#VIDEO - DEBT INTO RETIREMENT: DO YOU NEED RETIREMENT SOLUTIONS?# - Ira SmithTrustee & Receiver Inc. - Brandon's Blog (2024)

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The trend of debt into retirement

The biggest trend in debt into retirement among baby boomers is having a home mortgage in retirement. Financial advisers warn that this new trend could have serious lifestyle consequences for seniors. We have written on the topic of seniors in debt before:

• Fully Fund Your Retirement: Are You Asking Your House To Do It For You?
• Seniors Are Carrying Debt: Will Retirement Spell Poverty For You?
• How Hoarding Cash Does Not Always Lead To Good Debt Free Living And Retirement Income Planning
• Seniors Acquiring More Debt Delays Retirement
• Senior Citizen Debt Relief: 31% of Canadians believe CPP/QPP will be enough
• Video: The Stress of Seniors Carrying Debt
• The Modern Rules of Seniors Carrying Debt
• Seniors Debt Relief: Gray Debt on the Rise
• Able to Retire? Can You Afford To – Or Want To?
• Seniors In Debt: Solve It Without Bankruptcy
• Will I Ever Be Able To Retire?
• Canadian Seniors In Debt, Part 1 – What Do The Golden Years Really Look Like?

Have seniors previously taken debt into retirement?

The baby boomers are the first generation carrying a mortgage into retirement; that’s never happened before. Think about it. Our parents typically bought one house they lived in their whole lives. They paid it off and it was a priority to pay off the house.

Today, because of low rates and the wish to use the home as much for financial gain as for shelter, people typically move up two or more times. The previous generation viewed their home as mainly shelter, and looked at paying off the mortgage as forced savings. With the mortgage gone, our parents then continued saving for a “rainy day”. Memories of the great depression were vivid and alive in their parents’ minds, who passed on the behaviour and mentality that saving was important.

Has the world changed causing seniors taking debt into retirement?

Today, the stock market crash of the late 1980’s is but a distant memory, let alone the feeling of depression. The post-World War II growth years, followed by boom and recession times of the 1970’s through the 1990’s, doesn’t really exist anymore. Rather, in our global economy, growth is slower, so a slowdown in the economy is also muted. The need to save as a philosophy has also taken a back seat, and given the price of homes and the size of the related mortgages, savings today in a growing family is also a near impossibility.

Risks from taking debt into retirement

Two of the risks of having debt into retirement are:

1. Delayed retirement plans as the baby boomers must keep working to have enough income to service and repay that debt.
2. If you become injured or sick and cannot work, there won’t be the income to service and repay the debt.

Solutions for taking debt into retirement

So, baby boomers much find ways to mitigate the cost of debt into retirement and being able to repay that debt in a reasonable time period. Some of the more common ways are:

1. Prior to retirement and after spending the large costs of children and family, while you are still experiencing higher earning years, is to shorten the amortization period of mortgages so that more money goes towards principal.
2. You can increase the frequency of your mortgage and other debt payments from once a month to once every two weeks, thereby reducing principal faster.
3. Refinance debt with higher interest rates, such as credit card debt, with mortgage or line of credit financing and then use strategies such as the two listed above to repay that debt.
4. Adjust your budget so that you are not spending more than you earn, and allow the necessary part of your after-tax income pay off your debt.

What to do if you fear taking too much debt into retirement

To have a free checkup on your debt in retirement, and to look at ways of solving it while avoiding bankruptcy, contact Ira Smith Trustee & Receiver Inc. today. Our team of professional trustees can help you manage your financial crisis and get you back on your feet Starting Over, Starting Now.

• Tags baby boomers, budget, Debt, debt into retirement, Ira Smith Trustee, retirement, retirement plans, retirement solutions, seniors in debt