September 6, 2017

Canadian Payroll Association's 2017 Survey finds spending and debt levels remain high, with about half of workers still living pay cheque to pay cheque

Despite some economic gains, most employed Canadians continue to fall short of meeting their retirement savings goals

TORONTO -- Even though there have been some signs of economic improvement over the past year, most employed Canadians are no better off when it comes to their retirement prospects.

High levels of spending, low rates of savings

According to the Canadian Payroll Association's ninth annual survey, released today, 47 per cent of working Canadians report it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week. The numbers are even higher for millennials in their 30s (55 per cent would have difficulty) and Gen Xs in their 40s (51 per cent).

The survey also shows that 41 per cent of employees spend all of or more than their net pay. The number-one reason given for increased spending is higher living costs.

Forty-two per cent of survey respondents said they save five per cent or less of their earnings, below the 10 per cent savings level generally recommended by financial planning experts.

Illustrating just how strapped some employees are, 22 per cent (nearly one in four) say they could not come up with just $2,000 within a month for an emergency expense.

High debt levels

Debt levels of working Canadians continue to remain high. Over one-third (35 per cent) of working Canadians feel overwhelmed by their level of debt. Nearly one-third (31 per cent) of respondents say their debt load increased over the year. Those who believe it will take more than 10 years to pay down their debt has risen to 42 per cent (versus 36 per centin 2016). Fully 12 per cent believe they will never be debt free.

As in past years, 94 per cent of respondents carry debt, with the most common debt being mortgages (28 per cent), credit cards (17 per cent), car loans (18 per cent) and lines of credit (17 per cent). Not surprisingly, given the high cost of real-estate in some areas, more respondents than ever find mortgages on principal residences the most difficult debt to pay down, with 32 per cent of respondents selecting this option. For the first time in the survey's nine year history, mortgages surpassed credit card debt (23 per cent) as the most difficult to pay down.

Results indicate that the primary reason for increased debt is higher overall spending. The major reasons for increased spending are higher living expenses (32 per cent) and unexpected expenses (25 per cent). Despite their precarious financial situation, 26 per cent of working Canadians feel that earning more is their best way to financial well-being, versus just 19 per cent who think spending less is the ticket to financial security.

"These results underscore the need for spending less and saving more every day, for emergencies and for retirement," says Janice MacLellan, the Canadian Payroll Association's vice-president of operations. "They also show that it is very difficult for people to change or reduce their spending patterns. By Paying Yourself First through automatic payroll deductions, you are diverting money into a retirement or savings account before you have the opportunity to think about spending it."

Retirement delayed for many

Almost half of working Canadians (46 per cent) say they will now have to work longer than they planned five years ago, and the top reason cited is they are "not saving enough".

This is corroborated by another result indicating that 74 per cent have saved only a quarter or less of what they feel they will need to retire. And even among those closer to retirement (50 and older), a disturbing 47 per cent are still less than a quarter of the way to their retirement savings goal.

The average target retirement age is now about 61, and half (46 per cent) think they will need a retirement nest-egg of at least $1 million.

Economic outlook

There were a few positive indicators, most notably a five per cent increase in the number of employees with total household incomes of over $125K, and a slight rise (two per cent) in full time employment to 89 per cent.

However, most working Canadians see little to cheer about, with only 39 per cent expecting the economy in their city or town to improve. While up three per cent over last year, it is down by 27 per cent from the first survey done in 2009.

Their greatest concerns are the rising costs of living and the impact of potential interest rate increases.

What to do

With many Canadians challenged by debt, cost of living worries, and insufficient retirement savings, the Canadian Payroll Association recommends you Pay Yourself First by saving 10 per cent of your net pay.

If you want to learn more about automatic savings – and how you can Pay Yourself First – talk to your payroll professional.

"The Canadian Payroll Association's Research Survey of Employed Canadians is conducted each year to support National Payroll Week," says Frank Lilley, CPA, CGA and chair of the Canadian Payroll Association's Board of Directors. "National Payroll Week recognizes the contributions of payroll professionals in delivering $928 billion annually in wages and benefits on behalf of employers and in helping Canadians Pay Themselves First."

 

 

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