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April 16, 2021

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? 

By Gordon Powers, MSN Money







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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...