Canadians are expected to contribute a record $33 billion towards their RRSPs in 2008 but this number is miniscule compared to the $491 billion they still have in unused RRSP contribution room. Despite the strong growth in overall RRSP contributions in 2005, fewer than 40 per cent of Canadians between the ages of 25 and 64 actually contributed during the year. Maybe it's because they haven't changed their spending habits and don't have any money. Just a thought.
When accounting for inflation, the median amount of RRSP contributions made by Canadians is, in fact, falling. Low and falling median RRSP contributions translate into insufficient overall RRSP savings. As a share of income, RRSP contributions have fallen below 6 per cent in 2005, more than a full percentage point lower than the level seen in 1999.
The increase in total RRSP contributions also masks a growing income disparity, given that most of the growth is attributable to Canadians who earn more than $80,000 per year. In 2005, only 20 per cent of Canadians between the ages of 35 and 64 with a yearly income of less than $30,000 contributed to their RRSPs. At the same time, the declining relative importance of employer-sponsored pension plans is doing little to remedy this gap.
One can expect years of recessionary trends savings tend to increase, however, long term savings do not since people are more worried about their present situation rather than the future. If you do have the capability to purchase longterm instruments such as equity mutual funds, then within the next quarter could be the best time to invest for 2008 RRSP contributions. BUY LOW AND SELL HIGH FOLKS! Right now is pretty much as low as it will go.
[tags]rrsp, 2008 recession, recession, equity[/tags]
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