The Secrets to Financial Security Released

Evelyn Jacks & Beth Graddon

A new Statistics Canada Report, the “2019 Survey of Financial Security” was released on December 22 and provides some important insights to what Canadians need to do to build financial security, especially when recovering from these uncertain times. What secrets were revealed? Here’s a hint: it relates to the holding of specific assets that drive wealth accumulation.

Two major driving forces towards financial security were revealed in the Statistics Canada Report:

Home Ownership. Firstly, the report pointed to the tremendous value of home ownership for wealth accumulation. Renters nearing retirement had lower net worth than homeowners by a significant amount: medium net worth for homeowners was $685,400 compared to $24,000 for renters.

The report also shows that those in the 55 to 64 age range who are renters and approaching retirement may not have accumulated as large nest-egg in preparation for retirement as homeowners and therefore be in a significantly more precarious position. For this age group, the median net worth of homeowners was $952,1000 compared to $40,000 for renters.

Employer Sponsored Pension Plan. The survey also pointed to greater potential for wealth accumulation for Canadians with employer sponsored pension plans. In fact, the net worth of these families is nearly seven times higher than for those without one. Those with an EPP had a median net worth of $644,300 compared to $91,200.

As our economy and families across the country continue to face financial hardship as a result of the COVID-19 pandemic, it’s important insight into a topic that’s top of mind for many: what should the path towards financial security look like?

A big tip as we leave 2020 for the challenges and joys 2021 will bring:  invest in the opportunity to put money away in an employer-sponsored plan if possible; if not, invest in  your own tax-assisted retirement plan.  Don’t forget the benefits of investing well in a TFSA. . .your returns will be tax free in this case.  Otherwise, Homeownership, in the long run, builds wealth. . . and so far at least, that’s tax exempt wealth.     

See a  DFA-Tax Services Specialist™ to help you tap into the most tax effective way to save.