Credit Card Debt Delays Stress-Free Retirement Years

Many regard retirement as a well-earned and deserved conclusion to the years of hard work, but a growing number of retirees find themselves in debt. According to Statistics Canada, one in three retirees has some type of debt, including payday, student, and other loans, mortgages, lines of credit and credit cards, and other liabilities and unpaid debt. Canadians who are 55 years old and over also hold some form of debt – two thirds of the working and one third of the retired have debts. The average debt of retirees is $60,000. With this in mind, who is likely to retire with debt and how does debt delay stress-free retirement years?

Among the factors associated with debt are divorce, higher education, higher income, and home ownership. Higher education, for example, is linked to a positive and open attitude toward borrowing. Surprisingly, the likelihood of having debts also increases with financial knowledge. This may be explained with the fact that persons who understand financial concepts are more likely to borrow as to smooth consumption or finance investments.

Yet, retiring with debt may have some serious implications. The idea that retirees’ expenses drop considerably does not hold up, explains author of Master Your Debt Jordan Goodman. While retirees save on commuting and work clothes, medical expenses are likely to be incurred. Even if health isn’t an issue, retirees often want to travel and engage in activities they could not enjoy while they were working. Most of this costs money. And it may add even more debt, with stress-free retirement being difficult to attain.

Some claim that planning ahead can help reduce debt, thus relieving stress. One solution is to create a budget, assuming that most retirees will need about 70 to 80 percent of their present income as to maintain the same standard post-retirement. To this, it is imperative to get rid of debt by way of reducing frivolous expenses and paying debt with existing savings. Making smart investments is another way to go about this.

There is one more way to reduce debt, and while it delays stress-free retirement years, many opt for it. Finding a full- or part-time job and returning to work is one way to get rid of debt, at the same time preserving assets and retirement savings. The current generation of retirees actually prefers this solution to debt problems. Recent surveys reveal that between 60 and 90 percent of people choose to work post-retirement. There are many reasons why retires return to work, the main one being that they build more retirement assets and delay the need to utilize these. Other reasons include rising healthcare costs, reduction of health benefits and pensions, rising living expenses, and increasing longevity. All this means that many retirees have to work post-retirement. The good news is that many persons actually want to work in retirement rather than enjoy their retirement years. This group of retirees wants to engage with society and contribute to it through work, finding work in retirement to be an enriching experience.