Canada's Housing Bubble

Apr 20, 2011Tavia Grant theglobeandmail.com

More Canadians are feeling financially squeezed, suggesting the economic recovery hasn’t trickled down to many individuals, a pair of national surveys showed Wednesday.

Almost a third of Canadians don’t have enough money to cover living expenses and a more than half of Canadians find it difficult or impossible to save, according to the TD Canada Trust savings report.

Meantime, the number of retirees returning to the work force because they need the income has surged, while fewer Canadians are retiring debt-free, an RBC poll has found.

The results suggest many Canadians are still smarting from the effects of the recession, while record debt levels are pinching many families’ budgets.

“Working to pay off debt and cover basic living expenses, more than half [or 54 per cent] of Canadians find it a real struggle or impossible to save,” the TD report said.

It found Canadians struggle to save because many use disposable income to service debts, do not have enough money to cover living expenses and shop beyond their means.

It’s not all bleak though. Almost one in three Canadians have four months or more of living expenses tucked away for a rainy day. Six in ten save at least part of their paycheque and a quarter save more than 10 per cent of their pay.

Tighter finances are also affecting peoples’ retirement plans. The proportion of retirees who say they’re returning to the work force because they need the income hit 41 per cent this year compared with 32 per cent last year, the RBC poll found. And the number of who are retiring debt-free ebbed to 56 per cent from 61 per cent in 2010.

Four in ten respondents who have already retired said their retirement date was unplanned. The top three factors cited for early retirement are at an employer’s request, for health reasons or reaching mandatory retirement age.

“We’re finding that even Canadians who think they are well-prepared for their retirement years have not taken the unexpected into consideration,” said Lee Anne Davies, head of retirement strategies. “When their job disappears suddenly, they struggle with financing the added years in retirement that they hadn’t counted on.”

If their retirement income doesn’t support their lifestyle, respondents said they would live frugally, move to a smaller house or rent, or stay in their present homes and sell off assets.

The TD survey is based on an online survey of 1,003 adults conducted in December. The RBC poll was conducted in February and March, based on a national sample of 2,245 adults aged 50 and over with household assets of at least $100,000.