The Rising Age of Debt

May 13, 2015 Hull & Hull LLP Elder Law, Estate Planning Tags: , , 0 Comments

In recent years, Canadians seem more content with accumulating debt in their working years. While debt can be necessary to gain education or accumulate assets, it can cause issues into the future with regard to retirement planning.

According to a report by Hoyes, Michalos & Associates Inc., thirty per cent of personal insolvencies filed in 2013 and 2014 were by debtors 50 years of age or older. Further, the most heavily indebted group was over age 60 and reported an increasing amount of credit card debt.

Another report, published last year by the Vanier Institute of the Family, found that older Canadians are carrying more debt into retirement. The statistics are unappealing to those looking forward to retirement with the hope that a pot of money awaits them on the other side. A drop in income, income tax bills due to pension withdrawals, and expectations to assist both parents and children can create the perfect storm. A secondary factor is that payday loan companies will facilitate loans to seniors by lending against pension income. This likely explains why a growing number of seniors owed payday loans.

The Hoyes, Michalos & Associates Inc. report further found that unexpected life events are generally the trigger for filing for bankruptcy. Such an event could be a loss in employment, an illness or a relationship breakdown. These events often bring with them a shift in one’s lifestyle as well as financial situation.

Financial literacy and discussing finances with family is also helpful. Openness between family members when it comes to income and expenses may help seniors make more responsible financial decisions.

Bankruptcy triggering events should also encourage people to consider or re-consider their estate plans. Mechanisms to ensure the plan is executed and runs smoothly mirror mechanisms dealing with the prevention of individual bankruptcy. Knowledge, education, communication and professional advice are also recommended in dealing with these situations.

Thank you for reading.

Suzana Popovic-Montag

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