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, theTD Economics – October 11, 2011
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 increasesTD Economics – October 11, 2011
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?!??
I definitely suggest at least trying to pay off the majority of your debt before you retire. It’s very silly, and agreeing with a previous comment selfish, to retire with debt. The future is unpredictable, and even after retirement unforeseeable issues can arise causing you to need extra cash. The last thing you to do is retire with extra bills that you don’t need.
I think this all depends on what kind of a financial plan you have moving forward and what you’re leaving for your heirs. If you’re working with an estate/living will/etc. planner, that is GOOD at what he/she does, they will have a plan for you that lives for generations to come. Now, that may include having a debt load that also produces income so the debt may be intentional. It makes sense to work with someone and let them know your plan. With the rise of divorces, you don’t want to leave your children with a huge sum of money and they marry someone, who then divorces them and this non-family member then takes half of your life’s work that you left your child…a proper plan will prevent this and will keep your dough in the family.
I’m 20 years from my retirement age and 5-6 years from paying off my mortgage. After the mortgage is paid off, I may consider semi-retirement on a lesser income working part time from home.
Retiring with debt on purpose is a bit selfish I think, if you have to retire with debt it means you don’t have enough income to be financially independent. If anything happens, such as rates going up as you have mentioned and you can’t afford to service it, this falls on your kids.
I’ll quit my corporate job with mortgage debt. Mrs. RB40 will keep working and will continue to make payment. If she quits working, we’ll sell the condo and settle the debt. Not a perfect plan, but I’m going for it.
I am on track to have my only debt (mortgage) paid off to coincide with retirement in less than 6 years.