BMO Retirement Institute Reveals Why Canadians Aren’t Saving For Retirement
Report identifies psychological disconnect impeding Canadians from effective retirement planning

• Behavioural finance research provides clues to Canadians tendency to procrastinate
• Almost 90 per cent believe retirement planning should begin before the age of 35
• 40 per cent of non-retirees concede they have done no retirement planning at all

TORONTO, July 29, 2010 – A report from the BMO Retirement Institute has uncovered why Canadians are procrastinating when it comes to retirement planning. The report found that, while almost 90 per cent of Canadians feel retirement planning should begin early, 40 per cent of non-retirees have done little to nothing to prepare for the day they leave the workforce.

The report, Retirement Planning: Can I Get Back To You On That?, based on a survey conducted by The Strategic Counsel, is unlike other recent retirement studies, which tend to focus on whether Canadians are saving enough. Instead, this report explores the psychology and competing priorities that stand in the way of effectively saving for retirement and finds a disconnect between Canadians’ beliefs and behaviours.
Drawing on behavioural finance research, the report examines the concepts that affect decision making, including:

• Immediate Gratification – i.e., placing less value on a reward in the future than a benefit in the present, often encouraging procrastination. Although 82 per cent of respondents acknowledge the importance of saving early for retirement, more than eight in 10 non-retirees (81 per cent) who have not set aside any savings said they were more concerned about current needs
• Paralysis of Choice – i.e., when one is faced with an over-abundance of information, resulting in the inability to choose at all. According to the report, more than one-third (36 per cent) of non-retirees stated that they are overwhelmed by too much information, and this has been an obstacle to their retirement saving plans.

“While it’s often hard to act against our natural instincts, it’s critically important that Canadians take an active role in planning for their future and start as early as possible,” says Tina Di Vito, Head, BMO Retirement Institute. “Understanding the psychological barriers to effective retirement saving is the first step to overcoming them. It takes work and is not easy, similar to the challenges encountered when trying to stick to a new diet program. However, taking responsibility for one’s own retirement early on can ensure individuals will be set up for success by the time they’re ready to stop working and move on to the next stage of their lives.”

Other key elements identified in the report which hinder Canadians from retirement planning and saving are factors such as age, the presence of children and income:

• Canadians aged 35 - 44 are most likely to have debt (88 per cent) and worry about it (25 per cent); are most behind in planning (50 per cent) and are most dissatisfied (44 per cent) with the amount they have saved.
• Those with children under 18 are less likely (42 per cent) to view retirement savings as a priority and are most likely to put a bonus or raise towards debt reduction (62 per cent).
• Lower income respondents are overwhelmed (35 per cent) by the volume of information available.

“The idea of starting a regular retirement savings program can be overwhelming for many people,” added Ms. Di Vito. “So start small. It doesn’t have to happen all at once. The psychology of doing something puts you in the right frame of mind and helps to establish discipline. When you can, increase the amount you set aside. The chances are, if you start something, like contributing to an RRSP, you’re going to keep doing it.”

BMO Retirement Institute’s Strategies for Retirement Planning:

• Start saving early — even a little amount goes a long way and sets you up for future success
• Create a budget and control your spending
• Set financial goals and monitor your progress regularly
• Sign up for your company’s pension plan
• Make full use of tax-favoured investment vehicles
• Set up an automatic savings program
• Seek out financial help early to ensure you’re on the right track

The BMO Retirement Institute report was based on a survey conducted by The Strategic Counsel. The survey polled 2,034 Canadians 35 years of age or older and was conducted using The Strategic Counsel’s web panel between May 26 and June 2, 2010.

To view a copy of the report, please visit: www.bmo.com/RetirementInstitute