A few hours after I filed a column last week on seniors paying off their debts using reverse mortgages, I received the latest newsletter from consumer insolvency expert Scott Terrio.
My column looked at how more people are retiring with debt and finding the burden too much. In some cases, they’re kicking the problem down the road by using a reverse mortgage. Interest accumulates on a reverse mortgage, but you don’t pay it or the principal until you sell your home.
Mr. Terrio fills in some of the details on seniors and debt. Forty-two per cent of senior households had debt in the most recent data, compared to 27 per cent in 1999. Vehicle debt held by seniors nearly tripled between 2005 and 2019, while mortgage debt quadrupled.
Parents helping their adult children financially is the new normal in family life. It’s less common for those kids to help their parents, but high debt levels among seniors suggest this could change. Boomers and Gen Xers, do you know how well set up your parents are in their retirement or pre-retirement years?
If not, ask. You could start the conversation about debt. Mention how you’re working to reduce debt where possible, and then ask about their experience with debt. Recognize that debt today is about more than overspending.
Inflation has driven up the cost of living, particularly eating, and seniors are less adaptable because they don’t get pay raises or bonuses like working people. We should note that seniors do get inflation adjustments in their Canada Pension Plan retirement and Old Age Security benefits, and from some defined benefit pension plans.
Retirees in debt have options beyond reverse mortgages, including a home equity line of credit. A consultation with a financial planner sounds like good value for seniors who need a debt repayment strategy.
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Rob’s personal finance reading list
Welcome to the ‘vibecession’
Feeling negative about inflation, the economy and your personal finances? It’s a global thing. According to this CNBC story, people in countries around the world are stressed about their finances. If we’re not in actual recession, we are definitely experiencing a ‘vibecession.’
The #1 rule of investing
Losing money hurts more than a making money feels good. Govern yourself accordingly.
Pro tips for all-inclusive resorts
The writer of this article says she’s been to 35 all-inclusive resorts. Here’s her list of 10 rookie mistakes people make when booking this type of vacation. Yes, tipping is covered as a topic. Now for a list of tips for people travelling in retirement.
A realist’s take on real estate bidding wars
All about the strategy of underpricing a home to trigger a bidding war – pros and cons.
Calling all DINKS
Are you a dual income, no kids couple living in Canada? What is the best part about it, and the worst part? Please fill out this survey to share your experience with The Globe.
Reader comment:
“I noticed your posted link recently to the page that summarizes deposit insurance. I noticed that the province of Quebec was missing. So I did some research and found a site that appears to cover everything – FinanceProtection.ca.
Tools, Explainers, Guides and Charts
What to do if you’re an Ontario resident who has lost track of a workplace pension plan.
In the social sphere
Social Media: Trying to rent an apartment in Toronto – a sad but funny Instagram post.
Watch: Personal finance expert Preet Banerjee explains the federal carbon tax. Here’s an explanation of the Canada Carbon Rebate, with numbers for each province
Money-Free Zone: Bob Dylan covers an underrated Beatles song, Things We Said Today. Dylan’s voice is a little, uh, hoarse, but the effect of it is to add some depth to a great love song. And, the original version, from A Hard Day’s Night.
More PF from The Globe
- Retirees in debt have found an expensive way to get relief
- Two ways for dumpster-diving investors to play an old standby sector now fallen on hard times
- The 2024 Globe and Mail ETF Buyers Guide, Part Three - U.S. equity funds
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners - and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You're not bad at money - you're suffering from money shame • Retirement might look different for Gen Z and millennials. Here's how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn't special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada's big cities • Property taxes are popping in some cities - how worried should you be about other tax hikes? • Our other real-estate problem - people have too much wealth tied up in houses • Borrowers and savers, here's how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
Rob Carrick