The number of seniors seeking help with debt is increasing dramatically – here are some common causes:

Posted on by Duane Roberts

Personal Financial Debt

Instead of enjoying their retirement, many people worry about how they will make ends meet

Publication date:

Feb 11, 2022 • Feb 18, 2022 • 4 minute read • 13 Responses Instead of enjoying retirement, many people worry about how they're going to make ends meet. Instead of enjoying retirement, many people worry about how they’re going to make ends meet. Photo by Getty Images

Reviews and recommendations are unbiased and products are selected independently. Postmedia may earn an affiliate commission for purchases made through links on this page.

Over the past 11 years as a credit advisor, I have observed a dramatic increase in the number of seniors seeking help with their debts. Whether this is because more seniors are aware of nonprofit credit counseling services or whether more seniors are in debt remains to be determined. Either way, it’s surprising to realize that instead of enjoying retirement, many people worry about how they’re going to make ends meet.

This ad hasn’t loaded yet, but your article continues below.

There could be many reasons why more retirees are struggling with debt, but the causes often start years earlier. Here are some of the most common we see.

Supporting adult children

No financial planning can prepare a person for suddenly withdrawing from their adult children or needing financial support. As much as we would like to be there to help our children, we may have to accept that we are not in a financial position to do so while still saving for retirement. A compromise could be that the children pay part of the costs. It is still cheaper for them than paying rent elsewhere, but it allows the parents to continue to plan for their retirement.

Unexpected illness or unemployment

If you faced a time when you were unable to work due to illness, you might have been surprised to find that your long-term disability insurance only replaced a percentage of your income. But you also missed out on the contributions you would have made for your retirement pension or savings accounts. This can lead to a lower pension income.

This ad hasn’t loaded yet, but your article continues below.

Avoid getting caught up in using credit to cover your budget shortfall by adjusting your retirement goals as soon as possible. Look for ways to manage effectively so that you are not forced to accept the smaller, early retirement benefits that are offered to you.

Parting

Suddenly having to live on a single income after a divorce can put a significant damper on saving for retirement. The legal costs of undoing a marriage can also cause someone with extra debt to retire before they can do the same. In addition, a divorced spouse can expect to have their pension reduced, as the former spouse is usually entitled to a percentage of the pension contributions paid during the marriage.

If it’s difficult to plan for what you’re not sure about, you can cut spending in all areas of your budget to give yourself maximum flexibility in your decisions.

This ad hasn’t loaded yet, but your article continues below.

Death of the spouse who managed the finances

Managing household expenses should be a shared effort. Sadly, I’ve come across many cases of a widowed spouse feeding himself head over heels with unmanageable debt as they try to navigate their newfound financial situation.

Now is the time when those of us with aging parents can step in and make sure Mom or Dad is financially sound. If you’d rather not get involved, advise your parent to seek advice from a financial professional. Most financial institutions have financial advisors who can help them understand their investments. If they need budgeting or debt help, encourage them to contact a not-for-profit credit consulting firm that can provide free, impartial advice.

This ad hasn’t loaded yet, but your article continues below.

Maintaining our working lifestyle with a lower income

One of the most difficult parts of retirement is planning how we will adjust our budget to our new lower income. This is especially difficult if we still have to pay a mortgage when our income falls. If the only thing that changes when we stop working is the amount of income we receive, then there is a problem. Our spending must also be reduced.

Well before you make the decision about when to retire, it’s important to look at your monthly expenses and projected income to ensure that life will cost less than what you earn. If you can’t afford your existing lifestyle, you have to make decisions.

No

How to save money on your grocery bill amid empty shelves and higher prices?

Canada Pension Plan can start as early as age 60 or be deferred until age 70.

Four key things to consider if you’re planning to retire this year

We asked a group of experts experienced in helping women navigate the world of personal finance to explore what's holding women back and what they could do better to accumulate more personal wealth.

The ultimate financial guide for women: experts share financial tips that really work

This ad hasn’t loaded yet, but your article continues below.

One option may be to downsize. By selling a larger family home, you can reduce housing-related costs and free up some equity to supplement your retirement income. If you’re not ready to part with your home just yet, consider hiring a tenant or student. This allows you to offset your monthly expenses and still enjoy your home.

Another option could be to work a little longer. If higher interest debts are outstanding, you better address them before your income falls. Ideally, we want to retire debt-free, which is possible if we start planning early enough.

Don’t underestimate the value of saving as you make your plans. An emergency fund is all the more important if you live on a steady income or if your chances of upgrading your monthly income are gone. The last thing you want to do when those unexpected life events happen is depend on credit to cover the shortfall.

Sandra Fry is a Winnipeg-based credit counselor at Credit Counseling Society, a nonprofit organization that has helped Canadians manage debt for nearly 25 years.

†

For more stories like this, Sign Up for the FP Investor newsletter.

†

This ad hasn’t loaded yet, but your article continues below.

By clicking the sign up button, you agree to receive the above newsletter from Postmedia Network Inc. receive. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails. Postmedia Network Inc. † 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300

Comments

Postmedia is committed to maintaining a lively yet civilized discussion forum and encourages all readers to share their thoughts on our articles. It can take up to an hour for comments to be moderated before appearing on the site. We ask that you keep your comments relevant and respectful. We’ve enabled email notifications – you’ll now receive an email when you get a reply to your comment, there’s an update to a comment thread you’re following, or a user follows comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

This post The number of seniors seeking help with debt is increasing dramatically – here are some common causes:

was original published at “https://financialpost.com/personal-finance/debt/number-of-seniors-seeking-help-with-debt-is-rising-dramatically-here-are-some-common-causes”

Related Posts