A growing number of Canadian seniors are carrying debt into their retirement.
A new study by Statistics Canada revealed that just 58% of “senior-led” families were debt-free in 2016, a stark drop from the 72.6% that were debt-free in 1999. Another recent study found that a quarter of respondents between the ages of 55 and 80 were struggling financially, with the indebted respondents carrying an average of $11,204 in non-mortgage debt.
Several factors contribute to debt levels among seniors. For starters, many seniors try to maintain their pre-retirement lifestyle after they have transitioned out of the workforce, which places a financial burden on their post-retirement income.
Many seniors also continue to financially support their adult children. Whether they’re chipping in for major expenses like mortgage payments or helping out with smaller expenses, such as their grandchildren’s piano lessons, many seniors end up transferring a portion of their wealth to their relatives or extended family.
Another factor that leads to debt among seniors, is simply the fact that a number of Canadians do not build up adequate savings by the time they choose to retire. A new CIBC poll revealed 32% of Canadians between 45 and 64 had nothing saved for retirement, while another 53% were unsure if they were saving enough.
As a Licensed Insolvency Trustee at Grant Thornton, I meet with many retired seniors who come into my office because they are struggling to make ends meet. Seniors face unique challenges when dealing with financial difficulties, given their fixed and often limited income. That being said, there are a number of solutions that can provide seniors with the financial help they need to deal with an unmanageable debt load.
One solution may be to file a consumer proposal. In a consumer proposal, the filer typically asks his or her creditors if they can repay a portion of their unsecured debt rather than the full amount. The amount to be paid is negotiated by the consumer proposal administrator (a Licensed Insolvency Trustee) with the filer’s creditors who get to vote on the proposal, but will be based on what a filer can afford to pay. Once approved, the proposal forms the new arrangement with the creditors. One of the great aspects of a consumer proposal is that interest and other fees stop adding up on the outstanding unsecured debt, and the filers retains control of their assets. A proposal may be an excellent option for a senior who has enough income or equity in assets to offer a reasonable settlement to his or her creditors.
Another solution when your financial obligations can no longer be met, may be to file for bankruptcy. This is a legal option that enables you to also enjoy immediate protection from your creditors as they cannot continue or commence actions to collect outstanding debt. This option may be an excellent one for a senior who finds their income is not high enough to support making a proposal to creditors, and perhaps where the debt level is too high to enable a viable proposal to be accepted by creditors.
The solution that makes the most sense for a person struggling with debt will be quite dependent upon each person’s situation. Items such as the amount of income coming into the household, the level of debt, whether there is equity in a home or other assets and whether the person has been bankrupt before, will influence the best option to deal with the debt.