D E P E

Making smart savings choices is critical to ensuring Canadians have access to sufficient and secure post-retirement incomes. Except for the working poor, Canadians must save a very high fraction of pre-retirement earnings every year – either through employer plans or private saving – to provide for reasonably adequate and assured retirement incomes. We estimate that most Canadians, should they wish to retire at age 65 and replace 70 percent of their working incomes, will need to save from 10 to 21 percent of their pre-tax earnings every year, if they save for 35 years. Although private retirement savings allow choice about retirement age and income, Income Tax Act limits on tax-recognized savings would prevent many earners from accumulating sufficient RRSP savings over 33 years (by age 63) to securely replace 70 percent or more of their working incomes. The authors are grateful to the members of the Pension Series Advisory Group of the C.D. Howe Institute for their thoughtful comments and suggestions on this paper; and in particular to James Pierlot and Faisal Siddiqi at Towers Watson for providing us with annuity factors. As Canada’s babyboom generation approaches retirement age, public concern about the adequacy o