Waterloo – Eighty-five per cent of British Columbian homeowners indicate “being debt-free” is very important to their definition of a successful retirement according to a recent debt survey by Manulife Bank of Canada. It ranks second only to “good health” (92%) and slightly higher than “sufficient retirement income to maintain my current lifestyle” (83%).
When asked to imagine that they had reached their planned retirement age and still had debt outstanding, 52% indicated that they would find this scenario extremely stressful. This aligns closely with the national average, where the survey found that fully half of Canadians – more women (54%) than men (46%) – would find it stressful to reach retirement age with debt not yet paid off.
BC homeowners judge many non-financial factors such as “living near family” (60%), “keeping busy with a hobby or volunteer work” (66%), and “have a broad group of friends” (47%) much less important to a successful retirement than being debt-free.
“Like most Canadians, BC homeowners understand that a stress-free retirement relies not only on sufficient savings, but also on being debt-free,” noted Stuart Kirk, a Retirement Planning Specialist with Precision Wealth Management in Parksville, BC. “Understanding the importance of paying off debt is the first step to a successful retirement. The next step is putting a plan in place to help get there. And that’s where a financial advisor can help.”
Across Canada, debt-freedom expectations change as people get older
Manulife Bank’s debt and retirement survey found that three in four Canadian homeowners consider debt-freedom to be among their top financial goals – a finding that is relatively consistent with Manulife Bank’s past consumer debt studies. However, their expectation about when they will actually achieve debt-freedom appears to be largely dependent upon their age, a finding that is consistent across the country.
Most Canadian homeowners in their 30s (73%) who reported having debt expect to be debt-free before they turn 60. That number decreases to two-thirds for homeowners in their 40s. Just one third of homeowners in their 50s expect to be debt-free before they turn 60, with one in five indicating they either don’t know when they’ll be debt-free (14%) or don’t expect to ever be debt-free (7%).
Overall, just over half of the survey respondents are confident they will be free from debt when they reach their planned retirement age. This relative lack of confidence appears to be well-founded, as only half of Canadian homeowners report having less debt than they did 12 months ago.
“It’s encouraging to see younger homeowners express optimism about becoming debt-free” stated Doug Conick, President and CEO of Manulife Bank of Canada. “However, the experience of more seasoned homeowners, revealed by the survey, underscores the importance of developing a concrete debt-reduction plan and sticking to it. Most will find becoming debt-free much easier if they have a concrete plan for how to get there.”
BC homeowners focused on repaying debt.
In BC, homeowners are concerned about the challenge they face regarding household debt and they appear to be taking steps to address the problem. Close to half (46%) of those who are neither debt-free nor retired plan, to focus more on repaying debt than saving for retirement over the next year, compared to 11% who state the reverse. These results are comparable to those reported in the rest of the country.
In addition, within two-adult households, four in 10 BC couples review debt with one another at least once per month, indicating a concerted effort to manage debt.
Advice and planning
Despite the stated importance of debt-freedom and their concerns about not achieving that goal before retirement, only about a third of BC homeowners seek some kind of professional advice to manage their debt and day-to-day cash flow. On a positive note, among BC homeowners who get debt and cash-flow advice from a financial advisor, two-thirds have a concrete plan for becoming debt-free.
More than half of those surveyed in BC indicate that, should they reach their planned retirement age and still have debt, they would continue to work until their debt is gone. In contrast, more than four in ten state they would retire when they reached their planned retirement age even if they had debt outstanding. These findings are in keeping with the national results.
About the Manulife Bank of Canada Debt and Retirement Survey
The Manulife Bank of Canada poll surveyed 2,003 Canadian homeowners between ages 30 to 59 with household income of more than $50,000. It was conducted online by Research House between March 5 and March 16, 2012. Full survey results are available at manulifebank.ca/debtresearch.
Audio clips and infographics attached. More audio clips and infographics can be found at repsourcepublic.manulife.com
About Manulife Bank
Established in 1993, Manulife Bank was the first federally regulated bank opened by an insurance company in Canada. It is a Schedule l federally chartered bank and a wholly-owned subsidiary of Manulife Financial. As Canada’s first advisor-based bank, it has successfully grown to more than $20 billion in assets and serves clients across Canada. Manulife Bank believes that effective debt management is a key contributor to financial health and that, by working with a Financial Advisor to create a customized financial plan that incorporates debt and cash flow management, many people could save money, become debt-free sooner and achieve more of their financial goals. It’s for this reason that Manulife Bank offers its innovative deposit and loan products through independent financial advisors to help individuals make the most of their financial plan. Manulife Bank employs a team of specialists across the country that work with homeowners and financial advisors to design cash flow programs that are more effective, efficient and flexible. For more information about Manulife Bank products, speak to your financial advisor or visit manulifebank.ca. To learn more about Manulife One or Manulife Bank Select, or to find your local Manulife Bank specialist, ask your advisor for a referral or visit manulifeone.ca or manulifebankselect.ca.
About Manulife Financial
Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. In 2012, we celebrate 125 years of providing clients strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers. Funds under management by Manulife Financial and its subsidiaries were C$512 billion (US$512 billion) as at March 31, 2012. The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife Financial can be found on the Internet at manulife.com.
Tracy Van Kalsbeek
Public Relations Consultant
Manulife Financial Canadian Division