The 2015 Canadian Payroll Association once again shows that about three-quarters of Canadians are far behind their retirement goals, are not saving towards retirement and expect to need a lot of savings. The survey had a lot of exposure on September 9, 2015. However, most of it just summarizes the press releases. If you want more details, read on.
Canadian Payroll Association Research Survey of Employed Canadians
The survey results are given in a 15-page report that you can view and download by clicking here.
The news release indicates that “A total of 3,605 employees from across Canada, and from a wide range of industry sectors, responded to an online research survey between June 29 and August 7, 2015, using a convenience sampling methodology. Respondents were asked to complete the research survey by members of the Canadian Payroll Association with whom they work.”
There is more about the methodology at the above press release link, if you are interested.
Survey Report and Press Release Outlines
The report is organized into 3 sections: changes from the past 3 surveys, questions with the responses compared to the last 3 surveys and results. There are 12 questions, 9 results and 7 changes.
The national press release provides a few summary paragraphs and then 6 details. It is the summary and details that are covered by most of the popular press and TV. To see for yourself, doing an internet search on “Canadian Payroll Association 2015 survey” (no quotes), results in hundreds of thousand of listings. The first 50 or so are from the CPA and the popular press or TV. There are press releases for each province with added comments for the province using the percentages given for the province in the report.
Press Release Summary
In case you want to know what the national press release says, here are the summary paragraphs.
- - “Canadians are continuing to live pay cheque to pay cheque and are not saving enough, causing many to postpone their retirement (in some cases for several years)..”
- - “..the vast majority of employees are nowhere near reaching their retirement savings goals, and more than one-third (35%) expect to work longer than they had originally planned five years ago, with their average target retirement age rising from 58 to 63 over that period.”
- - “Nearly one-quarter (21%) say they’ll now need to work an additional four years or more. “I am not saving enough money” was the top reason for delayed retirement, cited by 35% of respondents.”
Comments on the Responses
Each of the 12 questions have detailed responses. It is these responses that are summarized in the 9 results and then summarized again in the 6 details of the press release.
Only some of the questions provide responses that are of interest to me and I have included a combined column and cumulative line chart that I produced from the responses. I have also given links to posts that I think would be useful in dealing with the problems identified by the responses.
The comments are organized by the results with the questions given below each result and then any comments I have.
Result 1 – Reaching Retirement Goals:
“Three-quarters have saved 25% or less of their retirement goal.”
Question 1 – “Which of the following statements best describes how close you are to your target retirement savings? (Please check only one.)”
Comment 1 – The red columns on the chart use the responses and show what percent of the responders feel that they are in the range along the horizontal axis. The blue line is the cumulative percent of each successive column. The Results statement uses the sum of the first 2 red columns to get the three-quarters of responders that only have 25% or less of their retirement target amount. Of course, this does not take into account how far away from retirement the person is. A better question might have been “what percent of your retirement goal do you expect to achieve when you retire”. In any case, almost 90% of the responders do not have even 50% of their target as seen on the cumulative blue line. As discussed below, their target may be too high.
Result 2 – Savings:
“Fewer than 62% of those trying to save able to do so”
Question 2 – “You have indicated that you are trying to save more today than a year ago. Have you actually been able to save more money than a year ago? (Please check only one.)”
[Responses where 62% Yes and 38% No.]
Result 3 – Retirement:
“Half feel they will need more than $1 million to retire”
Question 3 – “How much money do you think you will need to save to retire comfortably? (your target retirement savings)”
Comment 3 – The Results statement uses the sum of the last 4 red columns to get the 50% of responders that need more than $1 M of savings to retire. Conversely,19% say then need less than $500 K and another 30% need between 500 K and 1 million. Keep in mind that the last StatsCan data for 2013 puts the median income at $32,020. If you try to replace this income by withdrawing from assets at the sometimes recommended rate of 4%, it means that $800,000 (32K/.04) is required. However, this does not take into account that a person will receive Canada Pension Plan payments and Old Age Security, which could reduce the income need by at least $10,000. This would bring the target down to just over $500K. See Estimating How Much You Need In Retirement for help in determining your estimated requirement.
In addition, I urge you to use Lifetime Finances, which is described in FinanceBase-Lifetime Finances. It uses your assets, income & expenses during your lifetime to project whether you will outlive your money. It can be used at any age and provides a yearly cash flow (income less expenses, including taxes) from now to 45 years after retirement. If desired, changes can be made in any year. It can be downloaded free in a demo mode for 31 days. After that a license is required which is a very nominal amount.
