Rajeeva Sinha has some tough-love insights when asked what average Canadians can do to prepare financially for retirement.

"It's very challenging (to invest savings). If you're looking for advice: be conservative. The key thing is people should stop thinking about all the money they're putting away as their wealth," said the University of Windsor associate professor of finance. "You're living 20 to 30 years longer than your grandparents. So you're going to need more money for security in your old age."

Regardless of how that money is put aside and invested - through public or private pension plans, taxation to fund social security programs or some form of personal savings - don't expect more than modest returns, Sinha said.

He doesn't pretend to have all the answers to Canada's ongoing pension debate - reignited recently when Prime Minister Stephen Harper hinted the government needs to reduce the cost of the Old Age Security system to taxpayers in the future.

What Sinha has learned from research and teaching a class on pensions flies in the face of all the current preaching about financial literacy.

"The behavioural finance field shows that people don't really think of their long-term finances," he said. He also points to research showing even knowledgeable investors make bad choices.

That's why Registered Retirement Savings Plans have been, in his words, "a disaster, basically."

It isn't that putting aside income in a tax-sheltered account for retirement is a bad idea. It's just that Canadians aren't doing enough of it. The median RRSP contribution for 2010 was $2,790, according to Statistics Canada. Windsorites came in below that with a median contribution of $2,400. In all, Canadians poured a total of $33.9 billion into RRSPs and left unused room adding up to $650 billion in their plans.

At the same time, the number of Canadians who are part of employer-sponsored pension plans is shrinking. In the private sector, only 16 per cent of workers have defined benefit plans, which pay a set pension upon retirement that is guaranteed by the employer. In the smaller public sector, 80 per cent are still covered by these plans. Two-thirds of Canadians don't have an employer-sponsored pension plan.

Among employers, there is a trend toward offering defined contribution plans and group RRSPs, under which retirement income depends on the results of investments, notes a report released last week by the Bank of Montreal's BMO Retirement Institute. As well, workers are changing employment more often than in the past and more likely to benefit from plans that can move with them.

"The onus is going to be more and more on the individual to be able to fund the kind of retirement that they are hoping to live," said Tina Di Vito, BMO's director of retirement strategies and author of 52 Ways to Wreck Your Retirement.

"Irrespective of any of the changes in any of the types of pensions, the fact of the matter is we can't rely on someone else taking care of our retirement futures."

That could be a challenge. Just over half of 1,000 working Canadians surveyed by BMO said they wouldn't know which features they would select if they could design their own workplace or personal retirement savings plan. As well, only seven per cent considered a good pension to be the key factor when evaluating job opportunities.

Combine this with low savings rates and it's clear many who retire in the coming years will be relying primarily on two sources of income during retirement: the Canada Pension Plan and OAS, Sinha said.

While the current maximum OAS payment is only $540 a month and the associated Guaranteed Income Supplement pays up to $732, delaying eligibility to age 67 from 65 will hurt the most vulnerable segment of the workforce, he said. Those are lower-wage bluecollar workers who could find it difficult to work beyond age 65 because of the physical toll of their jobs.

The government should look at other options for funding OAS before cutting back what will continue to be an essential source of retirement income for many Canadians for decades to come, Sinha said.

He thinks it's unfortunate the federal government and provinces have failed to reach an agreement on increasing CPP payments and payouts, currently intended to replace about 25 per cent of pre-retirement income. The CPP, funded equally by employers and workers, is probably the most costeffective way for Canadians to increase their retirement savings and recent federal governments have done a good job of ensuring it remains sustainable, Sinha said.

It was sensible to make recent changes to CPP that reward those who delay receiving the pension beyond age 65 and penalize those who start taking payments before 65, he said.

What is not sensible is leaving Canadians on their own when it comes to setting aside and investing the rest of their retirement funds, Sinha said.

evanwageningen@ windsorstar.com