Retired with Debt?
One of my goals is to retire with no debt (not sure whether I can pull it off, but it is a goal), however TD Economics posted a disturbing report on Canada’s Aging Household Debt Burden which suggests my dream may be harder than I think it will be (or maybe I just won’t ever retire, thus making the goal always achievable).
The report is quick to point out that they are not singling out our Seniors as becoming spendthrifts and money wasters, every age group has their debt-to-income ratio increase, however, the problem with seniors is so many are on fixed incomes, paying off debt becomes a much more painful experience for them to endure. The 65+ group is also the group with the largest debt growth over the past little while.
An interesting twist on this debt increase being better is in the report:
Notwithstanding the rising household vulnerability, the
fact that a substantial share of the new borrowing has been
tilted towards the older age segments might lessen the overall
risk compared to what would be the case if concentrated
in the younger age groups. That is because older Canadians
tend to have lower debt balances and larger asset bases
which to fall back on.
So because seniors typically have lower debt balances to begin with, it’s not as bad that they are building up debt now? That’s an interesting point of view to have (which I do not agree with). It’s kind of like my argument that since I have lost weight before, it was OK to pack on a few pounds, because I wasn’t that fat to begin with, and I have proven I can lose weight. To say the argument is optimistic is an understatement (but then again it does use a lot of stock pricing logic (i.e. if it went up before, it will go up again), so who knows, maybe it is correct).
The authors do put a more sensible statement in the next paragraph:
Lastly, the trend towards retiring with debt increases
uncertainty with respect to these households’ longer-term
Precisely the point I worry about, if I retire with debt how can I pay it off, and what happens when interest rates go back up? Yes my CSBs will increase but my debt will grow even faster than that (note my humorous view that by the time I retire I will be using CSBs to save, just to be careful).
Are you planning on retiring with debt? If so, why?!??