B.C. Employees fare among Canada’s worst for debt and retirement savings shortfalls
For many working Canadians, especially those in B.C., the road to a comfortable retirement is becoming longer and more difficult. A large portion of the working population is living pay cheque to pay cheque, unable to save, and worried about their local economy, according to the Canadian Payroll Association’s eighth annual Research Survey of Employed Canadians, released today ahead of National Payroll Week.
The survey reveals that only 36% nationally expect the economy in their city or town to improve in the coming year. In B.C., 43% believe their economy will improve (making B.C. employees among the most optimistic inCanada).
Majority in B.C. still living pay cheque to pay cheque
Many working Canadians are barely making ends meet. About half (48% nationally and 53% in B.C.) report it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week. About one-quarter (24% nationally and 27% in B.C.) say they probably could not come up with$2,000 if an emergency arose within the next month, making B.C. employees among the most cash-strapped in the nation.
“A significant percentage of working Canadians carry debt, have a gloomy view of their local economy and are fearful of rising interest rates, inflation, and costs of living,” says Patrick Culhane, the Canadian Payroll Association’s President and CEO. “In this time of uncertainty, people need to take control of their finances by saving more. ‘Paying Yourself First’ (by automatically directing at least 10% of net pay into a separate savings account or retirement plan) enables employees to exercise some control over their financial future.”
Incomes flat, saving capacity drained by spending and debt
“Survey data suggests that household income growth has stalled, as respondents reporting household income above $100K has hardly increased in five years,” says Alec Milne, Principal at research-provider Framework Partners. “In fact, real incomes have actually declined when inflation is taken into account.”
While pay has remained largely unchanged, employees’ spending and debt levels have affected their ability to save. According to the survey, 40% of employees nationally, and 49% of B.C. employees say they spend all or more than their net pay. Nearly half nationally (47%) and more than half in B.C. (52%) save just 5% or less of their earnings.
Despite employees’ challenging financial situations, only 28% of respondents nationally cite higher wages as a top priority. This is down from the average of 34% over the past three years. Instead, an overwhelming 48% are most interested in better work-life balance and a healthy work environment. In B.C., 31% of employees want a higher wage, and nearly half (46%) want a better work-life balance and a healthy work environment.
“Clearly, many Canadians are concerned about their financial situation,” says Lucy Zambon, the Canadian Payroll Association’s Board Chair. “But better work-life balance does not have to mean reduced financial security if you spend within your means and ‘Pay Yourself First’ as a step towards financial well-being.”
More B.C. employees feeling overwhelmed by debt
Over one-third (39%) of working Canadians feel overwhelmed by their level of debt, an increase from the three year average of 36%. Debt levels have risen over the past year for 31% of respondents. In B.C, 48% feel overwhelmed by debt (the highest in Canada) and 32% say their debt level has increased this year. In fact, 11% nationally and in B.C. do not think they will ever be debt free.
Similar to prior years, 93% of respondents nationally and 92% in B.C. carry debt. Over half of respondents nationally (58%) said that debt and the economy are the biggest impediments to saving for retirement.
Retirement savings fall short, retirement pushed back
Half of Canadians and 47% of B.C. respondents think they will need a retirement nest-egg of at least $1 million.
Unable to save adequately, the vast majority of working Canadians have fallen far behind their retirement goals, with 76% nationally and 80% in B.C. saying they have saved only one-quarter or less of what they feel they will need (the biggest retirement savings shortfall in Canada).
Nearly one-half of employees nationally (45%) now expect they will have to work longer than they had originally planned five years ago, primarily because they have not saved enough. Nationally, respondents’ average target retirement has risen to 62, whereas these same respondents’ target retirement age five years ago was 60.
How payroll can help
“Payroll professionals can arrange to automatically deduct a portion of an employee’s net pay each pay period and direct it into a separate savings or retirement account, making it easier to save,” Zambon explains.
The Canadian Payroll Association’s Research Survey of Employed Canadians is conducted to mark National Payroll Week (September 12-16, 2016). – CNW