By Sheryl Smolkin

More working Canadians and Saskatchewan residents are living pay cheque to pay cheque, As a result they are saving less and falling further behind in meeting their retirement goals according to the sixth annual National Payroll Week Research Survey, conducted by the Canadian Payroll Association (CPA). 

Nationally, more than half of employees (51%) report that it would be difficult to meet their financial obligations if their pay cheque was delayed by a single week. In Saskatchewan, the percentage is even higher – 56% say they are living pay cheque to pay cheque, up from an average of 52% over the previous three years.

Another finding confirms that more than a quarter of those surveyed are living very close to the edge. A total of 26% say they probably could not pull together $2,000 over the next month if an emergency expense arose. In Saskatchewan, 28% would be hard pressed to come up with the funds.

The low savings rate has become even more prevalent this year. Half of all employees nationally (57% in Saskatchewan) are putting away just 5% or less of their pay, up from an average of 47% of employees over the past three years (41% in Saskatchewan). Financial planning experts generally recommend a retirement savings rate of 10% of net pay.

Part of the reason for low savings is that 44% of employees nationally, and 54% of employees in Saskatchewan, are spending all, or more than, their net pay. Among the top reasons for increased spending, the survey identifies: children, home renovations and education.

“Those who are trying to save but finding it hard to succeed should consider directing a portion of net pay into a separate savings account and/or a retirement savings program,” says CPA President and CEO, Patrick Culhane. “They can speak to their organization’s payroll practitioner to arrange this.” 

Retiring older and needing more retirement savings 

Fully 79% of Canadian employees and 75% of Saskatchewan employees expect to delay retirement until age 60 or older – up from 70% and 57% respectively over the past three years. The number one reason cited for retiring later in life is that employees are not able to save enough money.

Employees continue to raise the bar in terms of what they think they will need to retire comfortably:

• Fewer now feel that savings under $500,000 will be sufficient (10% in Saskatchewan, down from an average of 11% over the past three years; 18% nationally, down from an average of 21% over the past three years).
• Many think between $500,000 and $2 million will be required (71% in Saskatchewan, down 1 % from an average of 72% over the past three years; 68% nationally, up from an average of 60% over the past three years).

Yet despite upward adjustments in perceptions of what constitutes an adequate nest-egg, the vast majority of employees are nowhere near reaching their goals – 75% nationally and 74% in Saskatchewan say they have put aside less than a quarter of what they will need in retirement (up from an average of 73% and 70% respectively over the past three years). And even among employees closer to retirement (50 and older), a disturbing 47% of employees nationally (and 43% of employees provincially) are still less than a quarter of the way there, indicating a significant retirement savings gap, according to Culhane.

Debt overwhelms many

Over one-third of employees (39% nationally and 34% in Saskatchewan) say they feel overwhelmed by their level of debt (up from an average of 32% and 29% respectively over the past two years). Nationally, 1 % of respondents this year indicate they do not think they will ever be debt free, and one-third say their debt has increased from last year.

The number one step that employees believe they can take to improve their financial situation is to earn more (27%), while spending less dropped to second place from last year and decreasing debt remained flat. “Earning more is not always feasible,” says Culhane. The CPA suggests that automatic savings through payroll is the best strategy for financial well-being.

The Saskatchewan Pension Plan allows members to contribute up to $2,500/year to their SPP account using a credit card online, through online banking, automatic debit from their bank account or credit card or by sending a cheque. Up to $10,000/year can also be transferred to SPP from a personal RRSP.

Companies can also set up SPP in the workplace and employee contributions can be made by payroll deduction.