Do you think you'll be able to retire debt free?
Retiring debt-free used to be the goal for all Canadians. Pay off the mortgage, no more car payments, and use credit cards judiciously, if at all. After all, living on a fixed income leaves little or no room in the budget for making interest payments.
Looks like that's strictly old school, however, according to a recent study.
The study, conducted for the Investor Education Fund, found that 24% of the homeowners expect to have at least some debt on their home after they retire. What's worse, most of them admit that they don’t really know how they'll pay it off.
That's not completely surprising, however. More people are working well past the traditional retirement age. At the same time, the age of first-time home buyers has increased sharply, leaving them with fewer years in which to pay things off.
The truth is, many boomers have come to look on mortgages more as large investment loans, taken out on the theory that the asset they bought will increase in value, more than offsetting the cost of the loan in the end. Plus the profits are tax free, if we're talking about your principal residence.
Higher debt levels also have a lot to do with empty-nesters splitting up. Though overall divorce rates have declined in recent years, “grey divorce” is definitely on the rise.
As separating couples struggle to split things pensions and assets equitably, it’s not unusual for one partner to take out a mortgage to buy out the other’s interest in the family home, for instance.
That means the pool of money that was going to fund retirement for a couple will now be split in half, and must now fund things for two people living separately.
Do you expect to be debt free by the time you retire? Do you have a plan for paying things off?
Posted by: Bob | Apr 17, 2021 7:00:12 AM
Ha! Of course there will be debt in my retirement. The economy and job suck .
Had to take a 52% pay reduction to get work at 50. House is almost paid off though by 60 and have a young wife who will be the bread winner for the next 10 years if she can keep her job until she is at least 45.
Posted by: John | Apr 17, 2021 10:27:15 AM
Bob,
Just curious. Were you divorced? If so, apart from the sucking economy and job, this probably didn't help, as the writer points out.
As for paying off the house at 60? Seriously? What were you doing with your money up til now?
I'm 40, the house is paid off and we have 4 kids under 6 years old. My wife hasn't worked for those 6 years and probably wont' for another 10. Still, I plan on retiring at age 55 debt free.
Posted by: linda | Apr 18, 2021 6:31:49 PM
Bob- what the heck is your income?! Or maybe you live in a small town with low housing prices?
Our house will be paid off at around 55, and that's with 2 kids, few fancy vacations, and 1-1/2 incomes, and no other consumer debt. We do give generously to charity (10%, and that's not all to a church). Our only debt will be conditional on what cars we drive, and we don't usually drive anything fancy.
Posted by: linda | Apr 18, 2021 6:33:12 PM
Oops - that should be "John" that I'm wondering what your income was, etc.
Posted by: Trent Jeffries | Apr 18, 2021 6:58:22 PM
Has anyone considered that living in Canada, one of your biggest costs in retirement will be taxes!!
Posted by: Chris | Apr 19, 2021 8:19:47 AM
I am 57 and bought my house with cash in 2004. I had a 3600sq ft home and scaled down to 750sq ft home after a separation, and my first house was paid for after 2 years of purchasing it. Both my husband and I were in our early 30's when we married, so we had some financial security. I had a good job but gave it up and my pension to be a stay home mom. It was not easy, but we did not live extravegantly and our first home was paid for after 2 years, as was our second. You have to live within your means. I have been on my own for 11 years and helped my children with their university costs. Unfortunately, everyone wants the drive-in foyer, fancy cars and designer clothes NOW. Is it any wonder the personal/familydebt load is astronomically ridiculous??
Posted by: Very Concerned | Apr 19, 2021 9:03:50 AM
Every one has there opioion and good for you if you can retire at 55. And good for you having x number of kids, Good for you paying off your mortage. Good for you. I can see a pattern
to many good for you"s. The math doesn"t add up there are some numbers missing.
Small house, or do some of these people still live at home, Or have aquired the home house ?
Most is all job dependent and living in a box are some peoples choice. The bottom line is canada is on top for most taxs in the world. life styles very health takes its toll, jobs/education/devorce/etc.
Dont judge other people because you seem to have no money issues.
"GOOD FOR YOU"
Posted by: Chris | Apr 19, 2021 10:28:17 AM
Gee, 'Very Concerned'...no one is judging others regarding their money issues, we are merely expressing our views and experiences. Clearly, society today does not have the same 'save savvy' as our parents and their parents generation. More often than not, if they didn't have cash to pay for the item they neededor wanted, they budgeted to pay off their financial debt with maximum payment contributions in minimal time, or just plain didn't buy it. Today there is a sense of entitlement for working hard and rewarding yourself for doing so. That's all fair and good, but this 'live for today' generation has 'entitled' themselves into alarming debt, minimal savings at best which equals disasterous retirement consequences for the future.
Young people are often living vicariously through their children, giving and providing extravagances they themselves did not have: the fancy cell phone, the Rep soccer, the baseball, the hockey, the piano lessons, the Lululemon and Guess shopping, the $500.00 Prom dress, the once-a-week-eat-out dinners...while it is great to be well-rounded and well-dressed, the money for all this has to come from somewhere. The problem is parents feel guilty saying NO to their children AND themselves once in a while. Pay now or pay later.
Posted by: christine | Apr 19, 2021 10:36:39 AM
While i agree its good to be debt free my your 50's many of us people have only bought our house in our 30 and are starting families. Living in the GTA makes it challenging to find affordable housing and well paying jobs are hard to come by. Something to consider not everyone will leave to retirement age so as important is it is to pay down debt you have to live alittle too you can't predict the futre.
Posted by: Chris | Apr 19, 2021 10:45:06 AM
You're right, Christine, on your above accounts including the inability to predict the future, but you should prepare for it regardless.
Posted by: L | Apr 19, 2021 2:34:35 PM
"many boomers have come to look on mortgages more as large investment loans"
can you say........................many STUPID boomers...
Posted by: linda | Apr 19, 2021 2:36:07 PM
Problem is, even without our kids having the $500 prom dresses, etc, we certainly weren't able to pay off the mortgage that early. Mind you, if we hadn't put some major work into our 1250 sq ft house 4 years ago (furnace, roof, etc etc and some cosmetic stuff) we would have been free and clear 4 years ago (age approx 50). We've always been very careful with our money, not eating out much, no designer clothes or expensive sports participation. Some of your ability to save truly hinges on income, and the two of us combined have made over 100,000 exactly twice in all the years we've been married. One of us has health issues affecting job possibilities, so I think we're doing pretty good by having only a few years left on the mortgage, with no consumer debt.
Posted by: Chris | Apr 20, 2021 8:46:52 AM
Congratulations, Linda, you've done great! I know many people who are retired, in their mid 60's and still have mortgages, one spouse still working, (because they have to), and some even have borders or tenants to help offset everyday costs! These are couples that had double incomes for years, yet still struggle at this time in their lives, why? No financial strategy for the Golden Years. $30 a day on Timmies, $20 a day on cigarettes, $10 a day on a couple of beers...how did/do they think they were going to enjoy their retirement years? Survive, the retirement years? I'd be stressing myself into an early grave with those horrific choices. You have to look after and plan for yourself, because no one else will.