Most say they would "work longer to live better", but some are taking a risk by carrying debt into retirement
TORONTO, Sept. 21, 2012 /CNW/ - A new CIBC (TSX: CM) (NYSE: CM) poll conducted by Leger Marketing reveals that most of Canada's 50-59 year olds don't intend to give up their current lifestyle as they enter retirement, despite falling short of their retirement savings goals. The poll also reveals that some Canadians in their 50s are planning to carry debt into retirement with no immediate plans to pay it off, an approach that could reduce their retirement cash flow and jeopardize their plans to live the good life.
Key poll findings include:
- When given the option to retire earlier than planned but give up their current lifestyle and live more modestly in retirement, only 25 per cent of Canadians between ages 50 and 59 would take the offer
- 57 per cent said they would rather "work longer and live better" in retirement, and would not give up their current lifestyle (Another 18 per cent were undecided)
- 24 per cent of Canada's 50-59 year olds say they plan to carry debt into retirement. Of this group, the vast majority (80 per cent) say they will carry some debt throughout retirement, suggesting they have no immediate plans to pay off their outstanding debt
- Regionally, 50-somethings in Manitoba/Saskatchewan were most likely (67 per cent) to say they would prefer to work longer and live better, while those in Quebec (32 per cent) were most likely to take an early retirement with a more modest lifestyle
- This builds on previously released CIBC/Leger Marketing research that shows Canadians in their 50s have fallen short of their retirement savings goals, with almost half (45 per cent) having saved less than $100,000 over their lifetime for retirement.
"One of the keys to planning for retirement is having a clear view of how much monthly income you can generate once you leave work, and whether that income will support your expenses," said Christina Kramer, Executive Vice-President, Retail Distribution and Channel Strategy, CIBC. "These poll findings would suggest that some Canadians approaching retirement would benefit from a conversation with an advisor about whether their retirement income and monthly cash flow will live up to their plans."
Carrying Debt for Life?
Poll results also show that some of Canada's boomers are already forecasting that they will carry debt into retirement, and have no plans to pay it off anytime soon.
- One-quarter (24 per cent) of those surveyed said they plan to carry debt into retirement
- Most of this group (80 per cent) said they will carry at least some debt throughout their retirement
- This finding suggests that boomers believe their income will be sufficient to support their desired lifestyle as well as service outstanding debts over a long period of time
According to Ms. Kramer, this may also suggest some Canadians approaching retirement are too comfortable with today's low interest rates on their debt, and may not have evaluated the negative impact that ongoing debt payments can have on their cash flow.
"Retiring with debt creates a drag on your retirement income, as monthly repayments will reduce cash flow and can actually limit your financial flexibility once you retire," said Ms. Kramer. "While some Canadians may feel they can incorporate monthly debt payments into their retirement, the reality is that repaying debt before retirement remains an integral component of maximizing cash flow."
Ms. Kramer added that for the vast majority of Canadians, a debt-free start to retirement is the right strategy. "Entering retirement with minimal or no debt maximizes your cash flow, and gives you a clear sense of the level of expenses that will be manageable within your retirement plan."
Retirement Planning Advice
- Meet with an Advisor to forecast cash flow - You need to understand how much income you'll generate from your savings combined with any pension income you might be eligible for. This will help you determine what level of retirement expenses are appropriate for you and allows you to make changes to your retirement strategy today if required.
- Use the years before retirement wisely - For many Canadians, your late 50s and early 60s can be some of the best years for adding to your retirement nest egg as debts are paid off and cash flow improves. Take advantage of the opportunity to keep adding to retirement savings.
- Retire with minimal or no debt - One of the most effective ways to make your retirement savings go further is to minimize or eliminate debt repayment in retirement. This reduces interest costs and increases cash flow.
Supplementary Data Points
Percentage of Canadians in their 50s who said if they could retire earlier, they would give up their current lifestyle and live modestly in retirement, by region:
National Average - 25%
Percentage of Canadians in their 50s who said they would rather work longer and live better once they retire, by region:
National Average - 57%
Percentage of Canadians in their 50s planning to carry debt into retirement, by region:
National Average - 24%
Results are based on a CIBC poll conducted online by Léger Marketing via its LégerWeb panel, the largest Canadian-owned survey panel, which is comprised of more than 400,000 households. The survey was held in every province of Canada with a representative sample of 805 pre-retired Canadians aged 50 to 59 years, between July 5th and July 8th, 2012. A probabilistic sample of 805 respondents would yield a margin of error of +/- 3.45%, 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.
For further information:
Sean Hamilton, Director Communications and Public Affairs at 416-304-8456, [email protected]