Help For Seniors Who Have Debt Problems

The concept of a relaxing retirement, complete with an image of poolside lounging with a drink and an enjoyable book, or exciting travel around the globe with family and friends, is one we have all seen on TV shows and movies.  But the reality of retirement is often vastly different for many seniors. 

Instead of a relaxing time without fears about money or paying down debt, increasingly often seniors (many of which are suddenly living on fixed incomes) are finding themselves struggling with debt.

According to the federal OSB (Office of Superintendent of Bankruptcy) *, debtors aged 65 and over had the highest median credit card debt of any age category in 2019 (the latest reporting year from the OSB) at $18,700. In addition, this age group had the lowest average income of any age group, around $2,170 net income per month on average. They did also have the lowest average expenses (not including debt repayment), $2,235 per month.  These are not good numbers.

If a senior citizen with fixed monthly income attempted to pay down $18,000 of credit card debt over time, regularly sending their creditors $300 per month and no longer using the card, it would still take close to 13 years to pay off the balance owing.  The scariest number?  That same senior citizen would end up handing over as much as $28,397 in interest on that original $18,000 debt over the 13 years it takes to repay the credit card bill. 

Common sense dictates anyone’s retirement should be a time of zero debt.  By the time we are retired, the goal is usually to have most of our debt paid off and most of our financial obligations sorted out. Unfortunately, in today’s world this is not always the reality. And the COVID-19 pandemic has only accelerated these issues, especially as the pandemic continues to push up the cost of living. This year, essentials such as food, gasoline and other household expenses are skyrocketing.  

This issue of senior citizen debt has become such a large problem that Carleton University in Ottawa held a senior’s debt conference a few years back to determine the effect owing money has on our older population. The conference’s conclusion?  Large debt levels are having a seriously negative effect on senior citizens across Canada. Not a surprising result but certainly a confirmation that a problem does exist.  

One major reason many Canadian seniors are struggling with debt is because more people are retiring without adequate retirement savings or without a pension from their employer. According to a CIBC poll, as much as one third of Canadians between the age of 45 and 64 have nothing saved for retirement.  Broadbent Institute research found that only 15 – 20% of middle-income Canadians who are retiring without an employer pension have saved enough to retire comfortably.

The reality is that fewer and fewer people these days have employer pensions large enough to cover their expenses in retirement. This means it is essential for those about to retire to stash away more money while they are working so they can afford to retire when it is time to do so. 

But with costs rising for essentials such as housing in many areas of the country (and the cost of living increasing each year) there is going to be less money in a senior’s bank account for savings. Combined with record low interest rates, many of us have taken on significant debt. This means a lot of people are living paycheque-to-paycheque, with all the money they earn going towards their bills and debt repayment cost. And that does not leave anything for savings, which can be a huge problem when we retire.

Even seniors who have an employer pension or adequate retirement savings can find themselves struggling financially. The primary reason?  Financial assistance for their kids.  Between covering the costs of postsecondary education for their kids and assisting their children with a down payment on a first home, there is little left over for Mom and Dad once retirement rolls around. While it is certainly admirable that so many parents want to help their kids, if we are spending a large chunk of our income or savings on our children just before retirement it is possible, we will end up in financial trouble ourselves.

Another cost not usually considered when contemplating retirement is the cost of home care, specifically nursing care or daily assistance from a personal support worker. People are living longer than most did in generations past and despite OHIP covering most medical costs and the Ontario Trillium program covering many medications, the cost of in-house nursing care or the need for a personal support worker can really play havoc with your bank account. You may have saved enough to afford your normal yearly expenses, but a serious medical issue could result in more than just a broken hip or knee replacement – it can break your budget and your bank account.

Whatever the reason for debt issues, it is important not to forget there is help available. Many senior citizens hesitate to seek help for their debt pressures because they either do not realize federal legislation is there to protect them from their creditors, they feel ashamed about their situation or both.  If you have determined you have a debt problem it is essential for you to deal with it sooner rather than once it has spiraled out of control. 

If you are a senior citizen struggling with debt (or contemplating retirement and do not want to stop working before you have dealt with your debt pressures), please click on the FREE CONSULTATION button, below, or give us a call to speak with a Farber Licensed Insolvency Trustee.  We can help you determine which solution is right for your situation.

*survey results: https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br04358.html