Couple calculating financial savings on internet
© goodluz / 123RF

If we had a crystal ball, we’d know what to expect in our retirement years. We’d know how long we’d live and how much we’d need to save to support ourselves. While we may not have the advantage of those particular insights, we can take some advice from current retirees. According to Sun Life Financial’s 2016 Retirement Now report, the top 3 tips from retirees to working Canadians are:

  • Take care of your health,
  • Start saving early, and
  • Live within your means.

But living beyond our means appears to be a trend. The current low-interest rate makes it appealing to spend our way into the standard of living we feel we deserve instead of saving for the future.

What does canadian debt look like?

Canadians’ average debt level increased by 3.1% in Q4 2016 over the same period in 2015 to a national average of $21,336, according to Equifax. Even seniors have increased their debt by 6.1%.1

This report also identified a $1 billion rise in consumer debt, including mortgages, since Q2 2016 to an all-time high of $1.718 trillion. The 37% of Canadians who are still increasing their debt are adding a larger amount on average. Auto loans and installment loans are showing significant increases of 7.9% and 7.8% year-over-year, respectively.

The Bank of Canada reports the average Canadian holds $1.67 in debt for every dollar of disposable income – up from $1.65 last year.2

So it shouldn’t be surprising that debt reduction continues to be the top financial priority for 34% of Canadians,3 making it difficult for them to focus on saving for retirement.

Average debt by age. Average Canadian debt $21,336

Some of your clients may have unsettling debt levels that fall into 2 main groups – those who are:

  • Building for the future – clients who are building their careers and have young families have the highest level of debt.
  • Getting ready for or are in retirement – 70.3% of Canadians aged 55 to 64 have debt, and 42.5% of Canadians 65 and over still have debt — that’s a 55% increase since 1999. This means close to half of all Canadians will retire with some form of debt.4

Let’s take a closer look at how debt has an impact on clients at each life stage and how you can have conversations about their debt realities to help them plan to retire their way.

Download the Debt Discussions chart to review with your clients.

Debt discussionsIssues / ConcernsHow you can helpQuestions to ask
Building for the future
  • Student loans
  • Buying first or larger home
  • Building their careers
  • Starting a family
  • Less room for savings
  • Help them determine where they’re spending their money.
  • Show them the growth opportunities to reach their goals.
  • Explain how their debt levels play a role in their planning and their ability to save for retirement.
  • Demonstrate the power of compound interest.
  • Identify the impact on their ability to repay debts if the income earner loses their job or dies suddenly.
  • How much debt do you have?
  • Do you have a plan to sustain your lifestyle without incurring debt?
  • Are you putting extra money to work by investing it for future spending?
  • Are you the primary income provider?
  • If you got sick or died unexpectedly, could your family’s lifestyle continue without your income, or would you be able to pay off this debt with only one income?
Getting ready for retirement
  • Concerned about carrying debt into retirement
  • Revisit amount of mortgage remaining
  • Partners may have differing visions of retirement
  • Some clients need help identifying the key priorities for the present and the future.
  • Identify the trade-offs necessary to meet their goals.
  • Help them create a plan to cover their debt levels now, or they might be up against a serious risk of outliving their retirement savings.
  • As their grown children move out of the house, or they pay off their mortgage, clients will have additional funds in their budget to help speed up debt repayment.
  • It’s all about making the most of their income before they retire.
In retirement
  • No longer earning employment income
  • Among homeowners 65 years or older, 35% have a mortgage, with an average loan-to-value ratio of 33%.5
  • If interest rates rise, their retirement savings will be at higher risk, at a point in their lives when they can’t handle larger payments.
  • Increasing health-care needs
  • Help clients create a debt repayment schedule. Debt can include anything from a mortgage, credit cards, car loans, lines of credit and more.
  • Identify spending rates and any investment needs.
  • Discuss how their debt will impact their retirement income and the legacy they may want to leave.
  • Inform them that creditors will seek payment from the estate before the beneficiaries have access to it. This could significantly reduce or completely deplete the value of the estate for the beneficiaries.
  • Now that you’re in retirement, have your plans changed?
  • Do you have any debt? (Mortgage, credit cards, car loans, lines of credit.)
  • Do you have a plan to make your money last through retirement?
  • What are your legacy goals?

