Study: RRSP investments

View the most recent version.

Overall, 6 out of every 10 families in Canada held savings in registered retirement savings plans (RRSPs) in 2005, and these plans had a median value of $25,000, according to a new study.

The study, published today in the February 2008 issue of Perspectives on Labour and Income, showed that, as expected, the prevalence of families with RRSPs and the value of the plans both increased with age.

Among families in which the major income recipient was aged 25 to 44, more than one-half (56%) held RRSPs, compared with 68% for those in which the major income recipient was aged 45 to 54.

Among families in which the major income recipient was aged 65 to 69 — older than the traditional retirement age — the rate dropped to 47%. This is not surprising, because older people in these families may have already retired. Consequently, some may have converted their RRSPs to registered retirement income funds. Nearly 90% of families with after-tax incomes of $85,000 or more held RRSPs. This was more than double the proportion of only 35% among families with incomes of less than $36,500.

The study was based on data from the 2005 Survey of Financial Security, which measured the stock of RRSP assets accumulated over time as opposed to purchases of RRSPs in a specific year.

Younger families, in which the major income recipient was aged 25 to 44, have had less time to accumulate funds. Consequently, they reported a median value for their RRSPs of only $15,000. (Median is the point at which half is above and half below.)

Those in the age groups 45 to 54 and 55 to 64 have potentially had more years of employment to accumulate funds and, as a result, had saved substantially more. The median for the group aged 45 to 54 was $40,000, and for those aged 55 to 64, it was $55,000.

Among families in which the major income recipient was a senior aged 65 or older, the median value was lower, only $37,000.

On a broader scale, almost three-quarters of families had either RRSPs or employer-sponsored pension plans (EPPs), or both. The median value of their savings was $65,800.

At each age level, median EPP holdings were substantially higher than RRSPs. For families in which the major income recipient was aged 55 to 64, fully 8 in 10 held either RRSPs or EPPs. Their median value was substantially higher at $244,800.

Investors can hold a variety of investments in their RRSPs. The most common holding was mutual funds, held by 38% of families, likely because of the broad range of products available.

About 20% of families held guaranteed investment certificates, popular because of their predictability. Only 7% of families held stocks.

The majority (59%) of families held their entire RRSP portfolios in variable-value assets (mutual funds, stocks or bonds). Only one-quarter held assets exclusively with predictable values-guaranteed investment certificates, Canada Savings Bonds or treasury bills.

Among younger families, two-thirds held all of their RRSPs in variable-value assets, compared with close to half for older families.

Among families with after-tax incomes of less than $36,500, 35% held all of their RRSP investments in assets with predictable values. This was substantially higher than for families with higher after-tax incomes ($85,000 or more).

Definitions, data sources and methods: survey number 2620.

The article "RRSP investments" is in the February 2008 online edition of Perspectives on Labour and Income, Vol. 9, no. 2 (75-001-XWE, free), now available from the Publications module of our website.

For more information, or to enquire about the concepts, methods or data quality of this article, contact Wendy Pyper (613-951-0381; wendy.pyper@statcan.ca), Labour and Household Surveys Analysis Division.