With the rate of Canadian seniors in debt continuing to increase, it appears that retirement is turning from a time to relax to a time of stress. While there are a variety of reasons seniors are becoming increasingly indebted, there are a few notable causes we see come up time and time again.
Getting by on a fixed income while the cost of living rises
Gas prices, groceries, rent, you name it, the price is increasing. Most of us living on salaries and hourly incomes may not even notice the rising cost of living, as our incomes rise accordingly. Seniors, on the other hand, specifically those in retirement, can be hit hard by the rising cost of everyday items. Retirement means moving from an ever-growing monthly income to a completely fixed income. This is one reason we see seniors borrowing money and unable to pay it off. You may think using a credit card one month will help you get by, but when your income stays the same, paying off borrowing is impossible.
Divorce and death of a loved one
We see many seniors struggling with their finances when their marital status unexpectedly changes. Getting by on a fixed income can be hard enough, but when this is cut in half either from the separation or unfortunate death of their partner, this can have devastating consequences on their finances. Most couples will calculate their finances together, this combined income will dictate how they spend and where they will live. When that income drastically changes, seniors are faced with huge financial struggles including cutting back, facing bills alone and moving out of their home.
The pressure to help family members financially
One of the biggest causes of senior debt is the pressure to help family members with their finances. Many parents and grandparents would jump at the chance to help their daughter put down a deposit on a house, or help their grandson pay off his student loans. While there is no problem helping a family member out if you have the chance, be careful not to blow away any savings you might have. While they may not think this is the case, seniors, more than any other group, need money saved away for retirement. Living on a fixed income, you have to plan ahead for the unexpected.
In March of this year, the Equifax report found that seniors’ delinquency rates were up for a third straight quarter, with a year-on-year change of 7.2%. Lenders typically consider you delinquent if you fail to pay two consecutive payments on a loan. Which shows that Seniors are looking more towards borrowing, without the means of paying this back efficiently.
We urge seniors looking to retire to take a look at their financial situation. Even if you believe your fixed income and current savings will see you through retirement, take the above into consideration. We recommend having at least 3-6 months worth of savings put away to support your income during retirement.
If you are a senior and struggling with debt, I urge you to seek help from a financial expert, like a Licensed Insolvency Trustee. Most LIT’s provide free advice and walk you through all of your options.