Tag Archives: retirement

Many boomers in retirement-denial

In shocking news, it would appear that many Canadian boomer savings levels are below what it would take for a comfortable retirement.

Way back in 2006, about 20% of the boomers that responded to a BMO survey said they were not confident they had enough savings to retire on.

Now?  That’s changed to 46% of boomers who say they don’t have enough to retire on.

Most boomers said they would like to retire at 59, but will need to work until 63.

The plan for many is to take a part time job or sell off belongings.

About 32 per cent expected to sell their home, while another 19 per cent said they will rent out part of their home for additional income.

To Buttigieg, boomers’ ability to save may have been affected by the challenges associated with paying off a mortgage, helping children through university and caring for elderly parents.

Inflation, low returns, living a long life and health issues call also spoil retirement plans, according to Mastracci, but he says one of the biggest problems continues to be debt loads.

“A lot of retirees still have debts (and) they have to clear the deck,” he said.

A recent report from Equifax says a growing number of seniors are taking on more debt to fund retirement lifestyles.

Hat-tip to Many Franks.

Dipping into RSP to pay the mortgage.

There was a discussion here the other day about someone dipping into their RSP to pay the mortgage on the investment property they couldn’t sell.

It brought up comment anecdotes about others dipping into their retirement funds to pay the mortgage.

DON’T DO IT!

RSPs are protected in bankruptcy, but if you withdraw from them to pay for a losing asset and end up going bankrupt you lose not just the home, but your retirement savings as well.

And you want to retire don’t you?

You should exhaust all other options before touching your RSPs and that includes the option of bankruptcy.  Losing your home isn’t nearly as bad as losing your home and all of your retirement savings.

Real estate is not always the direct path to riches, leverage is a beautiful thing on the way up, but it can really bite on the way down.   Just ask anyone in who bought in the hot bubble markets of the US in 2005.

Don’t make the mistake of throwing away your retirement savings, especially if you don’t have a lot of time to start over with your savings.

Leaving debt as a legacy

There’s an article in the Globe and Mail about the rising number of ‘Grandpa debtors‘ – people past the age of 55 who have debt problems.  There are a few reasons sited for this shift: easy credit, lack of emergency savings and relying on real estate as a retirement plan:

Real estate can also be a factor in some of these dire debt situations, Mr. Elyea said. Some older debtors head into retirement with $50,000 still left on their mortgages, and then start using their credit cards to pay them because their income has dropped and the CPP and OAS aren’t enough to cover the payments.

There’s also the trap of considering your home to be your retirement nest egg, said Mr. Elyea, which can backfire because of the unpredictability of the housing market.

“In our Tri-Cities practice [covering Coquitlam, Port Coquitlam and Port Moody], that’s where a lot of people bought houses at the height of the market when anybody could get financing, and now they’re all [valued] below what they paid for them,” he said.

If you do find yourself in a situation where your debt has gotten out of control, see a professional, said Mr. Eylea, whether it’s a bankruptcy trustee or a money coach who can let you know about your options.

Here’s the full article.