While overall consumer debt rose in Canada by 6.1% in the second quarter of 2013, seniors saw their debt levels increase by 6.5%. This was the largest increase of any age group a report put out by Equifax.
Rise in Debt Levels Due to Number of Factors
This rise in debt is attributable to a few things, including elderly parents supporting grown children in greater numbers and a desire to live a pre-retirement lifestyle on post-retirement funds. Coupled with inadequate retirement savings, this can easily lead seniors into a higher debt load.
Is Using Credit Actually a Bad Thing in Retirement?
It depends on what you’re using it for and what kind of credit you’re using. If the problem is that you want to eat out at restaurants and go travelling the same way that you did before you retired, that money has to come from somewhere and your credit card is a bad place to draw it from. If you know you’re facing a shortfall over time and want to maintain your lifestyle to a certain standard, you can plan for it by getting a reverse mortgage.
If you’re looking for short-term credit and for amounts under $15,000, consider a Home Equity Line of Credit (HELOC) rather than putting it on a credit card. Rates for both reverse mortgages and HELOCs are much more attractive than credit card rates.
If You’re Heading Into Retirement
Before retiring, it’s very much worth a little bit of your time and money to hire a financial planner. They’ll be able to crunch the numbers properly and tell you if you really are able to retire, or if you should work a few more years to save the money you need to have the lifestyle you want. Since so much rides on your decision, you’ll want to look specifically for a professional who has earned their Certified Financial Planner designation, and you can do this on the Financial Planning Standards Council website.
Reverse Mortgages Can Make up The Shortfall
It’s hard to slip into an austere lifestyle when funds dry up, especially when credit is so easy to obtain. And politicians telling us we should have less household debt feels a lot like being admonished by a wealthy schoolmaster rather than concrete advice. Reverse mortgages have been shown time and again by retirement planners and other financial professionals to be a reasonable way to make up for a shortfall in retirement savings by drawing on the equity of your home. There are no monthly payments, and the loan is only payable when you sell your home. Plus, at today’s interest rates, there’s no better time to get one.
Contact Horizon Equity to find out more about how a reverse mortgage can help you make up for a shortfall in retirement funds, potentially helping you to retire earlier and lead the lifestyle you want.