RRSP investments

• Published in: Perspectives on labour and income Vol. 20; no. 1; p. 49
• Main Author: Pyper, Wendy
• Format: Journal Article
• Language: English
• Published: Ottawa Statistics Canada 01.04.2008
• Subjects: Age; Asset allocation; Education; Equity; Family income; Investments; Mutual funds; Pension plans; Portfolio management; Retirement; Savings bonds; Stocks; Studies; Canada
• ISSN: 0840-8750; 1492-496X

The SFS measures the stock of RRSP assets accumulated over time as opposed to purchases of RRSPs in a specific year. Since younger families (MIR 25 to 44) have had less time to accumulate funds, they reported only $15,000 in their RRSPs (median value).3 Those aged 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 ($40,000 and $55,000 respectively). After age 65, some families may have begun to draw funds out of their RRSPs as income has traditionally declined after retirement. In addition, some members of these families may have reached the mandatory age to convert RRSPs to RRIFs.4 As a result, the median value held by these families was lower ($37,000). Family income is related to both the propensity to save and the amount saved. Since famiUes purchase RRSPs (and other investments) out of disposable income, those with higher incomes are more likely to be financially able to invest in RRSPs. Indeed, nearly 90% of families with after-tax annual incomes of $85,000 or more owned RRSPs, with a median value of $80,000. This differs sharply from families with lower incomes (less than $36,500) where only 35% of families held RRSPs, with a median value of just $10,000. RRSPs are but one component of the total net worth of families. Subtracting total family debts like mortgages and consumer credit from assets such as homes, vehicles, [EPPs], RRSPs and other financial holdings determines net worth. In the bottom fifth of net worth, less than 20% of families had RRSPs. In the top 20%, however, the proportion reached 87%. Among those holding RRSPs in the top net-worth group, the median value was $111,100, significantly higher than for other groups.5 Similarly, since EPPs are a major component of net worth, it is not surprising that those with the top net worth have by far the largest median holdings of EPPs ($190,000).6