Wednesday, October 31, 2007

This is telling, non?

Castlegar News, Page 0024, 31-Oct-2007

Income Earnings – Where do you Rank?

By Debbie Pereversoff CFP, CSA

Last week, I searched the internet looking for interesting data from the good folks at Statistics Canada regarding retirement savings. I wanted to find out a little bit about income earnings. Specifically, how much money people make out there, and where do we as individuals stack up?

All the data here is for the 2004 calendar year, which is the most recent income data available.

Just prepare to brace yourself; we'll start with “median” total income. The median is the mid-point, where half the included population is higher and half is lower.

“Total income” in this case includes income from employment, investment, government transfers, private pensions, registered retirement savings plans and other income. What I found out was that the median total income for Canadians was…$24,400. If you made more than $24,400 in 2004 – congratulations - you were in the top half of income earners!

Now, before you calculate that fully half of Canadians work for less than $12.20 an hour, bear in mind that “total income” will capture part-time employees, after-school student jobs, etc. Those people will pull down the average with a low income that may not be representative of hardship. That being said, the bottom half of total income earners is also populated by people who are out of the work force and living on low incomes provided by pensions and government benefits.

Many of those people do indeed have financial hardship.

The median employment income for Canadians in 2004 was $25,400 - that's just counting the working folks. The highest median employment income by province was the Northwest Territories by a wide margin ($35,400), followed by the Yukon ($28,300), Ontario ($27,900) and Alberta ($27,500).

Newfoundland was the lowest at $17,000.

But let's move back to total income for Canadians, and climb further up the scale to see where the meat is. Let's move all the way up to where about 2/3rds of individuals have lower incomes. In 2004, you were in the top third of income earners if you made more than…are you ready? - $35,000!

I know what you're saying. Let's go higher! Okay, let's move up to the top quintile line. At this level of income, 80 percent of people made less than you – the number? – 19.8 percent of Canadians with an income made $50,000 or more in 2004!

Now, although a bit over 12 percent of individuals had incomes between $50,000 and $75,000, the atmosphere thins out pretty quickly above that. Only 7.6 percent of people had incomes of $75,000 or more in 2004. Only 3.4 percent made $100,000 or more. And by the time we get to the $150,000 or more category, we're down to just 1.3 percent of income recipients.

People with 2004 incomes of $200,000 or more were a rounding error: only 0.7 percent made $200,000 or more. And you can be 99.5 percent sure that any randomly selected Canadian earned less than $250,000.

OK - those are the stats for individuals. The nice folks at Stats Canada also track the incomes of various family groupings, so we can get an idea of where entire households compare by income. “Couple families” are couples (married or common-law, including same-sex couples) living at the same address, with or without children. No singles or lone parents are included. The median total income from all sources for all members of such families in 2004 was $64,800. Less than a quarter of such households had total incomes of $100,000 or more and just over 8 percent had incomes of $150,000 or greater.

So, there are the stats, and that's what we make. Now, consider some of the implications of this information. If there were folks who made $50,000 a year and didn't feel like they were making enough to get by (and there are), it would be useful for them to consider that based on 2004 figures, 80 percent of Canadians with an income actually make less than that. If their individual income was close to $65,000 – it would be enough to push them into the top ten percent of incomes, received by Canadians.

Ninety percent of the 23.4 million people with an income in Canada made less. If they felt they weren't getting by at an income level that's higher than that of the vast majority of the people, in one of the richest countries in the history of the world, do they have an income problem or is it a problem related to something else, like choices or expectations?

Looking at the statistics of what we all make, it sure gives you something to think about – doesn’t it?

Debbie Pereversoff CFP CSA is a Certified Financial Planner and a Certified Seniors Advisor with her company The Affolter Financial Group Inc. in Castlegar.
Unbiased by me for your reading pleasure. Comment away.


roger said...

If you are seeing these income statistics for the first time they are quite shocking. In particular, if you live in Victoria or Vancouver the urban affluence distorts one's perspective on how the rest of the folks in our country live and how much money they have to support themselves.

The statistics on retirement savings are also interesting. Many workers are not employed by government or large companies and do not have pension plans. They rely on savings and RRSPs for their retirement. However BC has a negative savings rate and the RRSP portfolio size and annual contributions on a national basis are quite low. Many people do not have an RRSP or have depleted theirs to buy a house or fund education.

Many people think of their house as an investment and feel that it will fund their retirement. How will this be possible? CHIP reverse mortgages have a high interest rate and a line of credit only goes so far. Downsizing is a possibility but if there is an economic downturn they will be left with less money than anticipated and an unpleasant change of lifestyle.

Getting old has few benefits but two of them are experience and hindsight. If you are mortgage poor today and not able to save for contingencies (i.e. job loss, health, family issues) or plan for your retirement the future may not be very bright. I was twenty-five the other day, blinked twice and now am in my fifties. It happens quickly!!

Anonymous said...

I make about 100 bucks an hour.

Minus Taxes = 50

Minus 13% GST and PST = 42.5

Minus the real 10% inflation this year = 32.5

Minus Expenses = 12.5hr

We are all in the same boat!

Anonymous said...

To ^^^ above... whoa... I get your sarcasm but your math is way off:

If you make $100 per hour, x 40 hours x 52 weeks = $208,000

Total tax/cpp/ei withheld in BC= $74,025 using the new rates from 2 days ago's mini budget if they get accepted. Using the tax calculator at

Total tax burden is 35.6%, but with MSP premiums, I'd say it closer to 36% of total income is taken as taxes.

