# RRSP contributions lowest in 11 years



## carverman (Nov 8, 2010)

Just heard on the news that the RRSP contributions reported by the banks (so far this year),
are the lowest they ever have been in 11 years. 
Although this is a leap year and the contributors have an extra day , so far about only 39%....
(got this statistic from the CBC news channel..so don't quote me on this please!) ....have managed to make any kind of contribution. and time is running out.

*So you latte sipping financial gurus out there...why is that? *

a) Is it the investment climate/economy shaky? 
b) Is it the fact that we now have TFSA savings account
to put our money into and withdraw without penalties or tax hits? 
c) Is it the high cost of real estate and living these days? 
d) Lack of new job opportunities? Too much consumer debt? 
e) Return on investment?


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## sisco (Oct 18, 2011)

I can't speak for everyone, but for my own situation I typically wouldn't contribute to an RRSP until my TFSA room was used up. The only exception to this rule would be using the RRSP to avoid withholding tax on international investments.


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## crazyjackcsa (Aug 8, 2010)

I think everything you lay out plays a part,

I'll put them in order though.

d) Lack of new job opportunities? Too much consumer debt? 
c) Is it the high cost of real estate and living these days?
a) Is it the investment climate/economy shaky? 
e) Return on investment?
b) Is it the fact that we now have TFSA savings account
to put our money into and withdraw without penalties or tax hits? 


The first two are related, as are the second two. As much as we hear about the need to put money aside for later, you need money right now to do that.

Eating today is more important than eating 30 years from now.


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## brad (May 22, 2009)

My guess is that there's no single smoking gun, and it's a combination of many factors at play, including most of the ones you listed above. But if one factor emerges as the leader, I agree that it could be that in today's economy people are concerned about their short-term financial security and are hesitant to lock up money in an RRSP when there's a chance they may need it sooner if they lose their job.

If you're feeling secure, you're more likely to pay attention to your future needs. If you're not feeling secure, your focus is more likely to be on ensuring your basic needs are met for the next 12 months.


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## the-royal-mail (Dec 11, 2009)

I agree with crazyjacks. I also think (judging by all the TV commercials and comments being posted in CMF) this makes sense, as the banks have been scheduling a lot of appts lately with customers to get them to invest in RRSPs, even to the point of selling them loans (at 5.25%) to do so. This is bad. The banks are raking in billions in fees and profits and putting people in debt!


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## Four Pillars (Apr 5, 2009)

I'm sure this "stat/crisis" is some number cooked up by a financial institution in order to drum up more business. 

Two thoughts:

1 TFSA - I think it's logical to assume that a certain portion of TFSA contributions are money that would have been RRSP contributions in years prior to the TFSA being invented.

2 It ain't over until it's over - There are three full contribution days remaining - check next week with the proper numbers.


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## MoneyGal (Apr 24, 2009)

I suspect a combination of demographic changes + the introduction of the TFSA can explain a lot of this. 

I'd like to see total contributions to TFSAs and RRSPs for a given year -- I'd also like to see the contributions broken down by age. 

Also, the last time I checked, only 5% of the total RRSP room available to Canadians was actually used -- so a drop from what is already a very low number, viewed in that lens, puts a different frame on the issue: i.e., the numbers are already very low and they dropped - different from the contribution numbers are high and they dropped by 40% (or whatever).


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## steve41 (Apr 18, 2009)

There is a bright side, folks. Our treasuries (fed&prov) will get a boost.... they won't have to send out as many RRSP refunds.


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## Cal (Jun 17, 2009)

Unfortunately too many people simply live for now, vs saving for the future or their retirement.


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## luisa (Dec 7, 2011)

brad said:


> My guess is that there's no single smoking gun, and it's a combination of many factors at play, including most of the ones you listed above. But if one factor emerges as the leader, I agree that it could be that in today's economy people are concerned about their short-term financial security and are hesitant to lock up money in an RRSP when there's a chance they may need it sooner if they lose their job.
> 
> If you're feeling secure, you're more likely to pay attention to your future needs. If you're not feeling secure, your focus is more likely to be on ensuring your basic needs are met for the next 12 months.


Maybe more people are catching on to trm's 3 tiers of savings?

For example, in our case, I am no longer employed and my husband has a 9 month contract and then no guaranteed employment. We chose to top up our TFSA first as they are not locked in. We did max out our RRSPs in the end as well to offset some capital gains, but the TFSA was first.


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## carverman (Nov 8, 2010)

crazyjackcsa said:


> Eating today is more important than eating 30 years from now.


Agree..but if you don't have 30 years of growth in some kind of investment
vehicle for the future..how are you going to eat 30 years from now?.
Already, the feds are contemplating raising the CPP pension age to 67 and
who knows if CPP and OAS will still be there 30 years from now.
I guess, everyone adopts the logic..
"we'll cross that bridge when we come to it".

I can see that the principle residence and the reverse mortage schemes may
become more attractive in the future for those that can't save for the future.


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## Karen (Jul 24, 2010)

Since I'm retired and no longer am eligible to contribute to my RRSP, I can only contribute the maximum allowable to my TFSA. However, if I had to guess, I would say the biggest reason for the drop in RRSP contributions is that many people have chosen to put their money in a TFSA and can't afford to do both. If I were still working, I would have made a TFSA my priority.


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## m3s (Apr 3, 2010)

TFSA is a huge factor

I can only wish I had $50k TFSA room, or $100k like future 20 something couples. Who needs RRSPs or Smith maneuvers anymore, not many. TFSA is the only true tax free


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## steve41 (Apr 18, 2009)

mode3sour said:


> TFSA is a huge factor
> 
> I can only wish I had $50k TFSA room, or $100k like future 20 something couples. Who needs RRSPs or Smith maneuvers anymore, not many. TFSA is the only true tax free


Not so..... when you run an RRSP vs a TFSA strategy side by side, they are very close. (as a saving for retirement strategy, mind you) 
Plus, for the undisciplined, the nature of the RRSP (withdrawals are taxed) is an incentive to leave them untouched.


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## m3s (Apr 3, 2010)

RRSP is only good if your income taxes go down, assuming taxes are not raised in the future and clawbacks are not changed etc etc. I'm sure it's always best to have some RRSP, but I can't see why you wouldn't lean towards TFSA given the space (beyond the shiny object tax rebate lure and undisciplined saving factor) If you pulled a Warren Buffet would you rather use TFSA or RRSP?


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