Canadians plan to tackle debt at the expense of retirement savings
Paying down debt will be a top financial priority for Canadians in 2013, according to the results of an annual poll for CIBC.
The poll found that 17 per cent of respondents said they will focus on paying down debt in the New Year, while only seven per cent said retirement planning would be a priority.
In 2011, 14 per cent identified paying down debt as a priority and 13 per cent named retirement planning a priority.
It is the third year in row that Canadians have named paying down debt as their top financial priority and the first time retirement planning has fallen out of the top three.
“People are starting to realize that retiring with debt is not a good idea and low interest rates will not be with us forever,” said CIBC deputy chief economist Benjamin Tal.
He cited warnings from the Bank of Canada to consumers as one of the reasons Canadians are increasingly focused on paying down debt. Bank of Canada Governor Mark Carney has repeatedly told consumers that the overnight lending rate of one per cent will not last indefinitely.
Tal foresees a significant reduction in debt accumulation by Canadians. He said the fact that debt accumulation is softening shows financial maturity.
“We actually borrowed our way out of the recession, outpacing the G7 in recovery if you look at GDP growth. We had the consumer to rely on,” he said. “Now we are exhausted, this consumer is exhausted. There isn’t pent-up demand for consumption.”
The CIBC poll shows that reducing debt is a priority even among Canadians traditionally focused on retirement, those aged 45 to 64.
Two years ago, 24 per cent of respondents in that age group named retirement planning as their top financial priority. In the most recent survey, only 12 per cent in that age group did.
Hal believes the generation now in their 20s will contribute more robustly to retirement savings than their parents did because they don’t have the same belief that the Canada Pension Plan (CPP) or company pension plans will sustain them in retirement.
The data for the poll were gathered in a sample of 2,009 Canadians between Oct. 25 and Nov. 4, and have a margin of error of plus or minus 2.2 per cent, 19 times out of 20.
The percentage of respondents who named building savings as a financial priority has remained the same for three years, at 10 per cent. Managing day-to-day spending was one of the other four financial priorities named by respondents.
thestar.com – Business