A new study done by Harris Decima shows that the majority of retired Canadians are in debt. But is that really such a big deal, when the percentage of non-retired Canadians carrying debt is higher than that of their older folks? In fact, it is.
Looking at the chart below, you can see the difference in the amount of retirees versus non-retirees that currently carry debt. The problem is that, even though it may be non-retirees that carry more debt, it’s also this group that’s better able to handle it.
“While retired Canadians carry less debt than the national average, their debt could be stagnant and may end up costing them more in interest costs over a longer period of time,” says Christina Kramer, executive vice-president of retail distribution and channel strategy at CIBC.
Especially because retirees are less likely to make additional payments on their debt. The survey also showed, as is pointed by the graph below, that non-retired folks are almost twice as likely to pay down more debt at one time than those who are already retired.
This is especially dangerous for retirees.
“You really have to think about the debt you are retiring with because the regular payments you make will directly affect the discretionary income you have,” continues Ms. Kramer.
Of course, that discretionary income is much smaller already when you’re in your retirement years and mostly relying on retirements savings and pension. If there’s a large amount of debt that has to be paid off out of that small amount, it can make it much more difficult for retirees to make ends meet.
The good news might be that while non-retired individuals tend to carry two or more debt products including lines of credit and mortgages, retirees only typically carry one debt product. When you consider that might just be their mortgage, their debt situation may not really be so bad.
The survey found that the highest amount of retirees carrying debt is in Atlantic Canada, where 76 per cent of retirees hold some type of it. All other areas of the country show that on average, 60 per cent of retirees carry some type of debt.