CIBC Poll: More than half of retired Canadians carrying debt

While retired Canadians carry less debt than the rest of the country they are less likely to make extra payments, which can lead to higher interest costs over time

TORONTO, July 23, 2012 /CNW/ - A new CIBC (TSX: CM) (NYSE: CM) poll conducted by Harris/Decima reveals that nearly 60 percent of retired Canadians hold some form of debt. Although retired Canadians hold less debt than those still working, they are also less likely to be taking steps to accelerate their debt repayment. This suggests that retired Canadians may carry debt for longer than they anticipated in retirement, incurring higher interest costs and affecting cash flow.

Key Poll Findings:

  • 59 per cent of retired Canadians currently hold some form of debt compared to 76 per cent of all non-retired Canadians
  • However, only 27 per cent of retired Canadians said they have made an extra lump sum payment towards their debt in the past 12 months, lower than the national average of 42 per cent of all non-retired Canadians
  • Retired Canadians on average carry less debt than non-retired Canadians.   On average, retired Canadians carry 1.65 debt products with a balance (including mortgages, lines of credit, loans and credit cards) compared to 2.64 products with a balance among non-retired Canadians

"While retired Canadians carry less debt than the national average, their debt could be stagnant and may end up costing them more in interest costs over a longer period of time," said Christina Kramer, Executive Vice President, Retail Distribution and Channel Strategy, CIBC. "You really have to think about the debt you are retiring with because the regular repayments you make will directly affect the discretionary income you have."

More difficult to pay down debt once you retire

Making the transition to retirement may mean adapting to living on a fixed income.  In past CIBC research from the beginning of 2012, retired Canadians identified managing day-to-day expenses as their number one financial priority for this year.

Debt carried into retirement can affect retirement plans and cash flow, as the monthly payments must come from pension earnings or from retirement savings - both of which were intended to serve as retirement income.

"These poll results clearly illustrate the importance of having a good debt repayment strategy in all phases of life, particularly as you approach retirement" added Ms.  Kramer.  "While it's a good sign to see that Canadians have made some progress on debt reduction entering retirement, it's also clear that once you retire with debt, it can be harder to pay off your outstanding balances."

Additional Advice for Retired Canadians on Managing and Eliminating Debt:

To increase cash-flow and eliminate debt, Ms. Kramer offered the following debt management tips:

  • Work with an advisor to structure your debt to minimize your overall interest costs by utilizing debt products that offer a lower interest rate and having a strategy to pay these balances down in a specific time frame

  • While interest rates remain near historic lows, don't ignore the long term benefits of making small adjustments to your payment today.  Setting your debt payment even slightly higher than your required payment can reduce your overall interest costs and help you become debt free faster

  • Use free budgeting tools to help you stay on budget - CIBC CreditSmart available to CIBC credit card holders allows you to set customized budgets and receive spend alerts if you exceed your planned budget for the month, helping you stay on top of your everyday budgeting and saving

"There is a clear benefit to sitting down with an advisor and working through your debt management plan to help you achieve a sustainable and enjoyable retirement," added Ms. Kramer.

To learn more tips and try various debt repayment tools and calculators, visit the CIBC Advice Centre.


For Reference - Summary of Key Data Points:

Percentage of Retired Canadians holding some form of debt, by region:

National Average     59% (retired Canadians)
   
BC       59%
Alberta       58%
Man/Sask       58%
Ontario      57%
Quebec      58%
Atlantic Canada      76%
   

Percentage of Retired Canadians who have made an extra lump sum payment toward their debt in the past 12 months, by region:

National Average     27% (retired Canadians)
   
BC       33%
Alberta       30%
Man/Sask       28%
Ontario      31%
Quebec      13%
Atlantic Canada      33%
   

Percentage of retired Canadians that hold a debt product with a balance, by product:

Line of Credit     29%
Credit Card     28%
Mortgage     14%
Loan     13%
   

Average age at which Canadians expect to retire**:

National Average - Age 63
Atlantic Canada - Age 62
Quebec - Age 62
Ontario - Age 63
Manitoba/Saskatchewan - Age 63
Alberta - Age 62
BC - Age 64

Results are based on a CIBC poll conducted by Harris/Decima, via teleVox, their telephone omnibus solution. These data were gathered in a sample of 2,003 Canadians between March 22nd and April 2nd, 2012. A sample of this size has a National margin of error of +/-2.2%, 19 times out of 20.

** This data is from previous CIBC research gathered from a sample of 1,116 employed Canadians between September 8th and 19th, 2011. A sample of this size has a margin of error of +/-2.9%, 19 times out of 20.

CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at www.cibc.com.

 

SOURCE: CIBC

For further information:

Sean Hamilton, Director Media and External Relations at 416-304-8456, sean.hamilton@cibc.ca