from Toronto-based BMO Financial Group.
The company’s fourth annual “Post-RRSP Deadline Study,” conducted during the last week of February, concludes that 63 per cent of Canadians contributed to their RRSP, or plan to do so, before the March 1 deadline stipulated under Canadian law. This number represents an increase over March of 2012, when only 38 per cent contributed or expected to contribute to their RRSP before the deadline.
The Canadian equivalent of a U.S. 401(k) retirement plan, the RRSP is a vehicle for holding savings and investment assets. The RRSP must comply with restrictions stipulated in the Canadian Income Tax Act, rules for which determine maximum contributions, the timing of contributions, the claiming of the contribution tax credit and assets allowed and the conversion to a Roth IRA-like Registered Retirement Income Fund (RRIF).
The BMO study also finds that Canadians contributed an average of $3,544 to their RRSPs this year, down from an average of $4,670 last year. So while more Canadians contributed, the average amount contributed was lower.
When asked what motivates them to contribute, more than half (51 per cent) of the survey respondents say that saving for retirement is the responsible thing to do. Other motivating factors that encourage Canadians to make a contribution this year include:
• Thirty-five per cent say that contributing makes them feel good about themselves.
• Almost a third (31 per cent) are worried about not having enough money for retirement.
• Seventeen per cent have extra money and so believe that investing in an RRSP makes sense.
According to the study, 43 per cent of Canadians who anticipate receiving money back this tax year because of an RRSP contribution plan to save or invest the money. And 36 per cent plan to use the money pay their bills. Other plans for tax refunds include:
• Doing home renovations or buying household items (19 per cent).
• Paying down mortgage (15 per cent).
• Travelling or purchasing leisure items (15 per cent).