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Canadians on shaky ground for retirement

(Special) -- The seemingly never-ending discussion about the state of Canadians' financial preparedness (or lack of it) for retirement just keeps chattering along.

Many Canadians nearing retirement appear to be confident they will have enough money to live out the retirement lifestyle they want, but a lot of them don't know how much income they'll have or how much their pensions will provide.

Add to that the fact that over half of Canadians don't feel confident their current savings for retirement are high enough and you've got a pretty shaky future for a lot of the country's ageing population.

A recent report by Edward Jones found that Canadians, regardless of their age, are not saving enough for retirement.

Thirty-four per cent of Canadians in the 18 to 34 age bracket are the most likely to save for retirement but only 15 per cent over 55 are set for their retirement.

"With various expenditures vying for our attention, it can be challenging to factor in retirement saving, but the simple solution is that Canadians need to get in the habit of paying themselves first," says Patrick French, director of financial planning with Edward Jones. "Implementing a pre-authorized contribution plan allows individuals to treat savings like any other bill, having funds automatically flow out of their bank account and into a registered retirement savings account. It's the first step to achieving long-term financial success and the earlier you start the better."

Another study by Investors Group rather alarmingly found that Canadians nearing retirement are confident they have enough money to live the retirement lifestyle they want, but many don't know how much retirement income they will need or how much their company and/or government pensions will provide.

Sixty-nine per cent of Canadians 55 to 64 were unaware of what the maximum monthly payout from the government for the Canada and Quebec Pension Plans and Old Age Security is even though 80 per cent of this age group plan to use these as a source of retirement income and more than a third anticipate they will be their primary source of income.

Further, sixty per cent say they plan to use an employer pension as a source of income and 37 per cent say this will be their primary source. However, of those who say they have a workplace pension and plan to rely on it as their primary source of income, 55 per cent did not know the monthly benefit they can expect.

"While the survey indicates that Canadians are approaching retirement with confidence, it also identifies the need for Canadians to gain a better understanding of what their financial future looks like so they can build a better plan to get there," says Investor Group's Dave Ablett. "Planning for retirement at an early age will help Canadians to really understand what will be required to maintain their desired lifestyle and where savings and investments are needed to fill the pension gaps."

Besides starting to save early, French recommends that you identify your retirement goals, use all of your retirement savings opportunities and reinvest any tax refunds in your Registered Retirement Savings Plan (RRSP).

RRSPs are still one of the best ways to save for retirement.

"Money contributed to an RRSP grows tax-deferred, so over the long-term it provides an opportunity to accumulate much more wealth and contributions can result in a generous tax break," French says. "And by paying your tax return forward and investing it in your RRSP when you receive your return you have already given yourself a head start for a tax break next year and hopefully another return."

In the Investors Group survey, 70 per cent said they will have enough money to pay the cost of living in retirement yet when asked what they anticipate their monthly cost of living will be, 42 per cent of unretired people didn't know. And as Canadians approach retirement age, more than a third still don't what it will take to support their lifestyle.

The lessons Canadians should take away from this research? - start saving as early as possible and seek out a professional financial adviser to help you identify your retirement goals and plan for your retirement needs to avoid ending up with an inadequate retirement income.

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

Copyright 2014 Talbot Boggs

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