TORONTO, ONTARIO -- (Marketwired) -- 07/30/13 -- Longevity is the defining financial challenge of our age. Canadians are living longer than ever before and while investors recognize their retirement savings may now need to last 25 years or longer, an alarming number of Canadians believe they are better prepared for a long retirement than they actually are, and few have a clear idea of how much they will need to save. This "Longevity Paradox" is revealed by BlackRock Asset Management Canada Limited's ("BlackRock Canada") first-ever Canadian Investor Survey, which was officially released today.
-- More than half (56 per cent) of non-retired investors believe their
savings will need to last at least 25 years.
-- One quarter of investors aged 45-65 - and more than one third of younger
investors - think they'll need 30 years or more worth of retirement
savings.
-- Non-retired investors are generally confident (62 per cent) that they
have planned well for retirement, but not all of those people actually
have a plan (59 per cent) and fewer than half (49 per cent) of those
with less than $100,000 in retirement savings - and arguably those who
need it most - have a plan.
-- Only 15 per cent of non-retired investors said they were very
knowledgeable about how much they will need to save each year to meet
their retirement goals.
"The paradox is that investors recognize that their retirement savings will need to last longer than ever before but they aren't making plans to ensure they will actually have the money they need," said Noel Archard, Head of BlackRock Canada. "There tends to be a false sense of security when it comes to planning for retirement. We hope that the money will somehow be there when we need it but we're not taking the action required to ensure it is. This is a serious problem, and addressing it must become an urgent priority."
Investors are unjustifiably optimistic and dangerously passive.
Canadian investors are optimistic about how well they are prepared for retirement, yet they are not taking action when it comes to managing their retirement savings:
-- 70 per cent of investors believe government pension plans will be there
for them in retirement.
-- While two thirds (61 per cent) of investors with a defined contribution
(DC) plan or group RSP said they take an active role in understanding
their workplace retirement plans, and 59 per cent make the maximum
contribution every month, almost three-quarters (70 per cent) admitted
they hardly ever, or never, adjust their allocations - even though most
know (57 per cent) that they should make yearly adjustments.
-- The cost of passivity? Nearly half of investors (45 per cent overall)
said they have chosen to invest less in the stock market over the past
few years, and a third (including 37 per cent of non-retirees and 41 per
cent of non-retirees with less than $100,000 savings) admitted they
missed out on the post-2009 market rally.
Home bias
Despite market performance and vast investment options, Canadian investors overwhelmingly overvalue Canadian equities - a sign that they are not taking a rigorous enough approach to investing for retirement.
-- Despite generally recognizing the need to diversify out of Canadian
holdings (44 per cent), more than a third (34 per cent) of investors are
looking to increase their holdings in Canadian equities, and only 10 per
cent would reduce them.
-- Those with less than $100,000 invested were the most uncertain about
this question (22 per cent replied "don't know").
Time for action
Inaction on retirement planning isn't just a challenge for investors - it's an issue that employers, the financial industry and policymakers need to address, and the reasons behind it are many and complex.
-- Nearly one in five investors (18 per cent) say they don't save anything
for retirement on a monthly basis, and one in 10 (11 per cent) don't
know what they save. The biggest barrier to saving more is "making ends
meet month-to-month" (59 per cent), but many also (40 per cent) cite "a
decrease in salary" and the cost of education (44 per cent).
-- Nearly a quarter (24 per cent) of all investors surveyed don't have an
RRSP.
-- The decline of the workplace pension: Nearly two in five investors have
no workplace retirement plan, including a full quarter of currently
employed investors. Overall, barely a third are in a defined benefit
(DB) plan (35 per cent), fewer than one in five (18 per cent) are in a
defined contribution (DC) plan, and only 15 per cent are in a group RSP.
-- Nearly three in five respondents (59 per cent) agreed with the statement
"I'm not sure what a safe asset is these days."
"What this survey of Canadian investors shows is the urgent need for all parties - government, employers, investment advisors and industry participants like us - to do a better job of helping prepare Canadians for retirement so that their ever-growing golden years will be a time of happiness and contentment and not one of need and worry," added Archard. "The effects are far-reaching and the solution needs to be as big and urgent because the longer we wait to act, the bigger the problem will become."
When it comes to retirement planning, the cost of inaction is high. Playing it safe will not help investors achieve their investment goals which is why BlackRock Canada has launched a microsite dedicated to helping Canadians plan for and understand today's market realities and use their longevity to plan for the long term. Investors can create an investment plan today at BlackRockPlan.ca or start with these three simple steps:
-- If available, take full advantage of your workplace retirement plans.
-- Reduce home market bias in your portfolio by looking for diversification
outside of our borders.
-- If you are unsure where to begin, seek professional advice.
About BlackRock
BlackRock® is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At March 31, 2013, BlackRock's AUM was US$3.936 trillion. BlackRock helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of March 31, 2013, the firm has approximately 10,600 employees in 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the company's website at www.blackrock.com
Contacts:
Contact for Media:
Maeve Hannigan
Veritas Communications
416-955-4570
C - 647-618-8621
hannigan@veritascanada.com
