The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
A majority of working Canadians believe their home will grow more in value than their investments over the next 10 years, according to the annual RRSP poll released this week by Investors Group. Conducted by Decima Research, the poll found that 59 per cent of non-retired Canadians say they expect their real estate assets will grow more in value than their investment portfolio over the next 10 years. However, enthusiasm for the real estate market may be misplaced. In fact, long term trends show that equity markets compare favorably to real estate as an investment. Over the last 20 years, the S&P/TSX Composite Total Return average annual return as of September 30th is 9.35 per cent. Based on MLS statistics supplied by the Canadian Real Estate Association, the average annual increase in real estate assets in Canada over the last 20 years is 5.1 per cent. "Rising house values are making homeowners feel wealthier and that can make it more difficult to follow a disciplined savings and investment plan," says Debbie Ammeter, Vice-President of Advanced Financial Planning for Investors Group. "However, Canadians should be aware that real estate markets are volatile. Even though investing in your home is a great idea, you still need a balanced and well planned approach to saving for your long term goals, such as retirement." When deciding how much money to put in their RRSPs, Canadians indicated that their most important competing financial obligations were: - reducing debt (36 per cent); - purchasing or renovating the home (33 per cent); - funding family expenses (22 per cent); - purchasing a car (20 per cent); - purchasing recreational property (12 per cent). See 'More' P.# Con't from P.# "It is encouraging that many RRSP investors are managing to squeeze more out of their cash flow ? 39 per cent say they plan to increase their contribution over last year, and another 44 per cent say it will be the same. Only 11 per cent expect to contribute less to their RRSP," Ammeter says. The poll results also indicate that Canadians have similar attitudes towards investing as they expressed this time last year, while demonstrating considerably more positive views than they held in the fall of 2002. Some 31 per cent say the stock market will go up, while only 9 per cent expect it to go down and 47 per cent say they think it will stay about the same. Similarly, about 48 per cent of Canadians describe themselves as more or equally enthusiastic about investing in stocks and mutual funds this year than last year. That's also an improvement over the 30 per cent who were equally or more enthusiastic compared to the prior year in 2002. While the RRSP deadline is approaching, a lot of Canadians are still delaying decisions about this year's investment. Only 26 per cent of RRSP investors say they invest in their RRSP on a regular or monthly basis. Of the remaining RRSP investors, two thirds (69 per cent) will wait until January or February to make their contribution. "I think that the last-minute nature of Canadians' RRSP investment habits suggests that many Canadians make RRSP contributions for the tax savings they offer, rather than as part of a personal goal to ensure they will achieve their retirement dreams. Sixty-one per cent of respondents told us they have not determined how much money they need to save for their retirement," says Ammeter. "We advise clients to think about what they want to do in their retirement. It's a lot easier to achieve a goal if you know what it is. Then you can enjoy the double benefit of working towards your goal and saving on taxes."
