Friday, June 15, 2007

Retirement Studies Are Smoke and Mirrors

I recently saw this article in The Star and I have to admit it made me laugh. It claims that 2/3 of Canadians who want to retire by 2030 are not saving enough money.

Basically the article is a rewording of the official press release (see here). They mention all this information they went through and all their hard work, yet they don't provide one single number of useful data in the press release other the headline. What do you assume for inflation? What are 'basic household expenses'? Out of this 72 profiles what factors did you take into account? Where did you assume they are living?

In the end this news article is not very useful other that getting people frightened and trying to get them to save more. They just don't provide enough information in a press release to tell if the report is useful or just full of holes in their logic. What really makes me mad is they never include a link to the actual report so I can read it myself and determine if it is useful.

Have a good weekend,


FourPillars said...

I agree, this article is ridiculous. Same sort of crap the investment industry pushes every rrsp season.

No numbers, no data, no assumptions...nothing.


Canadian Capitalist said...

I don't know how you can simply dismiss the study without knowing what it says. I don't find it surprising that savers are a small minority of the population. Want proof? We already know that the median RRSP has $70K and the average $40K. Take a look at StatsCan data on the Wealth of Canadians. It doesn't take all that much to have a higher net worth than the median household. So, why is it surprising that many Canadians are not saving enough for retirement?

Mr. Cheap said...

I was skeptical myself when I saw this (it scared my girlfriend, and I wasn't sure how to repond to her, as CC says, its probably good to be a little afraid because things look scary, but on the other hand I'm also suspicious there is a vested interest in this "report")

Canadian Money said...

I don't doubt that the study is reasonable. Most people have little to no interest in even thinking about retirement at age 40. At that age, age 65 is still 25 years away.

Here's a link to Waterloo Stats staff.

Perhaps some answers can be found there. Looks like they eventually post their studies on their website.

I expect we (Can Fin Bloggers) can connect with the actual researchers and get all the answers.

I sent an e-mail to Stephan, the Director asking for help finding the actual study on-line. Maybe they will post it soon.


FourPillars said...

One problem with this type of article is that they have arbitrarily decided that 2/3 of Canadians are not saving enough to meet their expenses in retirement. Fair enough, however they make it seem like the 2/3rds portion will all be starving and barely making ends meet. I don't think this will be the case for most people. For example someone who has an expensive lifestyle and no savings, and has to cut back a lot in retirement in order to make ends meet - so what? I don't see what the problem is there.

As for CCs point about RRSPs - what age groups do those average encompass? What about pensions?

I don't have any way of knowing if the average Canadian is prepared for retirement or not, but it's hard not to be skeptical after years of "reports" sponsored by investment companies which make it sound like either you retire rich (using their products) or you retire into a cardboard box.

What about Canadians who are currently retired? Seems to me that a survey of their opinions of how they're doing or a study of their incomes would be pretty useful.


Canadian Dream said...

Well this is interesting discussion. I agree with CC that there is likely a portion of the population that are not saving enough. At the same time I have a hard time believe 2/3 of people won't have their mortgages paid off and a small pension by the time they retire. Really that's all you need for a basic retirement.

I dislike these articles for the lack of detail, which would allow me to assess if I want to read the study itself. They always remind me of a poor novel that has a great hook, but falls flat on its face 30 pages in.


Richard Cleaver said...

The report was sponsored by the Canadian Institute of Actuaries. They have the report up on their website .

This link will download the pdf from their website.

Reading through the report, I found it very difficult to determine the actual planning assumptions. For example, the report makes reference to the attributes underlying their modeling without specification. I can only guess at attributes like the assumed rate of inflation and the assumed rate of return. The data are suspect mind you. They illustrate that a 42-year old single income earner, making the average industrial wage of $40,000 per year, wishing to retire at age 65 and supporting 2 people in the household at retirement, would need to be saving 44% of income annually. That is if inflation is "moderate". If inflation is low, that person would need to save 30% of income annually.