BMO says the answer can be found inside their minds. Using behavioural finance research, the bank believes it has uncovered clues as to why Canadians are procrastinating the way they are.
A report from BMO Retirement entitled Retirement Planning: Can I Get Back To You On That? and based on a survey conducted by The Strategic Counsel reveals that Canadians are more mindful of their present financial circumstances rather than their future.
The concepts of "immediate gratification" and "paralysis of choice" have severely affected retirement planning in Canada.
Delving into the psychology behind the competing priorities, the report states that although 82% of respondents understood that saving early for retirement is important, more than 81% are more concerned with their present needs than their retirement.
Canadians are also overwhelmed with too much information and too many options involving retirement planning. This has resulted in frustration and paralysis when action is required.
Thirty-six percent of non-retirees said they are overwhelmed by too much information and this has been an obstacle to them moving forward with retirement saving plans.
"While it's often hard to act against our natural instincts, it's critically important that Canadians take an active role in planning for their future and start as early as possible," says Tina Di Vito, Head, BMO Retirement Institute. "Understanding the psychological barriers to effective retirement saving is the first step to overcoming them."
The report also points to other contributing factors that are delaying many retirement plans. Those who have children under the age of 18 are unlikely to see saving for retirement as an immediate priority, as post-secondary education may take precedence. It is also difficult for those with a heavy debt burden to focus on retirement. Lower income respondents are overwhelmed by the volume of information available.
For those who are interested in saving for their retirement, BMO suggests the following steps:
- Create a budget
- Set financial goals and monitor your progress
- Sign up for your company's pension plan
- Make full use of tax-favoured investment vehicles
- Set up an automatic savings program
- Seek out financial help
Filed by John Powell, firstname.lastname@example.org
Originally published on Advisor.ca