Canadians increasingly worried retirement won't be so golden

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Canadians are increasingly worried about the financial state of their golden years, according to a survey that found they are fretting about having a reliable source of income, a realistic financial plan and reducing debt in retirement.

The Russell Financial Health Index, an online survey that gauges that the financial health of Canadian investors, fell to 47.08 in the fourth quarter of 2011, down slightly from the previous quarter's reading of 47.47.

The index has now dropped to its second lowest level since it was established in 2008. The lower the reading, the more concerned Canadians are about their financial health in retirement.

In terms of ranking the areas of concern, having enough income in retirement was the greatest concern, the realization that one likely needs a financial plan to ensure this was second, and reducing debt was third.

"Considering that the market volatility we experienced in 2011 is expected to stay with us in 2012, it's only natural that Canadian investors continue to be concerned about generating a consistent level of income in their retirement years," said Bob Leeming, the director of client solutions at Russell Investments Canada.

An increasing number of older Canadians are worried about carrying debt into their retirement.

Canadian household debt is at a record high, according to the latest report from Statistics Canada. Bank of Canada Governor Mark Carney has warned that swelling household debt is the biggest domestic risk to Canada's economy.

Bogged down by large mortgages and consumer debt loads, a growing number of older Canadians are worried about carrying debt into their retirement, something that most financial planners discourage.

Entering retirement with debt can create cash flow problems, especially if it is variable-rate debt which will cost more to service when interest rates finally do rise, Mr. Leeming said.

"While it can be tempting for people to delay their long-term investment plan, reduce their exposure to potentially risky growth assets or perhaps even flee the market altogether, sound strategies such as reducing debt, combined with implementing a solid financial plan can help Canadians take some of the emotion out of the turmoil created by the financial markets."

For tips, stories, videos and live chats ahead of this year's RRSP contribution deadline, check the Globe Investor 2012 RRSP season section for daily updates.