Retiring With Debt

Consolidated Credit’s tips to avoid post-retirement bankruptcy

Retiring with DebtRetiring with debt is the new norm in Canada, as an increasing number of seniors owe more now than in the past.

Debt levels for those 65 and older are higher now than they have ever been.  So high in fact, that a record number of Canadian retirees have declared bankruptcy.

According to a recent report from the CBC which drew research from the Superintendent of Bankruptcy Canada:

  • Ten per cent of those who declared bankruptcy in 2014 were 65 and older;
  • The number of seniors filing for insolvency increased 20.5% over 2010 statistics;
  • In 2012, 42.5% of those aged 65 and older still carried debt;
  • The number of Canadians carrying debt into retirement has increased 55% since 1999; and
  • For those under 75, the most common cause of financial trouble was an unplanned early retirement.

Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, says it is concerning that so many seniors are facing financial difficulties and unmanageable levels of debt.

“Consumer borrowing for all Canadians has continued to increase, and seniors are not immune from this increase in debt.” says Schwartz. “There are more Canadians aged 65 and over now than ever before and those numbers are only going to increase.  As this demographic grows I fear we will continue to see an increase in golden year bankruptcies.”

While Schwartz warns that retiring in the red can lead down a devastating road of debt, he also adds that there are many steps retirees, and those about to retire, can take to avoid a financial disaster.

“Most Canadians retiring today are a part of the Baby Boomer generation, and were among the first to use borrowed money to live well”, adds Schwartz. “Changing attitudes about money and being realistic about an affordable post-retirement lifestyle can go a long way towards securing a healthy financial future.”

 To help those looking to build a strong financial future – not only today, but also well into retirement – Schwartz and the team at Consolidate Credit offer these tips to deal with debt after you’ve stopped working:

 Accelerate your mortgage payments – If you know retirement is around the corner and you are still carrying a mortgage, now may be the time to accelerate those payments and pay off your mortgage debt while you’re still getting a paycheque.  For those already retired, this option may only work if you have money in the bank.  Compare the interest rate on your mortgage with the current rates on your savings accounts and other investments.  There may be greater savings in paying down the mortgage instead of keeping the money in the bank.

Downsize – Retirement typically translates to ‘empty nest’.  Seriously consider if your home fits your current or future retirement needs.  Do you really need four bedrooms and three baths if it’s just you and your spouse living at home?  While selling a home can be an emotional decision, downsizing into something more affordable can free up cash for living expenses – helping you avoid relying on credit.

Postpone retirement – We know that for many, postponing retirement is not always an option.  Certain careers have a mandatory retirement age, health issues can lead to early retirement, and the golden handshake can come at any time.  However, working longer gives more time to bring in income and pay down debts.  This may be a tough pill to swallow for those planning to retire, but remember, a few extra working years may be enough to eliminate your debts.

Consult a professional – If you don’t already have a retirement plan you need to contact a certified financial planner immediately.  These professionals are trained to help you build a retirement plan, budget for your golden years, set goals to pay off debt and build your retirement savings.  They can also help you build an overall retirement spending plan that will account for your debt payments and other retirement expenses.

Ask for help – When all else fails, don’t be afraid to ask for help.  Non-profit credit counsellors are trained to help individuals and families establish a manageable schedule for repaying debts.  A trained credit counsellor can review your budget and spending to come up with a plan to reduce your debt and avoid the financial pitfall of bankruptcy.

Retirement is supposed to be an enjoyable and relaxing time.  After all, you’ve worked hard for your golden years.  If unmanageable debt and the threat of bankruptcy have taken the fun out of your retirement, we can help.  Call today to speak to a trained credit counsellor and find out how you can get your budget under control.  You can also try our Free Debt Analysis online and a counsellor will reach out to you.

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