Retirement Debt

2014-11-24   minute read

Canadians of all ages are awash in credit card debt, often paying exorbitant interest rates. Unfortunately, debt is becoming embedded in our society. With the financial squeeze and increased unemployment rates, it’s more difficult than ever for most people to pay off their debts and save for retirement. Retirement can and should be an enjoyable and relaxing time of life, but for Canada’s aging population, it can bring about financial difficulties, stress and anxiety. Many seniors are forced to live on significantly reduced incomes in their later years, making everyday living expenses and monthly bills more difficult to afford. 


There has been much concern expressed about the increasing proportion of older Canadians who are approaching retirement with significant debt, including mortgage debt on owner-occupied housing. The reality is that seniors generally have lower than average incomes, with very little money left over each month to put towards debt repayment. 

It used to be that when Canadians approached retirement, they could look forward to retire in comfort and with dignity, but times have changed. Most pre-retirees are now mired in debt. According to Equifax Canada, seniors are racking up debt to help maintain the lifestyle they enjoyed before retirement. These same findings point out that the average debt for consumers over 65 has climbed more than any other age group at 6.5%; a rise they call an “alarming trend.” With low savings rates, inadequate pensions, volatility in the stock markets and longer lifespan, living with unmanageable debt is an extremely difficult experience that puts great stress on seniors. 

Statistics Canada on the other hand, says it found that about one-third of retirees in Canada have racked up huge debt. This is substantiated by Ipsos Reid data which shows, at the national level, the moderation in household debt growth in 2012 was broad-based across most age groups, with the exception of those 65 years and older. See Chart 4 below.

The age picture also changes by province. The run-up in debt and the average borrowing level for those 65 years and older was highest in Ontario, Alberta and Québec in 2012 (see chart 6).

A growing number of older individuals are finding themselves entering retirement with high levels of debt built up much earlier in life than their parents and grandparents.

The question then, is what can be done to ease this debt burden of both seniors and pre-retirees to allow them to live a financially stress-free life? To begin with, it is vital to decrease debt load, increase savings and increase income. It may be necessary to pay more than just the interest only payments on your debt, to pay it down faster. Further, serious consideration must be given to the possibility of renting instead of owning and thus carrying a mortgage, or alternatively, downsizing to a smaller home.

More specifically there is a need to (a) formulate a debt management plan and (b) to develop a realistic financial plan, which means having a realistic budget built out for retirement. If all else fails and your situation becomes unmanageable, be sure to enlist the help of a licensed debt professional as early as possible.

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