A look at the best of the Internet, from an SPP point of view
Debt beginning to restrict retiree cash flow
When the boomers’ parents got set to retire, they advised their kids to – like them – be sure to not bring a penny of debt into retirement. They dutifully paid off their $25,000 mortgages, saved in their double-digit interest GICs, and merrily rode into retirement.
Easier said than done for those of us who are younger.
According to Which Mortgage, citing Equifax Canada statistics, the debt on Canadian credit cards alone is a whopping $599 billion. As interest rates on those cards begin to tick up, people are less and less able to pay the full credit due each month, the article notes. In fact, only around 56 per cent do pay the full amount owing, and the rest are nudging into delinquency, the story continues. And the total debt of Canadians including mortgages is $1.83 trillion, the article says.
So we’re not able to emulate our parents and grandparents.
A CBC story from earlier in the year found that 20 per cent of retirees are still paying mortgages, and 66 per cent are “still carrying credit card debt.” On average, the report says, citing Sun Life data, Canadian retirees had $11,204 in non-mortgage debt.
Experts disagree as to whether this means retirees are facing hardship. Theoretically, as long as they can still pay off the bad debt (credit) and good debt (mortgage) they will eventually be OK. But an obvious lesson for younger retirement savers is this – try not to be like your parents, and try to get to retirement without debt. You have to try and do both.
A rule of thumb that Save With SPP has heard over the years re debt and retirement savings is the 80/20 rule. While you are young, direct 80 per cent of extra money onto killing debt, but put away 20 per cent for retirement. The same ratio works for retirees trying to pay down debt. You can tweak things once the debt is gone.
A nice way to build your retirement savings gradually while killing off debt is through the Saskatchewan Pension Plan. You can start small and increase your savings rate over time.
Top retirement goals
The Good Financial Cents blog talks about “good retirement goals that everyone should have.”
- Have a well stocked emergency fund
- Get out of debt completely
- Plan to retire early
- Have multiple income streams
Some great advice here. It is very difficult to visualize life in retirement when you are still working, so planning is a great ally to a low-stress future.
|Written by Martin Biefer
|Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22|