This leaves about $133,000 after MSP to pay for *everything* else, which is HUGE.

As housing is likely your largest expense, you do not pay 13.5% GST/PST (soon to be 12.5%) on all your after tax income as mortgages payments and rents are not charged GST&PST. Although I do agree you do pay for it indirectly as residential landlords cannot claim GST or PST paid whereas commercial landlords can deduct GST at least.
(GST & PST also lead to higher building costs hence higher house prices).

Your sarcasm/joke is thus a little off the mark.

Anonymous said...

I have no data to support this, only through talking with various loans officers in order to get an idea as to what the typical double income couple in Victoria earn. The answer that I consistently get is that the majority of couples looking to purchase or refinance a home have a combined annual income of $85,000.

With normal debt servicing this allows for a mortgage payment of around $2,300 per month.

So how can these people be buying the half million plus dollar Gordon Head box? Simply by using the "bubble bucks" winfall from the sale of their previous home.

In my opinion, the first time buyer has been long gone from this market place and the market has been driven for the last few years by people using their equity to buy additional properties. Or, moving up the property ladder. But still being confined by the amount of monthly income that they can afford.

Eventually, people will stop moving up the ladder. And, if market prices stagnate or dip slightly - then the affect of the "bubble bucks" dissapates and these people cease buying. Since first time buyers are gone, there is no longer any base support for the pyramid of prices, and you begin to see a lot of collapsing offers to purchase which hinge on the sale of their current home.

I believe that we are now seeing this affect reflected in the significant drop in the volume of sales.

First volume drops - and then??

JMK said...

With normal debt servicing this allows for a mortgage payment of around $2,300 per month.

So how can these people be buying the half million plus dollar Gordon Head box? Simply by using the "bubble bucks" winfall from the sale of their previous home.

One way is by saving up ~25% down.

Anonymous said...

As my learned collegue has said - one way is to save up the 25 percent down.

So, lets all save 15 percent of our typical annual income of $85,000 a year to buy that typical $550,000 home.

Mmmm 137,500 divided by $12,750 thats ahhhhh 11 YEARS!!!!

Of course you could invest the money and let it compound - but how much would housing cost in 11 YEARS.

So, if your making the typical income your probably in your mid fourties. Mmmmm plus 11 years is
your now 55. Wheeee, thank god for the 40 year mortgage. Freedom 95 here I come.

hhv said...

Median sales price in Victoria dropped $25K on higher sales volume than September 2007. WOW!!!!!

roger said...

VREB stats are now out. More positive spin from VREB. Lets take a look at the facts.

VREB in italics; Last months numbers in bold

The average price of single family homes sold in October was $556,222 (584,193); the six-month average for single family homes was $570,454 (572,007). The median price was considerably lower at $495,000 (520,000). The average price of all condominiums sold in October was $343,334 (341,014); the average for the last six months was $321,993 (318,198). The median was again lower at $291,000 (288,500). The average price of all townhomes sold last month was $407,031 (402,213); the six month average was $404,163 (402,246). The median price was $369,950 (375,000).

MLS® sales last month included 375 (335) single family homes, 196 (150) condominiums, 79 (77)townhomes and 22 (21)manufactured homes.

There were 3,311 (3381)properties listed for sale on the MLS® system at the end of last month, down slightly from the 3,426 properties in the same month a year ago

Now for the analysis:

1. Sales of homes and other properties in the Greater Victoria area soared 20 percent in October compared to the same month a year ago. There were 708 sales through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) in October, up from the 590 sales in the same month a year ago. There were 632 sales in September of this year.

This is true but the tone leads the reader to believe that the market is still hot and rising. What is happening is that more buyers are buying houses at a price that is cheaper than last month!!

2. Meantime, prices for single family homes moderated somewhat while prices for condominiums and townhomes showed little change. Victoria Real Estate Board President, Bev McIvor, says the strong sales and stable prices show continued consumer confidence in the market. McIvor added that it’s normal for overall prices to fluctuate on a month-to-month basis depending on the properties that sell in a given month. “While the average price of single family homes moderated slightly last month, the overall average price so far this year is over seven percent higher than at the end of last year.”

Moderated somewhat - moderated slightly - stable prices !! The statement is true for condos and townhouses but the average price for single family homes dropped by $27,981 (4.8%) and the median by $25,000 (4.8%) in one month!!

stable prices show continued consumer confidence in the market
Oh yeah - for those of you registered for real estate PCS you know that there are big price reductions every day and some nice haircuts given out in October.

Bears - stay tuned - we are on a roll here. The cold weather and Christmas season are coming up fast. Next month sales will be down, lowballers will be active and the inventory is still high. I can hardly wait for the November and December numbers.

Anonymous said...

JMK said...
With normal debt servicing this allows for a mortgage payment of around $2,300 per month.

So how can these people be buying the half million plus dollar Gordon Head box? Simply by using the "bubble bucks" winfall from the sale of their previous home.

One way is by saving up ~25% down.


I'm sorry JMK, as I know you're just trying to provide balance, but honestly, this doesn't add up. For our combined household income of well over 100k, I view paying any more than our current $1600/mo rent as irresponsibly high. And our saving up $100k as a down payment is simply not going to happen for first time buyers, or any remotely normal human in Canada for that matter.

As the article points out, $100k a year is a very healthy income, and always has been. For this income to be insufficient to afford an entry-level home is quite simply mental, and the inevitable result can be viewed in the US and coming soon to the UK, Ireland, Spain and Canada. Sometimes the common sense of a child is all that's required to see the emperor has no clothes.