Monday, March 24, 2014

Seniors and debt part one of two

I came across a series of articles about seniors and debt and thought I would share some of what the articles said. The articles are written by a firm that gives advise and guides lawyers, bankers, financial advisors, corporations, small business, and individuals. Their clients include:
  • Small business owners, individuals who are in a financial crisis, believe they are facing bankruptcy, or seek an alternative to bankruptcy.
  • Lawyers, bankers, financial advisors who hire us on behalf of their clients or need a Trustee and Receiver as part of an insolvency team.
  • Secured lenders, unsecured creditors who require a trusted business advisor to assess credit exposure and provide advice on how to increase their chances for collecting outstanding funds.
Given that this firm works more with Lawyers and others who are trying to collect debts, I would advice caution on the advice they give, but I know their stats are correct.

You may be one of the fortunate few that actually get to live this retirement dream, but the reality that many seniors face is bleak. Sadly many seniors are finding themselves drowning in debt without enough income to pay it off.

  • 1/6 of seniors report that they owe more than $100,000. Statistics Canada
  • 59% of retired Canadians say they’re carrying debt. And 19% of those say that their debt level has increased over the past year. New CIBC poll
  • Canadians over the age of 65 have the highest insolvency and bankruptcy rates in the country. Vanier Institute for the Family
  • Average debt for consumers aged 65 and over climbed 6.5% over the past year, the biggest year-over-year increase in the period for any age group. Equifax
  • Canadians are entering retirement more indebted than ever. Toronto-Dominion Bank Economic Overview Report dated February 13, 2013
  • Half of Canadians say they are not financially prepared for their retirement. CIBC 2012 Poll
Seniors are facing a myriad of financial issues that have made their anticipated “golden years” anything but golden.
  • The Sandwich Generation: Many are still part of the “sandwich generation” a phenomena caused by delayed marriage, postponement of children, and adults with increasingly long-lived parents. They’re borrowing to help their children, grandchildren and parents. As long as they have collateral and a good credit rating, banks will readily lend them money.
  • Grey Divorce: According to Statistics Canada, divorce among couples 65 years of age and older is becoming more common and grey divorce can create serious debt for boomer retirees.
  • Recession: Battered financial markets and anaemic economic growth have forced Canadians to make debt management and not retirement the primary focus of financial planning. Their investment returns may have been decimated by the recession and they borrowed hoping markets would stabilize.
  • Lifestyle Choices: Even though they've reached 65 and their incomes have been greatly reduced, they continue to live the same lifestyle that they lived prior to retirement. With reduced incomes, often coupled with increased expenses, they are accumulating more debt to boost income through credit so that they can continue to enjoy a pre-retirement lifestyle they may no longer be able to afford. Some adapt by making only the minimum monthly payments on credit cards, which leads to a downward debt spiral, a journey that often ends with a trip to a trustee in bankruptcy.
The problem with carrying debt into retirement is that it must be serviced with less income than when working full-time. Mid-career people can start over, but retirees can‘t. 

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