Who’s the Wealthiest in Canada?

A new report entitled Haves and Have-Nots, was released by the Broadbent Institute from customized reports prepared for it by Statistics Canada from the Survey of Financial Security. 

The conclusions drawn have focused on the important issue of wealth inequality. A deeper look at its reasons are warranted to find solutions for the issue beyond the obvious calls for higher taxation.  

Age, for example, is a key factor. When it comes to single people, non-seniors had the lowest net worth ($22,700); unattached seniors fared much better ($246,000).

The Survey of Financial Security, which analyzed the 2012 year, noted that the median net worth was highest for family units where the person with the highest income was 55 to 64 years old ($533,600) in 2012. Senior families had the highest median net worth ($650,400). This was almost three times higher than for family units where the highest income recipient was 35 to 44 ($182,500). Lone parent families had the lowest median net worth in 2012 ($37,000).

The survey also notes, however, that where the highest income recipient was 65 or older, median net worth was diminished ($460,700), as seniors start to draw on their assets as they transition from the workforce. 

As important, is where wealth comes from. While net worth grew by 7.7% in Canada in 2013, according to a report by Environics Analystics, this was largely due to a rise home prices. At the same time, mortgage debt rose 3.3%. Based on this survey, the top 20% of households experienced increased wealth of 8.1% while the bottom 20% experienced an 8.7% increase, narrowing the gap somewhat.

Other key findings of the Broadbent Report:  

• The top 10%: Accounted for almost half (47.9%) of all wealth in 2012, with median net worth rising 41.9% since 2005 (to $2.1 million). This group held close to 60% of financial assets excluding pensions – more than the bottom 90% combined.
• The bottom 10%: Experienced a 150% drop in the median net worth (to negative $5,100).

Key questions that arise from this, especially as it relates to taxation, are the following:

1. Should we more significantly tax the wealth accumulations of seniors at the start of their retirement?
2. Should we tax the estates of seniors before they are passed down to their heirs?
3. Should we encourage the use of inherited wealth to eliminate high debt in Canada?
4. Should we spend more time helping younger families understand the importance of saving and debt management in securing financial futures?
5. Should young people be encouraged to stay in school to get better jobs, pay more taxes and accumulate investments, including affordable housing, that can help them leverage their financial futures?

Readers are invited to weigh in. Come think with us about these issues at the Retirement and Estate Planning workshops which begin this week across Canada.