Post retirement debt is rising in Canada. But it doesn’t have to be the end of the road.

2021-01-26   minute read

Dean Prentice Renee Hubert

Lifestyle Debt

Debt during retirement is incredibly stressful, especially if you’re caring for an ailing spouse or dealing with health issues of your own. It can keep you from fully enjoying your golden years and using the freedom of this juncture to get the absolute most out of life.

Some seniors admit feeling embarrassed about their debt. Many tell us they’ve avoided seeking help because they blame themselves for their financial difficulties. But you need not feel ashamed. Post-retirement debt is increasingly common for a multitude of reasons — including longer lifespans, a rising cost of living, shifts in employer pension policies, a growing dependence on consumer debt over the last 50 years, plus any combination of the following:

Common causes of post-retirement debt

  • Owed money before retiring
  • Fewer employment opportunities for older workers
  • Difficulty making ends meet on a fixed income
  • Retirement benefits aren’t keeping up with the rising cost of living
  • Not enough, if any, retirement savings
  • Depleted savings to pay down debt or cover unexpected costs
  • Relationship breakdown / divorce immediately before or after retirement
  • Rising healthcare costs
  • Financially supporting adult children or aging parents

Spot the warning signs of financial difficulty

It can be challenging to know whether your debt is a mere annoyance, a problem, or a potential crisis — and therefore what to do next. The following warning signs indicate you’re headed or may already be in troublesome territory and will want to take immediate steps to reduce the amount of debt in your life.

  • Using credit to pay for basic living expenses
  • Only making minimum payments on credit card balances
  • Relying on credit to pay the mortgage, rent or utility bills
  • Considering cashing in your RRSP or RIF to pay down debt
  • Avoiding phone calls, mail, and online banking

What next?

There’s no one size fits all solution to your financial troubles. Your strategy should be proportionate to the severity of your situation. For example, some people may be able to eliminate their debt through a combination of a budget and better cost management; others may require a more formalized process such as bankruptcy or a consumer proposal. Below is an overview of some of these options:

Make a plan

This is a good place for everyone to start. Start by listing all your debts, regular household costs, and sources of income. Look at your expenses and determine where you can cut back.

The Financial Consumer Agency of Canada is a federal agency which provides financial educations and tools and calculators to assist you through this process. 


If budgeting alone won’t help, you may be able to apply for a low-interest consolidation loan to pay off other high-interest debts. This could reduce your interest costs and the number of payments you need to make every month, thereby helping you pay off your debt more quickly.

Seniors are increasingly turning to payday loans, but these may only worsen your situation. Short-term lenders charge extremely high interest rates and design their products to keep you in a borrowing cycle. Paying the loan from your next pension cheque puts you in the negative the following month, and the following month, and so on.

Do nothing

In most cases, creditors cannot garnishee your pension. So, doing nothing may be a viable option if you have no assets and only your pension as income. However, this is not without risk.

If you owe money where you bank, your bank can apply the funds directly from your deposit account to any unpaid credit cards or loans you have with them. Also, the Canada Revenue agency may garnish pension income for unpaid taxes. Finally, you need to remember that your debts will outlast you and your estate may be liable for any unpaid debts(plus interest) after you pass.

Do not cash in your retirement funds

Retirement funds such as RRSPs, RIFs, and pension plans are meant for your retirement, not your creditors. Most RRSPs are protected in a bankruptcy or consumer proposal. Speak with a Licensed Insolvency Trustee first, before cashing in any retirement vehicles to pay off your debts, they can advise on all your debt relief options.

Consider a consumer proposal or bankruptcy

A Licensed Insolvency Trustee will review your financial situation, seek to understand your goals and identify opportunities to help you eliminate your debt for good. This could include bankruptcy or a consumer proposal, which will halt all present and future collections action and give you a clear path to becoming debt free.

Don’t hesitate to ask for help. It’s never too late. MNP offers Life-Changing Debt Solutions to help you face your difficulties head on.

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