With the Feb. 29 RRSP deadline looming, many Canadians find themselves rushing to their respective financial institutions to make last-minute contributions. They can blame part of their procrastination on evolution.
A recent RSP Deadline Poll by the TD bank, based on 664 responses, showed 58% of Canadians who expect to make contributions to their RRSPs, have left it to the last two weeks before the deadline to contribute. That includes 15% who contribute this way every year.
A similar survey by CIBC on Feb. 23, based on 876 responses, found that 25% of potential contributors were yet to make a contribution and, of that group, half have said they would leave it right down to the wire and put it off until the 28th or 29th of February.
What makes this interesting, says Geoff Dillon, senior director of retail and business banking at CIBC is "the deadline comes up roughly around the same time every year and yet we do find obviously that there are people at the last minute making contributions."
This last-minute push, however, doesn't surprise Timothy Pychyl, a professor of psychology at Carleton University in Ottawa, and a leading expert on procrastination.
He says it comes down to procrastination, what he defines as "a voluntary delay of an intended action despite knowing that you're probably going to be worse off if you delay."
Which is exactly the case, most financial experts will agree, when it comes to contributing to your RRSP
Pychyl identifies a few basic reasons why we procrastinate when it comes to things like RRSP deadlines.
Chief among them is that "we like immediate rewards, so we give in to feel good by putting off things we find aversive," he says.
More often, he adds, "we choose to reward ourselves in the short term and discount the future rewards."
Basically, we are more likely to choose something that will make us happy now instead of later because, as Pychyl points out, "we are very bad at delaying gratification and predicting future emotions.
"If you ask me how I'm going to feel tomorrow, I will usually base it on how I feel today."
Another way of understanding why we delay in making RRSP contributions is through something called temporal construal theory.
As Pychyl puts it: "If we think about things concretely, they seem to belong to the present, they have a sense of urgency to them, but if we think about things abstractly they belong to the future, then there is no urgency."
According to one expert, "Canadians have confided in us they don't really have a clear picture of what retirement is."
She says "only 16% have a clear idea, 44% have a vague idea and 40% have no idea at all".
According to temporal construal theory, people, events, outcomes, can be perceived as either close or distant and the further away they may seem, the less desirable they tend to be.
Pychyl further explains that this lack of a clear image of our future blurs our reality and is based on evolutionary history.
"We aren't programmed for long-term rewards," he says. "Our ancestors did not live like we live, so long-range planning is not built in us."
According to Statistics Canada, the average life expectancy in 1952 for Canadian males was 66 years and for Canadian women 71 years.
By 2030, that is projected to be over 80 for both males and females.
This means the average person will spend 20-plus years in retirement, but the idea of taking that first step can be daunting.
Experts like Dillon say "it's well worth the modest time investment to sit down with an adviser" and look at your options.
Pychyl agrees. "You have to plan," he says, "the remedy here is people have to start to plan more very concretely. This is why having a financial consultant can help."
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