Manulife Bank – Wanted for a Successful Retirement: A Debt-Freedom Plan

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  • Lack of will opens doors to legal complications
  • Paying down debt more important than saving for retirement for many homeowners
  • Debt-freedom expectations change as people age
  • Many Canadian homeowners will continue to work until they achieve debt freedom before retiring
  • Manulife Bank surveyed 2,003 Canadians
  • Audio clips and infographic attached

WATERLOO, ON, May 14, 2012 – Nearly nine in 10 Canadian homeowners (87%) indicate that “being debt-free” is very important to their definition of a successful retirement according to a recent debt and retirement survey conducted by Manulife Bank of Canada. This is second only to “having good health” (94%) and slightly higher than “having sufficient income to maintain my current lifestyle” (85%).

This is the first time that Manulife Bank has focused on surveying Canadians about debt in the context of retirement planning. The survey found that half of Canadians – more women (54%) than men (46%) – would find it extremely stressful to reach retirement age with debt still outstanding.

Interestingly, many non-financial factors such as “living near family” (62%), “keeping busy with a hobby or volunteer work” (64%), and “having a broad group of friends” (43%) were deemed much less important to a successful retirement than being debt-free.

“The results from this survey strongly support the fact that, for a successful retirement, people need to pay close attention to not just their retirement savings, but debt repayment as well,” stated Doug Conick, President and CEO of Manulife Bank of Canada.

Similarities and differences across Canada

While Canadians are relatively consistent in their views on debt, some regional differences stood out:

  • Almost all regions of Canada rank “being debt-free” as the second most important factor for a successful retirement – after “good health.” The exception is Quebec, which also ranks it behind “having sufficient retirement income to maintain my current lifestyle.”
  • When it comes to the thought of reaching their planned retirement age with debt still outstanding, 57% of Ontario homeowners and 41% of Quebec homeowners indicate they would feel extremely stressed if they found themselves in this situation, compared to the national average (50%).
  • All regions rate “living near family” as less important to a successful retirement than being debt-free, however, in the three Prairie Provinces, homeowners deem this factor to be even less important than their counterparts across the country (55% vs. 62%).

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. However, their expectation about when they will actually achieve debt-freedom appears to be largely dependent upon their age.

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.

“It’s encouraging to see younger homeowners express optimism about becoming debt-free” added Mr. Conick. “However, the experience of more seasoned homeowners, revealed by our survey, underscores the importance of developing a concrete debt-reduction plan and sticking to it. Most will find becoming debt-free much easier if they have a concrete plan for how to get there.”

Homeowners focused on repaying debt

Results show that homeowners in Canada are taking steps to reduce their debt. Close to half of those who are neither debt-free nor retired plan to focus more on repaying debt than saving for retirement over the next year. About the same amount plan to focus equally on retirement savings and paying off debt.

In two-adult households, two in three Canadian couples review debt with one another at least every two months, indicating a concerted effort to manage debt.

Advice and planning

Despite the importance attributed to being debt-free and their concerns about not achieving that goal before retirement, only a third of Canadians seek some kind of professional advice to manage their debt and day-to-day cash flow. However, one reason for optimism is that, among homeowners who get debt management advice from a financial advisor, more than two thirds (72%) have a concrete plan for becoming debt-free.

As if to highlight the finding that people see debt freedom as a key to successful retirement, more than half of those surveyed indicate that, should they reach their planned retirement age and still have debt, they will continue to work until their debt was gone. Four in 10 state they will retire even if they still have debt outstanding.

“Ultimately, the results show that Canadians are thinking about their debt and understand how crucial debt freedom is to an enjoyable retirement,” notes Mr. Conick. “My hope is that more Canadians will reach out to a financial advisor and get some assistance in creating a debt reduction strategy that will allow them to be debt-free by the time they’re ready to retire.”

About the Manulife Bank of Canada Debt and Retirement Survey

The Manulife Bank of Canada poll surveyed 2,003 Canadian homeowners between ages 30 to 59 with household income of more than $50,000. It was conducted online by Research House between March 5 and March 16, 2012. Full survey results are available at manulifebank.ca/debtresearch.

Audio clips and infographics attached. More audio clips and infographics can be found at repsourcepublic.manulife.com.

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 $20 billion in assets and serves clients across Canada. Manulife Bank believes that effective debt management is a key contributor to financial health and that, by working with a Financial Advisor to create a customized financial plan that incorporates debt and cash flow management, many people could save money, become debt-free sooner and achieve more of their financial goals. It’s for this reason that Manulife Bank offers its innovative deposit and loan products through independent financial advisors to help individuals make the most of their financial plan. Manulife Bank employs a team of specialists across the country that work with homeowners and financial advisors to design cash flow programs that are more effective, efficient and flexible. For more information about Manulife Bank products, speak to your financial advisor or visit manulifebank.ca. To learn more about Manulife One or Manulife Bank Select or to find your local Manulife Bank specialist ask your advisor for a referral or visit manulifeone.ca or manulifebankselect.ca.

About Manulife Financial

Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. In 2012, we celebrate 125 years of providing clients 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$512 billion (US$512 billion) as at March 31, 2012. 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.