Results from the twice-yearly survey finds Canadians view their home as their saviour come retirement. Think again says Manulife Bank CEO Rick Lunny.
WP sat down with the bank’s CEO Friday, the first interviews he’s given since becoming the top dog in June. In a wide-ranging discussion Lunny spoke of the biggest issues facing Canadians when it comes to debt.
Probably the most depressing finding is the reality that almost 50% of the respondents expect to be in debt when they retire. This particular bugaboo makes planning for retirement that much harder; many will simply continue working later than planned in order to eliminate these debts.
The survey asked 2,373 homeowners aged 20 to 59 with incomes greater than $50,000 from across the country a variety of questions about debt, finances and retirement. Conducted online by Research House over 12 days in mid-September, the results indicate Canadians of all ages are incredibly conflicted about their financial situations.
Financial advisors, Lunny reminded WP, have a big part to play in helping their clients win the ongoing battle against debt, which can seriously affect the quality of life their clients will have in retirement.
In that regard, survey respondents, when asked what makes a successful retirement, said being debt-free was more important than almost everything except one’s health. So, although Canadian homeowners haven’t done a good job when it comes to financial planning, they at least recognize it’s not something they can ignore.
Looking at the glass half-full for a moment, 45% of respondents are happy with how they’ve handled their debt in the past 12 months while only 15% were unhappy.
Manulife’s press release paints a more dire picture and why not when a September survey found 51% of working Canadians
apparently would find it difficult to meet their financial obligations if their pay was delayed by a just a week.
The bank’s findings suggest Canadians are leaning far too heavily on the equity in their homes. A strategy, Lunny believes is doomed to failure. “… Retirees who use home equity to supplement their retirement risk leaving no legacy for their children or grandchildren. If home values fall, they could end up further in debt and have negative equity in the house.”
The big takeaway for advisors?
With equities and real estate investments likely to see slower growth over the next five years compared to the previous five, it makes sense to have a conversation with clients about debt.
The numbers don’t lie.