Focus on Personal Savings for Retirement Urged by Ex-BoC Chief

Focus on Personal Savings for Retirement Urged by Ex-BoC ChiefEx-Governor of Canada's central bank, the Bank of Canada, David Dodge has stressed that Canadians should now start saving far more money than earlier estimated if they want to retire comfortably, and this includes even those Canadians who tend to think that they have really good company pension plans and robust RRSPs.

In a study on savings, commissioned for the CD Howe Institute, Mr. Dodge has managed to discover that if Canadians want to continue to maintain the same lifestyle and standard of living that they have now even after they retire, they need to put away about 10-21% of their pre-tax income every year, given that they save for 35 years.

"This fraction is likely far higher than many Canadians believe and higher than is set aside in most employer-based group RSPs or defined-contribution plans. It is also higher than the effective contribution over time of employer-sponsored defined benefit plans. And for high-income earners, (it) exceeds the annual limits placed on RRSP contributions", Mr. Dodge wrote in a recent paper.

The paper specifies that for Canadians who are past the age of 35, and have not managed to keep up with their savings, they will be required to stash aside much more than 20% of their earnings every year, if they want a smooth post-retirement life. Either that or they will have to work well past 65.

Mr. Dodge has written the paper in association with two other authors, Alexandre Laurin and Colin Busby.