Foot loose and fancy free and sailing into the sunset as we retire.
That is not the reality very many retired Canadians with debt are moving into today.
Unless they are sailing away in a boat with a loan attached to it, they’re not sailing into the sunset in retirement.
Almost 40 per cent of Canadians carry debt on credit cards—this is very expensive debt, costing between an interest rate that can range from nine per cent to 28 per cent annually.
Some 30 per cent carry debt on a line of credit—this can range from three up to six per cent or higher. Sixteen per cent carry mortgage debt. Almost 15 per cent carry consumer loans.
If you have debt of any kind, you should know how much your interest rate costs are, and pay the lowest interest rate possible.
Do not make the credit card companies any richer than they are—they don’t need your money to increase their wealth.
They already have enough other people paying high interest rates and not paying their credit balance each month when due.
Interest rates are low in Canada and many retired people have consumer debt.
A per cent of this debt makes it difficult for retirees to make other consumer choices because of their debt load.
Paying down debt after retirement becomes more difficult due to living on a fixed income with reduced cash flow.
Financial planning in pre-retirement should involve a review of cash flow, budgeting and interest rate costs to determine if you need to or should carry debt in retirement.
Baby boomers, those born between 1945 and 1964, are painfully short of their retirement savings goals.
Debt among seniors is growing faster than other age groups. Individuals are accumulating more debt by using credit cards or consumer loans so they can continue to enjoy a pre-retirement lifestyle they may no longer be able to afford.
Credit rating company Equifax says seniors are increasing their debt levels to maintain the lifestyle they enjoyed before retirement. Equifax says the average debt for consumers over 65 has climbed more than any other age group at 6.5 per cent.
Some retirement people head back to the work force to earn additional income.
Downsizing your home is an option to help fund retirement.
Staying in a home you can no longer afford in retirement can quickly drain your bank account.
If you are a two-car family, can you be a one car family saving vehicle insurance and repair costs on the second vehicle?
Do you have antiques or valuables that you no longer used and are gathering dust that you can sell off to raise some extra cash?
More than half of all retired Canadians are carrying debt and the debt is increasing.
Although retired Canadians hold less debt than those still working, they are less likely to take steps to accelerate their debt repayment.
Retired Canadians may carry debt longer than anticipated in retirement. This results in higher interest costs and reduced cash flow.
Is it a need or a want? If it is a want and you don’t need it, don’t buy it. Avoid unnecessary consumer debt.