Nowadays, seniors are more and more likely to retire while in debt. In fact, according to a study by Equifax (one of Canada’s two largest credit bureaus), people aged 65 and over experience the largest debt growth, with retirees aged 56 to 65 arriving in second place with the highest number of debts and those aged 45 to 55 are the most indebted.
Here are some of the reasons why this situation could occur:
Credit card debt began to increase during the 1960s, and while no one was really educated on this topic, people began to rely on more and more credit. This addiction creates a vicious circle in which seniors begin to go into debt even further without any means of repaying their debts. Some studies even suggest that retirees have already delayed their 5-year retirement in order to pay off their debts before retirement.
People aged 50 to 60 have reached an age when they have to care for both their children and their own parents. A typical scenario for Canadians aged 50 to 60 is to support their children at home because they have accumulated a large amount of student loans and can not live alone. In addition to caring for their adult children, those between the ages of 50 and 60 take their parents home because they can no longer afford to take care of themselves. Seniors with adult children living at home also help them pay Internet and cell phone bills and student loans.
In order to avoid bankruptcy, seniors are not able to retire when they want because they have to work more and more to pay off their debts. Easy access to credit, adult children returning home, and lack of retirement planning have forced seniors to file bankruptcy filings. This is a trend that continues to increase at an alarming rate. As a result of having to retire later than desired, seniors compromise their health because of the stress of having to work more than they should.
Before your debts become uncontrollable, it’s important to create a budget and track your expenses. Tracking your expenses is the most important part of budgeting as it translates into the success of your budget. If possible, you should try to get rid of your debt at least a year before retiring.
It is important to be cautious about replacing one debt with another. This can happen if you consolidate your loans. In this case, you are only required to repay the interest instead of the aggregate amount borrowed. However, because you never really pay the amount borrowed, the overall costs can be very high.
If you are a senior with high debt, it is important to try to find help and get advice from a debt management expert as soon as possible. At Pierre Roy & Associates, we are determined to help you take control of your debts in order to fully enjoy your retirement without stress.