Are you ready to retire?

2021-10-15   minute read

John Athanasiou

Lifestyle Debt

Debt Solutions

When you are considering your retirement goals, remember having a plan to deal with your debt is just as important as planning for your retirement income. Planning your retirement income is something we are trained to do from a very early age. Planning to deal with your debt isn’t.

With the increasing costs of living, many individuals find they are unable to retire as early as they would like. They find themselves working several extra years to meet their debt obligations to their creditors. Even after these efforts, it often happens the debt they struggled for years to pay off is still with them when they retire and they no longer have the income to support the repayments. 

Older woman thinking

Retirement is supposed to be a happy time in your life and carrying the burden of debt creates stress and anxiety. Facing your retirement years debt free will make your retirement that much more enjoyable. Accordingly, it’s important to ensure you make debt management a part of your retirement planning so you can face your retirement years with less stress. This should be part of the discussion with your financial advisor.

Understand your ability to service your debt now versus later

Right now, you may be getting by and making your debt repayments, but what happens when your income changes? Make sure you understand your anticipated income at retirement and how much it will change. Contact the Canada Revenue Agency to understand your anticipated pension when you get close to a point where you will not be working any further. Based on the projected income, prepare a cash flow forecast for the household and determine if you will have sufficient cash flow to live and service the debt until it gets fully repaid. 

Understand your projected living expenses

Take a good look at your monthly expenses and make adjustments where possible. You may want to evaluate your existing living arrangements and make changes that will accommodate your retirement income. Owning a home may put too much of a strain on your budget and it may be cheaper to sell and rent, downsize, or relocate to a more affordable city or town.

You should plan to be able to live worry free and hopefully never have to make the choice between paying your living expenses and making a debt payment. If it looks like those debt repayments will live longer than you, it may be time to consider a formal proceeding to deal with those debts.

Retirement has become a dream for many hardworking Canadians

The average age of retirement is slowly rising for a lot of reasons. One of these reasons is the increasing debt levels that individuals in their later years are still carrying. Debt either prevents you from reaching your retirement dreams, or it can ruin your retirement experience.

If you are approaching the age where retirement planning is necessary, it is a good idea to consult with an expert in the field of debt management. Having a conversation with a Licensed Insolvency Trustee can help you decide if it is realistic for you to continue to pay your debt at its current level. It may be advisable to look at other options for reducing or eliminating your debt. A Trustee will be able to show you how reducing or eliminating your debt can allow you to free up room in your budget to make sure your retirement savings goals are attainable.

This type of planning makes good sense. It will help you weather any unexpected reductions in income and can also ensure you are able to retire on your timeline, debt free.

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