According to a recent survey by Manulife Bank only 16% of those surveyed ages 50-59 -very near the age they planned to start retiring- are actually debt free.

The average debt of those in their fifties was over $100,000.

Also nearly three quarters of those in that same age group said they didn’t have any outside advice on day-to-day spending or debt management. What could a properly trained advisor do to help their great quality clients attain a debt free retirement?

Here is the survey

2011 News Releases

For Immediate Release

May 9, 2011

Young homeowners optimistic about when they’ll be debt-free

Years of experience give older homeowners a more realistic perspective on debt

Waterloo- More than four out of 10 Canadian homeowners aged 30-39 expect to be debt-free by the end of their forties and another third expect to be debt-free in their fifties, according to Manulife Bank of Canada’s quarterly Debt Freedom Survey. The reality, though, is that only seven per cent of homeowners aged 40-49 and 16 per cent aged 50-59 have actually paid off all their debts.

“When people buy their first home, they have the best of intentions to pay off their mortgage and other loans, and are optimistic about their financial future,” said Doug Conick, President and CEO of Manulife Bank of Canada. “However, even carefully laid financial plans can be thrown off track by unexpected life expenses, such as home repairs, family illness, or job loss. Debt-freedom is possible, but it requires a commitment to financial discipline, and for many people, some professional advice on how to plan finances for the long term.”

The reality is that paying off a large debt such as a mortgage requires a series of smaller decisions over a lifetime, and people often use their extra cash for things other than debt repayment, even when they know they should pay down that loan. When respondents were asked what they would do with an unexpected windfall, they identified debt repayment as a priority by a significant margin - an average of 51% of the hypothetical windfall was allocated to debt repayment. But when respondents were asked what they actually did with the money the last time they were in that situation, debt repayment remained the top priority, but the amount allocated to debt dropped to 39%, while money allocated to day-to-day expenses rose significantly.

The average homeowner aged 30-39 has $209,200 in debt of all kinds according to the latest quarterly survey results. By comparison, those in their fifties still have $108,500 of debt on average, or just over half as much. The survey data shows that 19 per cent of homeowners in their fifties actually increased their debt in the past 12 months, while only 33 per cent reduced their debt by as much as or more than they had expected. In fact, 20 per cent of homeowners aged 50-59 either couldn’t foresee when they would be debt free, or don’t expect to ever reach that point, while 44 per cent expect to carry debt into their sixties. Nonetheless, homeowners in their fifties are happier with the amount of debt they currently have than those in their thirties and forties, reflecting perhaps both the progress they have made in reducing their debt, and their perceived ability to repay that debt.

Overall, 57 per cent of respondents report reducing their debt over the last 12 month, up 8 points from 49 per cent in November 2010. Additionally, nearly 7 in 10 respondents rank being debt-free among their top financial priorities, a relatively consistent finding over the past five quarterly surveys.

Other findings from the survey:

71 per cent of those in their 50s manage their debt and day-to-day finances with no outside advice, compared with 63 per cent for the 40-49 age group and 57 per cent for the 30-39 group

• A third of respondents believe their knowledge of personal debt management to be “above” or “well-above average”, compared with just 10 per cent who characterize their knowledge as “below average” or “well-below average”

• Those 30-39 have 3.8 separate loans outstanding, compared with 3.1 for those in their 40s, and 2.7 for the 50-59-year-olds.

• Among common financial priorities, all groups expressed the lowest level of satisfaction with their level of debt and the highest level of satisfaction with their ability to manage day-to-day expenses.

More detail on these and other data, including a breakout of responses by age category, can be found at manulifebank.ca/debtresearch.

The Manulife Bank of Canada poll surveyed 1,000 Canadian homeowners between ages 30 to 59 with household income of more than $50,000. It was conducted online by Research House between March 22 and April 4, 2011

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 $18 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.

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