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38% of Canadians dip into RRSPs early, BMO survey suggests

February 8, 2017

38% of Canadians dip into RRSPs early, BMO survey suggests

Percentage of respondents withdrawing savings rose from 34% last year, poll indicates

Almost four out of every 10 Canadians withdraw money from an RRSP before they hit 71, a new poll from BMO suggests.

Almost four out of every 10 Canadians withdraw money from an RRSP before they hit 71, a new poll from BMO suggests. (Shutterstock)

Almost four out of every 10 Canadians polled in a recent BMO survey admit they’ve withdrawn money from their RRSP early, and almost a fifth of them don’t ever expect to replenish what they’ve taken out.

According to the poll of 1,500 people, conducted by Pollara but commissioned by Bank of Montreal, more and more Canadians are dipping into their retirement savings to keep their heads above water financially.

In a similar poll last year, 34 per cent of respondents said they had tapped their registered retirement savings plans early. This year, it jumped to 38 per cent.

The survey was conducted online between Dec. 14 and 19. It carries a margin of error of plus or minus 2.5 percentage points, 19 times out of 20, BMO said.

Of those polled who had dipped into the kitty early, almost a third, 30 per cent, said they had a good reason for doing so: buying a house. Under the Home Buyer’s Plan, Ottawa allows an RRSP-holder to withdraw up to $25,000 from their RRSP if they’re going to use the money for a down payment.

But more than a fifth of those who have withdrawn money early said they did so to pay living expenses, and 18 per cent reported they did it to pay down debt — two excuses the tax man will not accept as legitimate enough to waive the penalty for doing so.

“It’s concerning to see that so many Canadians are dipping into their RRSPs to meet short-term needs, which should only be considered as a last resort,” Chris Buttigieg with BMO Wealth Management said in a release announcing the results of the poll.

…click on the above link to read the rest of the article…

Canadian households are racking up more debt, poll suggests

July 10, 2015

Canadian households are racking up more debt, poll suggests

Average Canadian household owes $92,699, BMO poll suggests

A new poll suggests Canadian households are piling on more debt and plan to borrow more in the short term, even though a slight rise in interest rates would “stress” most of them out.

In BMO’s Annual Debt Report, the average household debt of those surveyed is $92,699, more than $4,000 higher than the four-year average dating back to 2012. And servicing that debt, which includes mortgages, lines of credit and credit card debt, is costing $1,165 a month.

Nearly half (46 per cent) feel some stress about those figures, but they’re still not as stressed as those surveyed in the past two previous years, suggesting many don’t anticipate a rise in interest rates.

Two-thirds admit, though, they would feel stressed if interest rates rose by two percentage points.

“The sizeable number of indebted households that would feel very strained by a relatively moderate increase in interest rates is concerning,” said Sal Guatieri, senior economist of BMO Capital Markets. “This is a worrisome side effect of a prolonged period of low interest rates and needs to be closely monitored, especially if rates continue to fall.”

Canadians carrying debt will be watching the Bank of Canada’s next interest rate announcement July 15. Economists remain split over whether the Bank will hold or cut rates. A rate hike appears off the table — for now.

Statistics Canada says the debt-to-income ratio of Canadian households stands at 163.3 per cent. That means for every dollar Canadians earn, they owe $1.63 in debt, which is just barely lower than the record level measured last year.

BMO’s new poll finds many Canadians — 46 per cent in this case — are optimistic they can still have all of their debt paid off in less than five years.

The survey was conducted by Pollara and is based on interviews with an online sample of 1,001 Canadians conducted between June 19 and June 22.

 

 

Canada’s RBC and BMO move to cut prime rates

January 28, 2015

Canada’s RBC and BMO move to cut prime rates

TORONTO (Reuters) – Royal Bank of Canada, the country’s biggest lender, said on Tuesday it would cut its prime lending rate by 15 basis points, becoming the first of Canada’s big banks to trim borrowing costs nearly a week after the central bank stunned markets with a rate cut.

Bank of Montreal BMO.TO, Canada’s fourth-largest bank, quickly followed suit.

The moves by RBC RY.TO and BMO take their prime rates to 2.85 percent from 3 percent, effective Wednesday, the banks said.

Canada’s biggest banks, which also include Toronto-Dominion Bank TD.TO, Bank of Nova Scotia BNS.TO, Canadian Imperial Bank of Commerce CM.TO and National Bank of Canada NA.TO, have come under fire for not immediately cutting their lending rates after the central bank’s rate cut.

By not passing on the full rate cut to borrowers, the banks can protect their net interest margin, which boosts profits.

Typically, once one bank cuts its prime rate, the others follow in order to remain competitive with borrowers.

The Bank of Canada surprised markets with its Jan. 21 decision to cut overnight borrowing costs by a quarter of a percentage point, to 0.75 percent, to counter the effects of cheaper oil on economic growth and inflation.

 

 

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