Sixty-five per cent of Canadians don't seek expert advice about saving for retirement, according to a CIBC poll released Jan. 25. This may lead to some misconceptions about the value of contributing to a Registered Retirement Savings Plan (RRSP), says the bank.
The poll found that two in five Canadians see "no point" in investing in an RRSP, and two-thirds believe a Tax-Free Savings Account (TFSA) is a better savings vehicle since it is completely tax-free.
"Several myths about RRSPs have been circulating in recent years, which are unfairly giving them a bit of a bad rap and Canadians are asking if an RRSP is still the way to go," says Jamie Golombek, Managing Director, Tax & Estate Planning, CIBC Financial Planning and Advice. "While everyone's retirement needs will be different, it's important to take the time to build a retirement plan to ensure you have sufficient funds to live the lifestyle you want, cover unexpected expenses such as health or care costs, or leave a legacy for heirs."
"RRSPs should still be the primary retirement savings vehicle for most Canadians, and in many cases, can be your best option," adds Golombek.
Cocktail party banter
The poll revealed that only 35 per cent seek expert advice when planning for retirement and Golombek says this may account for the misconceptions about RRSPs. "The danger comes in not seeking advice from a qualified financial advisor or planner, and instead relying on misinformation and cocktail party banter to make important financial decisions," says Golombek.
RRSPs often the better choice
"Perhaps the biggest misconceptions about RRSPs is that they're pointless given you'll still pay tax in future, while a TFSA provides a completely tax-free source of income," says Golombek. "But, the fact is, although a TFSA may be a better choice for those currently in a lower tax bracket or early in their income-earning years, an RRSP can provide a completely tax-free rate of return and is frequently the best option for retirement savings."