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%).
According to Manulife, 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.
B.C. 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, B.C. homeowners understand that a stress-free retirement relies not only on sufficient savings, but also on being debt-free," said Stuart Kirk, a retirement planning specialist with Precision Wealth Management in Parksville. "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. But respondents' expectations 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.
In B.C., 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.
More than half of those surveyed in B.C. 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 10 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.
The Manulife poll surveyed 2,003 Canadian homeowners between ages 30 and 59 and was conducted online by Research House between March 5 and 16 of this year. Full survey results are at manulifebank.ca/debtresearch.
