In recent years many seniors in Canada have increasing debt. Statistics Canada data show that 42.2 percent of people aged 65 and over had some debt in 2012 and the Office of the Superintendent of Bankruptcy at least 10 percent of those who declared bankruptcy were 65 and older in 2014. This growing concern about seniors has been well documented and examined by the media, by the Office of the Superintendent of Bankruptcy, by Statistics Canada and by the Ontario Securities Commission. CBC News recently released an in-depth business profile into this increasingly prevalent issue, entitled, “Seniors going bankrupt in soaring numbers: More Canadians are outliving their savings and spending their golden years in debt.” In this examination of the effect of bankruptcy on seniors, several economic and societal causes are considered. A summary of the concerns that seniors face is provided here. These issues that are leading to debt include: an increasing life span, being income-poor, retiring with debt, health issues, family issues, job and/or business losses, and poor investment returns.
Retiring With Debt
A major factor that explains why seniors are going bankrupt in soaring numbers is that more seniors are retiring with debt. Low interest rates have made it easy to have and hold debt but many Canadians are teetering on the edge of financial ruin. An interest rate increase could plummet record numbers of Canadians into bankruptcy, including many seniors.
A common issue in the financial landscape for seniors is that they have little income to live from. Many, but not all, have modest pensions. Often seniors can be asset-rich but income-poor, in that they may own their home but will no longer have the same level of income to pay expenses as when they were employed. They may not be budgeting properly and living on a fixed income will make it more difficult to pay down debt.
Increasing Life Span
Another of the key reasons for debt discussed in the CBC News article is that seniors are living longer. Seniors have longer life expectancies than in the past and many are outliving their savings, according to Nora Spinks of the Vanier Institute of the Family, a non-profit research organization.
A further concern is the health care costs to consider in late maturity. In Canada, we are fortunate to have semi-socialized healthcare, though the system does not cover everything we need. In home nursing care, private nursing homes and retirement homes are all expensive options to consider in addition to other health expenses such as uncovered treatment, uncovered prescriptions, dental work and eyeglasses.
Access to counselling for personal mental health can also be a necessary and costly expense. Losing a spouse can have a devastating effect on the living partner who may not make finances a top priority. Without proper planning, health care for seniors can be an unexpected costly venture.
It is also hard to predict and plan for the future about how long you can manage independent living and what your mental and physical needs will be. Missed payments can occur easily for those incurring issues with memory and mental fitness. Having a trustworthy Power of Attorney for Property and for Personal Care in place can help to mitigate these situations.
While the safety net of family has been a comfort to many aging parents, most folks can no longer depend on their children for support in their aging years. Their adult children or grandchildren may be in financial need if they are not still struggling to achieve financial independence. Love has a way of transcending sound financial decisions and even seniors who are not financially equipped to give may feel pressured to provide financial support to family members. Some seniors will also have their own financial burdens from a partner’s illness, such as the high cost of nursing care, and they may be struggling financially as a result of lost income due to death of a spouse or the costs of a late life divorce.
Employment and Business Loss
Unexpected events can translate into significant losses even in the business world. In some cases, seniors feel forced into early retirement from their employer and then find it difficult to find work at a late age again. Those who have businesses may have gone through challenges associated with business ownership (including business lawsuits in some situations) and may have had set-backs from trying to stay competitive in a constantly changing market place.
Poor Investment Returns
Another reason many seniors are not faring as well financially as may be expected is that, since 2008, the market has provided insufficient investment returns. Individual investors have suffered tremendously from a weak market and several have lost their life savings. Interest rates are at a record low, which means that fixed income products that seniors usually purchase such as Guaranteed Investment Certificates, Canada Savings Bonds and savings accounts are being offered at extremely low rates. Like individual investors, pensions are facing the same challenges and to ensure coverage for all pension participants, employers are often limiting or reducing the pensions offered.
What Can Be Done?
With the causes of debt in mind, seniors with financial difficulties need to find a way to stop debt from incurring and to start getting out of debt. If you are a senior, living on a fixed income will heavily influence your priorities and may help you cut expenses. Sizing down your home and selling household items is one way to reduce costs and gain some extra cash. If income isn’t enough, returning to work part-time or on a consulting basis may be an option. A trained professional at WBLI Insolvency Consultants has the ability to help you develop a long-term plan that will re-establish your financial footing. A WBLI Trustee can review how you currently manage debt and advise you on how improvements can be made. We can also discuss debt consolidation, consumer proposals and bankruptcy at our Halifax, Truro, New Glasgow or other 11 office locations. Call us at 902-482-2000 or 1-800-495-5909 for your free consultation today.