Nearly 60% of retired Canadians hold some form of debt and although they hold less debt than those still working, they are also less likely to be taking steps to accelerate their debt repayment.
According to a new CIBC poll, 59% of retired Canadians currently hold some form of debt, compared with 76% of all non-retired Canadians.
However, only 27% of retired Canadians said they have made a lump-sum payment towards their debt in the past 12 months, lower than the national average of 42% of all non-retired Canadians.
In B.C., retirees holding debt matched the national average at 59%, and 33% of those polled said they had made a payment towards their debt in the last year.
This suggests that retired Canadians may carry debt for longer than they anticipated in retirement, incurring higher interest costs and affecting cash flow.
Christina Kramer, executive vice-president of retail distribution and channel strategy at CIBC, said, “While retired Canadians carry less debt than the national average, their debt could be stagnant and may end up costing them more in interest costs over a longer period of time.
“You really have to think about the debt you are retiring with because the regular repayments you make will directly affect the discretionary income you have.”
Making the transition to retirement may mean adapting to living on a fixed income. In previous CIBC research from the beginning of 2012, retired Canadians identified managing day-to-day expenses as their number one financial priority for this year.
Debt carried into retirement can affect retirement plans and cash flow, as the monthly payments must come from pension earnings or from retirement savings – both of which were intended to serve as retirement income.
“These poll results clearly illustrate the importance of having a good debt repayment strategy in all phases of life, particularly as you approach retirement,” added Kramer.
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