2016 Sun Life Financial Retirement Now Report

  • 52% of retirees don’t know or don’t think they’ve saved enough for their retirement
  • Retirees are living on 62% of their pre-retirement income
  • Working Canadians expect that 30% of their retirement income will come from their personal savings

Read the full report.

As an advisor, your role in all of this is vital. We know that advised households save at twice the rate of non-advised households6 and that 86% of Canadians say that advice from advisors is critical to reaching their most important financial goals.7Imagine the impact you could have on those Canadians who are more concerned about debt repayment than retirement savings.

Checklist to help clients find their way to financial well-being

No one knows how long they’re going to live or what sort of medical expenses will be needed, but we do know that people are living longer. Many advisors have raised the average life expectancy from 80 to 90 when helping clients estimate their retirement income needs. Share Sun Life Financial’s life expectancy calculator with clients to help them estimate how long their retirement may last. Longevity combined with the reduced number of defined benefit pension plans indicates that personal savings have become as important as a workplace or government plan to create retirement income. Carrying debt into retirement can add stress to a retiree’s budget.

Working Canadians continue to fight the traditional dilemma – to pay down their debt, or save for retirement. Ask clients these questions and help them find their way to financial well-being:

Download the checklist to review with your clients.

Ask your client…If yes, Checkmark HappyIf no, Checkmark Unhappy
Do you have at least $1,000 in savings to cover emergency expenses?

This will cover any unexpected medical, car or home repairs.Share these 12 tips for savings to help clients redirect some of their spending money into an emergency savings fund.
Are you contributing enough to take advantage of any employer matching contributions to your group RRSP or pension plan?Not only are you saving in taxes, you’re giving yourself a raise.Money may be tight, but make sure you save at least enough to qualify for any company matching contributions.
Do you have any high-interest debt – greater than 6%?Low-interest mortgage rates are great, but try to keep these payments under 25% of your monthly income.Making the minimum payment will cost more in interest. It’s possible to become debt free by paying off the highest interest debt first. Another option is to secure a loan at a lower rate and use it to pay off all the other debts.
Do you have enough savings to cover 3-6 months of living expenses?

You’re in great shape. It can take approximately 1 month to find a job for every $10,000 you make.It’s important to pay yourself first. Set up an automatic transfer to a separate savings account until you’ve built up enough of a cushion to carry you through a long-term medical issue or job loss.
Are you on track to replace 70% of your income in retirement?Congratulations — expenses tend to drop in retirement, but inflation rises. Do an annual check to ensure you’re still on track.Use the Sun Life Financial Retirement savings calculator to see how making adjustments to your various retirement income sources can help you meet your retirement savings goals.

Helping clients manage their risks and plan for their needs is part of Money for Life — Sun Life Financial’s customized approach to financial and retirement planning. For more information about Money for Life, visit sunlife.ca/moneyforlifeadvisor.


1 Equifax Canada Reports: Consumer Appetite for Credit Grows as Total Debt Climbs to $1.718 Trillion, March 15, 2017: http://equifax.mwnewsroom.com/press-release/Equifax-Canada-Reports-Consumer-Appetite-Credit-Grows-as-Total-Debt-Climbs-1718-Trillion-2148263

2 Bank of Canada, Household Credit, March 2017: http://credit.bankofcanada.ca/householdcredit

3 2016 Sun Life Financial Retirement Now Report

4 Statistics Canada, Study: Changes in debt and assets of Canadian families, 1999 to 2012, released April 2015.

5 Canadian Association of Accredited Mortgage Professionals, 2014.

6 Ipsos Reid ‘Canadian Financial Monitor’, special analysis for IFIC.

7 The Investment Funds Institute of Canada. CIRANO research paper: New evidence on the value of financial advice by
Dr. Jon Cockerline, Ph.D., November 2012.