frugal Archives - Ira SmithTrustee & Receiver Inc.

Seniors and debt – Background

Seniors and debt is a growing problem. This past Tuesday, we published our blog titled “SENIORS ARE CARRYING DEBT: WILL RETIREMENT SPELL POVERTY FOR YOU?” This is such a serious issue that we have written a series of blogs on the topic which delve into WHY seniors are carrying debt.

Seniors and debt – What is the current situation?

One year ago, CBC News ran a feature on how more Canadians are outliving their savings and spending their golden years in debt. Shortly after that, a new study from credit firm Equifax said seniors are increasing their debt loads at a faster pace than the population at large. This was the first time that such a phenomena had occurred, and it continues.

In September 2015, the Financial Post reported that Canadian seniors are ramping up debt to soaring new heights. They reported that Canadian seniors are getting a lot more comfortable with debt, adjusting to a lifestyle where debt will get them nicer things. It seems that seniors and debt go together very well, which historically was never the case. This is a recipe for disaster.

The image of the frugal senior is waning. They are still around but they have gotten a lot older and do not form the bulk of seniors. The current group of seniors entering retirement have grown up carrying more debt than their parents, so, to have debt in retirement does not faze them. It is a habit that has not been broken yet, in spite of the cost of their “wants” in retirement, as opposed to their “needs”, is greater than their income can sustain.

The baby boomers are the ones who have been the prime generators of big debt loads in Canada. They know how to live large while they were working. The problem is that once they are in retirement, they have even more time now to consume, but are living on a fixed income. All of a sudden, for many it is the first time in a very long time, they need to constrain their spending because they are living on a fixed income. However, not all can change their behaviour, leading to the serious problem of seniors and debt.

Many of today’s seniors are entering retirement with a mortgage outstanding on their principal residence. This is a sign of living large throughout their working years. The baby boomers spent money on more acquisitions, and not paying down debt. This is the first time this is happening in Canada.

The latest facts and figures will not offer any comfort I’m afraid. According to a report by the Broadbent Institute on seniors’ finances:

47% of Canadians aged 55 to 64 don’t have an employer pension plan
50% of Canadians aged 55 to 64 who don’t have an employer pension have less than $3,000 saved up for retirement
Of the Canadians without an employer pension plan those who earn $50,000 to $100,000 a year have saved up an average of $21,000
Of the Canadians without an employer pension plan those who earn $25,000 to $50,000 a year have saved up an average of $250
Less than 20% of people over age 55 who don’t have an employer pension have enough to live in retirement for five years or more
The poverty rates for single seniors, especially for women, is nearly 30%

What can I do now to avoid being a seniors and debt casualty?

The sooner you address debt issues, the better. Eliminating debt is an excellent first step. Contact the Ira Smith Team. We’re professional, federally licensed trustees who can help you conquer your financial problems so that Starting Over, Starting Now you can put debt behind you and start saving for the future. Contact us today so you will live a financially healthy life, and not be one of the seniors and debt casualties.

Seniors and debt – Background

Seniors and debt – What is the current situation?

What can I do now to avoid being a seniors and debt casualty?

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track