Seniors are often considered to be more vulnerable during retirement because many are on fixed incomes. According to the federal Office of the Superintendent of Bankruptcy, 10 per cent of those who declared bankruptcy in 2014 were aged 65 and older, meanwhile TD Bank is saying seniors living in Ontario, Alberta and Quebec have the highest rates of debt accumulation.
A key problem that many seniors are facing is, retiring with debt. According to Statistics Canada in 2012, 42.5 per cent of people aged 65 and over still had debt, which is a major stress when seniors are planning out their retirement. Another major factor that needs to be accounted for is the fact that seniors are living longer. The truth is, seniors are outliving their retirement savings. And while for some that has meant selling their home for a big profit and a comfortable retirement, for others, medical bills, job loss or divorce have crippled them financially.
Reverse mortgages a better solution than bankruptcy
Reverse mortgages have traditionally been viewed as an option for seniors who weren’t able to save as much as they would have liked for their retirement or who have unexpected financial needs during retirement. Less than four in ten seniors saved for retirement in 2014. If you are a Canadian homeowner older than 55, you can get up to 50% of your home’s value through a reverse mortgage. You are not required to make any payments and don’t have to pay any interest or principal until you sell the home or pass away. The reasons most people file for bankruptcy is often an unexpected life event such as job loss, illness or relationship breakdown. Reverse mortgages are great for helping to cover costs for, perhaps paying out old debt, medical issues as well as other unexpected life events.
More Canadians are carrying years of debt into retirement, at a time when their income drops and those years of hard work are supposed to be spent with loved ones. Perhaps sticking to old tricks like filing for bankruptcy isn’t the best thing to help our retirees gain freedom from debt. Reverse mortgages are a great option and are here to stay. They’re increasingly becoming a go-to solution for a growing number of older Canadians and Canadians planning for their retirement.
If you want more information about reverse mortgages in Canada, please contact one of our helpful representatives at Horizon Equity.