The vast majority of Canadians are saving enough for retirement to ensure a standard of living similar to their preretirement lifestyle, according to a new large-scale survey of household finances.

A financial survey of 12,000 households by consulting firm McKinsey & Co. shows 83 per cent of Canadians are on track to maintain their standard of living after they stop working, even though 60 per cent of those surveyed reported one of their largest financial worries is not having enough money for retirement.

McKinsey principal Fabrice Morin said the findings suggest many people are worrying needlessly because they don't know how much income they will have when they retire or don't know how much they will likely spend.

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"It's very hard for individuals, even when they get close to retirement, to be able to say with certainty, 'Here's how much I'm going to have annually in retirement,'" Mr. Morin said.

"Those who have built a financial plan know, but those who we surveyed who do not have a financial plan usually don't know how much they will have in retirement."

The survey, which included 9,000 working households and 3,000 retired households, has implications for the ongoing debate about reforming the retirement savings system in Canada.

Mr. Morin said the findings suggest policy makers should aim for targeted reforms rather than creating retirement programs that may not be necessary for most people or could have negative unintended consequences, such as hampering economic growth.

The group with the greatest savings gap are mid- to high-income Canadians who do not have workplace pension plans, with just 63 per cent saving enough on their own to maintain their same consumption patterns in retirement.

The survey demonstrates the merits of traditional defined benefit (DB) pension plans, which pay a guaranteed level of income in retirement, showing 91 per cent of mid- to high-income Canadians with a DB pension are on track to maintain their lifestyles in retirement, the study says.

The survey shows 75 per cent of those with defined contribution (DC) or group RRSP pension plans will have enough income to maintain the same consumption patterns in retirement. DC pension plans do not pay a guaranteed level of income in retirement, but instead provide income based on the performance of the financial assets in the plan.

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Mr. Morin said most of the people in the DC pension group who have inadequate savings are those who make little or no contribution to their DC plans. Among those who do not participate in their workplace DC plans, just 59 per cent will have adequate income in retirement, compared with 84 per cent who contribute at least 6 per cent of their annual income to their plans, including employer contributions.

To determine retirement income, McKinsey assessed the financial assets each household will have in retirement, including government pension plans, corporate pension plans and personal savings. The analysis did not include the value of equity in peoples' homes because it assumed most people will not liquidate their real estate.

Mr. Morin said if even 30 per cent of the value of peoples' homes had been included as a financial asset, the proportion of Canadians with adequate savings for retirement would climb to 87 per cent.

The survey calculated how much income will be required in retirement as a proportion of working life consumption costs before retirement.

The survey assumes most people will spend 65 per cent as much in retirement as they did preretirement based on surveys of average household spending patterns. The exception is the lowest 20 per cent of income earners, who typically consume 80 per cent as much in retirement as before retirement.

The majority of retirees surveyed by McKinsey reported they are spending less in retirement by choice and do not feel the need to spend more. Only 33 per cent said they would spend more but feel financially constrained.

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Some of that group includes low-income earners. The survey found 93 per cent of low-income workers will be able to have similar consumption in retirement because government pension programs provide a minimum level of income that matches their preretirement lifestyle.

But the survey adds that does not mean they will necessarily have a comfortable life, especially single people who get less income than couples. "In fact, some modest-income households may experience poverty in retirement," the survey says.

Mr. Morin said the survey assumes retirees will have similar spending habits in the future, but said it is possible the next generation of retirees may spend more and have higher income needs as a result. Some people also need more money than the 65 per cent spending average during the early years of retirement, and gradually spend less as they get older.