Borrowing in retirement: Introduction
At a time when Canadian seniors should be living a carefree life, they’re unfortunately borrowing in retirement. Retired people are accumulating non-mortgage debt at the fastest rate of any age group in the last 12 months.
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Borrowing in retirement: Seniors rely upon debt
Equifax data on this subject is nothing short of alarming:
- The average amount of debt held by those over 65 is $15,244
- Those 65+ owe on average 6.1% more than they did a year ago—the Canadian average increase was 3.1%
- 15% of seniors still carry a mortgage and rely upon mortgages borrowing in retirement
- 30% of seniors carry unsecured lines of credit
- 10% of seniors have a home equity line of credit
Borrowing in retirement: The Broadbent Institute study
To add insult to injury a report by the Broadbent Institute paints a very bleak picture of the financial situations of many Canadian seniors who now rely very heavily or entirely on government and other retirement benefits.
- 28% per cent of single women and 24% of single male seniors are living in poverty in this country
- Canadians in the majority are retiring without an employer pension plan have totally inadequate retirement savings — the median value of their retirement assets is just over $3,000
- 55% have savings that represent less than one year’s worth of the resources they need to supplement government programs like OAS/GIS and CPP/QPP
- Fewer than 20% have enough savings to support the supplemented resources required for at least five years
- For those with annual incomes in the range of $25,000–$50,000, the median value of their retirement assets is close to just $250
- For those with incomes in the $50,000–$100,000 range, the median value is only $21,000
- Less than 20% of middle-income Canadians retiring without an employer pension plan have saved anywhere near enough for retirement
- Only 28% of Canadian seniors without employer pensions have five years’ worth of replacement income saved
Borrowing in retirement: There is a need for seniors debt relief
Borrowing money in retirement is not a way out; it’s the fast lane to debt that you can’t hope to repay. With a greatly reduced income or no income at all beyond government benefits and programs, many are in need of seniors debt relief.
It’s so easy to use that line of credit or rack up high interest debt on credit cards. Larry Moser, a divisional manager at BMO InvestorLine, says it’s important for retirees thinking about borrowing money to understand how they’re going to pay it back or if they’re going to let their estate repay the money after they die.
Don’t be embarrassed to seek professional help. Don’t be enticed by the commercials for senior debt consolidation also. Debt consolidation works when you are working and have enough income to reserve a part for debt repayment. It doesn’t work on a reduced retirement income.
The Ira Smith Team has helped many seniors in debt get back on track and living debt free lives Starting Over, Starting Now. Take the first step and give us a call today.
