Study: Trends in pre-retirement RRSP contributions and withdrawals
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In 2013, 4.2 million individuals aged 25 to 54 contributed about $22.5 billion (measured in 2013 constant dollars) to registered retirement savings plans (RRSPs).
From 2000 to 2013, two of the largest annual declines occurred in 2008 and 2009, which coincided with the economic recession as well as the introduction of tax-free savings accounts (TFSAs) in 2009.
From 2000 to 2013, the use of RRSPs declined steadily among individuals aged 25 to 54. The number of annual RRSP contributors decreased by 16% over this period and the total value of annual RRSP contributions fell by approximately 26%.
These results are available in the article "Trends in RRSP Contributions and Pre-retirement Withdrawals, 2000 to 2013 ", which provide an overview of recent trends in RRSP use among taxfilers aged 25 to 54.
While the number of RRSP contributors declined from 2000 to 2013, the number of RRSP withdrawers increased by more than 30%. This was largely due to an increase in defaults on repayments to RRSPs under the Home Buyers' Plan (HBP). However, because the monetary value of HBP defaults tended to be small, the total annual value of RRSP withdrawals remained relatively stable over this time at approximately $5.0 billion. Excluding HBP defaults, about one-half of individuals who withdrew funds from an RRSP in a given year also made an RRSP contribution in the same year.
The introduction of TFSAs in 2009 expanded the options of tax-preferred savings vehicles available to Canadians. Alongside the decline in RRSP use, contributions to TFSAs increased from about $9.0 billion in 2009 to $15.9 billion in 2013 (measured in 2013 constant dollars). However, TFSA withdrawals were also common. In 2013, approximately $0.47 was withdrawn for every $1.00 contributed.
From 2009 to 2013, the likelihood of making a positive contribution to an RRSP and/or a TFSA ranged from 9% in the bottom income quartile to nearly 60% in the top income quartile. Among taxfilers in the bottom quartile, 2% saved in an RRSP and 8% saved in a TFSA, while in the top income quartile, 55% saved in an RRSP and 22% saved in a TFSA.
Among taxfilers who contributed to an RRSP at least once from 2005 to 2008, the shift from RRSP to TFSA use appears to have been most prevalent among those in the bottom half of the income distribution. This may be attributable to differences in the incentives to use RRSPs versus TFSAs across taxfilers with different levels of income.
The research article "Trends in RRSP Contributions and Pre-retirement Withdrawals, 2000 to 2013 ", which is part of Economic Insights (11-626-X), is now available.
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