Thursday, February 25, 2010

Lack of RRSP Rush?

On my way to a drive-up cash machine recently, I glanced inside my bank branch expecting to see lines of people waiting to make RRSP contributions. After all, the deadline for 2009 RRSP contributions is only about a week away. However, I didn’t see anyone waiting. Of course, this is only a single snapshot in time at one bank branch, but it left me wondering if this year’s RRSP season is fizzling.

There are some good reasons to expect this to be a weak RRSP season. Unemployment is still high, the economy over the last year or so has been weak, and TFSAs are competing for people’s retirement dollars.

I’d be interested to hear what others have observed about the strength of this RRSP season. In particular, if any readers work for a bank or other institution offering RRSP accounts, how is this season shaping up?


  1. I had to talk to someone about an RDSP, and saw them right away, there was no long line of folks attempting to do RRSP stuff, so I have not seen much of a rush either.

  2. Big Cajun Man: I suppose it's possible that more people are making their RRSP contributions online, but a lack of people in lines at bank branches seems to point to a weaker RRSP season.

    Thicken: Good point. It's hard to worry about your future decades from now of you feel like you're drowning right now.

    1. The second reply above is to Thicken My Wallet's comment:

      Slower than usual. In a choice between food on the table and clothes for the kids now and planning for a brighter future, the former is an over-whelming priority.

  3. Hi,

    I realize this is not the topic you are talking about... But, what are your thoughts on the fact that with an aging population MORE people will be withdrawing from Mutual funds as opposed to those putting money in...

    Do you have suggestions as to where someone can put money in (conservatively) and expect it to give a return - possibly at least 4% on average...


  4. Al: I'm not convinced that there will be a sudden massive shift to selling retirement assets due to baby boomers aging. When I retire, I'll be selling off my stocks slowly over decades (hopefully). Behind us there is a secondary boom whose peak age is about 20 right now. In a few years some of them will start to become savers. Demographics may play an important role in market returns, but I just don't think it will be as sudden or dramatic as some people think.

    As for a safe place to get a modest return, the safest place for a Canadian to put money is in a Canadian government bond. Some variants of these bonds have inflation protection. However, it's important to match the bond's duration and payment schedule to your financial needs. Otherwise you're taking interest rate risk.

  5. Do we really think people who usually save in RRSPs are having trouble making ends meet?

    I bet it's just that people are scared of mutual funds because of the recent stock market crash (never mind the subsequent woefully under-reported rebound).

  6. Patrick: That's an interesting idea. I figured that people who have the money would still contribute to their RRSPs, but might opt for GICs or bond funds. I suppose that some people might not bother making an RRSP contribution at all right now even though they have the money.

    As for the question of whether former RRSP savers are likely to be having financial trouble, I think this is the case for many people who have lost jobs. This applies whether they are still looking for work or now have a much lower-paying job. In these cases, there just may not be enough money to make a contribution.

  7. I used to work at a financial institution and the people I know there still have said that this is by far the slowest RRSP season on record. Where in the past an individual teller would have $50,000 worth of RRSP contributions per day or couple of days currently an entire branch for the entire season might have $50,000. And it is system wide.

    This is in Vancouver. And no, I don't think that the Olympics have gotten in the way of RRSP as it is in several locations.

  8. Thomas: That's much more solid confirmation than my drive-by look at one bank branch. I expected the season to be slower than usual, but it seems to be very slow.

  9. Forget the RRSP, put $10,000 in your TFSA, then put $10,000 in your wife's TFSA. That money compounds forever tax free - don't be a fool and get it going before the government repeals it as too good.

  10. Ray: Maybe quite a few people are thinking this way and this partially explains the dampening of the RRSP season. However, RRSPs give you tax-free compounding as well.

  11. i believe this is mostly due to both TFSAs. Young people are still trying to decide should they open an RRSP or TFSAs. For example, i thought i would open an RRSP account outside my Employer Pension Plan before TFSA. But, once TFSA was available i gave up that thought and opened an TFSA. Also, I am not planning to open any RRSP.