Result 4 – Living pay cheque to pay cheque:
“Large proportion (48%) still living pay cheque to pay cheque”
Question 4 – “If your pay cheque (i.e., payment of salary or wages) was delayed for a week, how difficult would it be to meet your current financial obligations? (Please check only one.)”
[There were 7 possible answers with degrees of difficulty and manageability.]
Comment 4 – There are no questions that provide an insight into whether responders use a budget and if they are able to keep to it. The four part post that starts with Managing Expenses and Cash Flow – Part 1: Why provides a spreadsheet the can be used to identify and then track year income and expenses. If this is too much work, then try Making a Yearly Budget. If you want to manage in detail your expenses and income using an application and not a spreadsheet, try FinanceBase (FinanceBase – Overview).
Result 5 – Rate of Savings:
“Continued low savings of 5% or less of pay” [for 47% of respondents]
Question 5 – “On average, what percentage of your pay cheque do you put toward savings? (Please check only one.)”
Comment 5 – The results statement uses the first 2 red columns to make the statement. The 47% is taken from the results table for Canada. However, as shown in the other red columns, the majority saves over 5% with a 23% saving from 6 to 10 %. Notice that almost 10% save over 20%. It would be nice if everyone saved at least the recommended 10%, but given the low average income mentioned above, it is not surprising that 70% do not reach this objective. It is not clear if this question also includes company based RRSP or similar savings. It is possible to project what the capital will be at retirement by using the spreadsheet provided with Estimating Capital Totals at Retirement.
Result 6 – Debt:
“Over one-third feel overwhelmed by debt”
Question 6 – “Please indicate how strongly you agree or disagree with each of the following statements: “I feel overwhelmed by my debt.””
[There were 7 levels that were presented.]
Question 10 – “What type of debt do you currently have? (Please check all that apply.)”
Comment 10: 7% had no debt. 30% had a mortgage, which seems low, but most of the responders could be renters. 16% had a Line of Credit, 17% had a car loan and 19% had a credit card debt. There is no mention of the size of the total debt or the percent it is to the pay cheque.
Question 11 – “Please indicate how strongly you agree or disagree with each of the following statements: “My debt has increased from last year.””
Comment 11: Of the 7 possible responses, the percentages were about 10% each, except for the disagree and strongly disagree that were 22% and 26% respectively.
Result 7 – Economy:
“Fewer believe the economy will improve” [33%]
Question 7 – “Over the next year, do you think the economy in your town or city will: (Please check only one.)”
[7 choice were presented from strongly improve to strongly worsen.]
Result 8 – Average target retirement age
“of those who feel they will need to postpone retirement [is] 63″
Question 8 – “What is your target retirement age? Please express your response in years. For example, if you plan to retire at age 65, the appropriate response would be “65”.”
Question 9 – “What was your target retirement age five years ago? Please express your response in years.”
Table of Comparison between Question 8 and Question 9:
|Age||Q9 %||Q9 Cum %||Q8 Cum %||Q9-Q8 Cum %|
Comment 8 & 9 – There is no question that supports Result 8 (Average target retirement age of those who feel they will need to postpone retirement [is] 63). Questions 8 and 9 are the only ones that deal with retirement age. Perhaps the result comes from a detail analysis of each response and the answers to each of the questions.
Chart 8 above shows that 55% of responders expect to retire by age 63 and 90% by age 65. As shown in the Chart 8 & 9 chart above, five years ago these numbers were 63% and 97%, respectively (using the black columns) and the Table of Comparison. The blue columns are the cumulative values from Chart 8 (for Question 8) and the black columns are for Question 9. As this chart shows, retirement has been delay for all ages. The last column on the table shows how much each age range has been delayed.
This is a significant result as it means that at least 7% of the responders have shifted their expectation to retire by age 65 to a later year (the cumulative 97% versus 91% for the 64-65 age range). This is probably due to the high retirement savings amount that responders believe they need and the increasingly negative view of the economic future (Question 7).
Result 9 – Emergency:
“Percent of employees unlikely to obtain $2,000 within a month [is] 24%”
Question 12 – How likely are you to come up with $2,000 if an emergency arose within the next month? (Please check only one.)
[There were 7 possible choices ranging from very likely to very unlikely.]
Comment 12 – The results are a little pessimistic as the responses show that 72% believe that they are likely to have the money. This is somewhat at odds with question 4 and result 4 where 48% responded that they are living pay cheque to pay cheque.