Some Canadians retire without debt, then face unexpected life events that cause financial trouble. Others carry debt into retirement, then struggle to repay it on a fixed income. Fear that retirement savings will run out is becoming more realistic due to inflation and low RRSP returns. The good news is that there are debt relief options if you are at or near retirement and dealing with financial difficulties.
Common causes of financial trouble in retirement
Even if you made it through your working years debt-free and saved for your retirement, life can throw financial curve balls, including:
Health problems
Unplanned early retirement
Medical, dental and other care expenses
Inflation and increases in the cost of living
Stock market decreases, low-interest rates on RRSPs and poor return on other investments
Need for major home repairs, renovations, or other expenses (e.g., new vehicle)
Giving financial support to your children or other family members, including co-signing loans, lines of credit, and mortgages
Separation and divorce
Death of your partner
The cause of financial trouble in retirement can also be as simple as overspending or living outside of your post-retirement means. After a lifetime of working, it can be challenging to adjust to living on a fixed or reduced income. Adding to that is that once you are retired, you have more leisure time. The increased costs of activities and travel that you now have time to do can add up fast. You no longer have your full working income to rely on, so even a small amount of debt can be difficult to pay off when you are retired.
Tips for managing debt before retirement
The best way to manage debt is to be realistic about your retirement needs and goals. Get a good budget in place and consider ways to downsize or eliminate expenses in the lead-up to your retirement. Talk to a professional about how much you need to save to retire comfortably, and consider postponing your retirement age, even if only for a few months or years, to build up your savings, pay off debts, and get you on a solid financial footing to enjoy your retirement. Additional strategies for managing debt before retirement can include refinancing and paying down higher-interest loans and lines of credit. As you approach retirement, avoid taking on more debt (either for yourself, your children, or your grandchildren).
Financial red flags after retirement
Once you have retired, several red flags can signal financial trouble. For example:
You are living on credit, and your credit cards/lines of credit are always at or near their limit
You are only making the minimum monthly payments on credit cards/lines of credit
Your savings are depleted, or your emergency fund has been spent
You are relying on cash advances or overdrafts to cover your monthly living expenses
Your credit score has dropped, or your application for credit has been turned down
Collection agencies have started calling you
You helped a family member financially, and that family member is having financial difficulties.
Tips for dealing with debt after retirement
If a debt problem arises post-retirement, the #1 tip is to take the initiative. Avoiding red flags or ignoring growing debt will only make the situation worse. An important aspect of this is to look at your budget at the first sign of financial trouble. Analyze your income and spending and consider expenses that can be eliminated or reduced. An insolvency trustee can help with this. The second tip is getting advice from a debt professional. Budgeting, downsizing and other “self-help” remedies may not be enough. You owe it to yourself to get advice on the debt relief options that can free your retirement years from overwhelming financial stress.
How a Licenced Insolvency Trustee (“LIT”) can help you
If you fall into financial troubles in your retirement, getting back on track is often simpler and quicker than you’d expect. In addition to credit counselling and reviewing your budget, a licenced insolvency trustee or “LIT” can help you explore options such as a consumer proposal, personal bankruptcy, and more. Greater Vancouver LITs at Campbell Saunders Ltd. have compiled answers to FAQs on personal bankruptcies and consumer proposals which may be helpful to you. If you need more information or are wondering which debt solution is best in your situation, speak to an insolvency trustee as soon as possible.
Comprehensive Debt Help Solutions in Greater Vancouver
Insolvency trustees at Campbell Saunders Ltd. are here for you if you are dealing with financial troubles in retirement. We can discuss credit repair and other debt relief options with you. Please contact us to book a free consultation with one of our team of licensed insolvency trustees in Richmond. We serve clients throughout Greater Vancouver, and virtual appointments are also available.