Peter Boys, Boys Financial Services

Eliminate Your Debt Before Retirement

eliminate debt
Is Debt Freedom #1 On Your Retirement Bucket List?

A recent survey about debt by Manulife Bank revealed that Canadians rank good health, being debt-free, and having retirement income as the most important factors for a successful retirement.  Having debt in retirement can have a very significant impact on one’s retirement lifestyle and force you to have to continue working after reaching your desired retirement age.  Having a plan to eliminate your debt before retirement can make your retirement easier and more enjoyable.  Retiring debt-free can help you to live the retirement lifestyle you desire without having to make sacrifices.

The facts about current debt levels

Canadians in their fifties now owe an average of about $108,000, with one in four burdened with between $100,000 and $250,000 of debt.  Many are still struggling with significant outstanding balances.  These monthly debt obligations may mean that they won’t have the flexibility to retire when or in the manner that they would like to.

Top concerns for those in their 50s

These people tend to have the following goals:

  • Reduce debt and save enough for retirement
  • Build a rainy day fund to cover unexpected expenses
  • Help their children and establish legacies for them and their grandchildren
  • Maintain the assets they have accumulated
Here are simple debt reduction strategies to that can be implemented that could have a powerful effect on one’s overall debt
  1. Consolidating Debt: Many people in their 50s may have accumulated more than seven sources of debt, including carrying over balances on credit cards.  Debt consolidation at lower interest would help them pay down their debt sooner.
  1. Create financial flexibility: Some in their 50s may have paid off their mortgage but still need cash for other expenses, such as their children’s post secondary education.  Cash can be freed up by accessing some of their home equity.
  1. Having appropriate risk protection: Ensure that they and their family are protected financially in the event of premature death, disability or illness.

As most of you already know, getting out of debt can be a challenge, so I would challenge you with the following five questions as a place to start the conversation:

  • Are you satisfied with your current financial situation with respect to any discressionary spending?
  • On a scale of 1 to 10 where does becoming debt free rank as a top financial priority?
  • How do you expect to cover any unexpected expenses that may pop up?
  • If you won $10,000 tomorrow, how would you allocate the additional funds?
  • Do your children need guidance that could help them become debt-free earlier in life?

 The good news is, it’s not impossible and you’re not alone.  Talk to a professional financial advisor to help you take stock of your debt, provide you with strategies, options and tools, and help you develop a plan for becoming debt free, hopefully well before you’re ready to retire.