More than half of homeowners report debt reduction over the past year, says Manulife Bank of Canada debt survey
- More than half of homeowners report having less debt than they did 12 months ago.
- Most want to be debt-free by retirement, but many aren't confident they'll succeed
- Those who get debt management advice from their financial advisor are more confident they'll be debt-free in retirement
- Few homeowners plan to tap into home equity for retirement income
C$ unless otherwise stated
WATERLOO, ON, May 22, 2013 /CNW/ - In a sign that Canadians are becoming more focused on reducing their debt, a Manulife Bank of Canada Survey found that 55% of homeowners report having less debt than they did 12 months ago. This is an improvement from August 2012, when 50% reported year-over-year debt reduction. Just one in five (20%) homeowners report having more debt than they did a year ago, with the balance reporting no change in their debt level (16%) or being debt-free over the past 12 months (9%).
"This is an encouraging result," says Doug Conick, President and CEO of Manulife Bank of Canada. "Effective debt management should be a core component of every financial plan. This is true whether you're just starting out in life and trying to manage the amount of interest you're paying or approaching retirement and trying to ensure you're debt-free before you get there."
Alberta homeowners report the most success, with six in 10 (60%) reporting year-over-year debt reduction, while just under half (49%) of those in Quebec report the same result.
Many Canadians are not confident they'll be debt-free at retirement
While eight in 10 (80%) Canadian homeowners who have debt indicate it's very important to be debt-free by the time they reach their planned retirement age, fewer than six in 10 (56%) are confident they'll achieve that goal. Notably, the percentage of those expressing confidence increases to two-thirds (66%) among those who get debt-management advice from a financial advisor.
"Becoming debt-free may appear, on the surface, to be easier than saving and investing," says Mr. Conick. "However, if you're serious about getting out of debt, want to minimize the interest you pay and still have flexibility in your budget - you need a plan. A financial advisor can show you how your debt fits into your broader financial goals and develop a customized plan to help you become debt-free sooner. Just as importantly, an advisor can keep you focused on your debt freedom goal - and this can be a big advantage in your journey toward a debt-free retirement."
Regionally, homeowners in Alberta (60%) and Ontario (58%) are most likely to feel confident they'll be debt-free when they reach retirement, while those in Manitoba and Saskatchewan (53%) and Atlantic Canada (50%) are least likely to be confident.
When asked what they'd do if they do if they reached their planned retirement date and still had debt outstanding, sentiment was divided. Just under half of homeowners (47%) indicate they'd continue to work until their debt was gone, and a similar number (45%) indicated they'd retire even if they still had debt. Regionally, homeowners in Quebec (32%) and Atlantic Canada (40%) were least likely to indicate they'd continue working in this scenario, while those in BC (60%) were most likely to do so.
"When it comes to planning for retirement, eliminating debt is just as important as creating an income stream, because they're two sides of the same coin," says Mr. Conick. "If you have debt in retirement, your principal and interest payments will generally come from the same pool of assets you're using to fund your retirement. When planning for retirement, people need to think about their debt and develop a plan that addresses their unique goals and situation."
Most homeowners do not plan to tap into home equity for retirement income
When asked about their plans regarding their living arrangements in retirement, nearly half (46%) of homeowners indicate they expect to stay in their current home while a third (33%) plan move to a different home and one in five (20%) have not yet made this decision. Slightly more than one in eight (13%) homeowners plan to access the equity in their homes to supplement their retirement income, with 4% planning to borrow against their home equity and 9% planning to downsize and use the excess equity to provide retirement income.
"For most people, their home equity represents an important part of their net-worth - and it may make sense for them to include this in their retirement income plan." adds Mr. Conick. "However, before doing so, it's important to ensure this strategy aligns with your broader financial goals. A financial advisor could help you see the big picture and develop a customized plan that meets your unique needs."
About the Manulife Bank of Canada Debt Survey
The Manulife Bank of Canada poll surveyed 2,141 Canadian homeowners in all provinces between ages 30 to 59 with household income of more than $50,000. The survey was conducted online by Research House, an Environics company, between March 4-19, 2013. National results were weighted by province and gender. Full survey results, including additional regional, gender and age-group comparisons, are available at manulifebank.ca/debtresearch.
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 $22 billion in assets and serves clients across Canada.
About Manulife Financial
Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Clients look to Manulife for 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$555 billion (US$547 billion) as at March 31, 2013. 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.
SOURCE Manulife Financial Corporation
Image with caption: "Manulife Bank of Canada survey finds that Canadians are making progress on reducing debt. (CNW Group/Manulife Financial Corporation)". Image available at: http://photos.newswire.ca/images/download/20130522_C8928_PHOTO_EN_26970.jpg
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