Retired Canadians are holding less debt than the rest of Canada, but they’re also taking fewer measures to pay it off, according to a recent poll by CIBC poll and conducted by Harris/Decima. As a result, many retirees may be carrying their debt for longer than they anticipated, incurring higher interest costs and affecting cash flow, says CIBC.
The survey found that nearly 60% of retired Canadians hold some form of debt, compared to 76% of non-retired Canadians. As well, on average, retired Canadians carry only 1.65 debt products with a balance (including mortgages, lines of credit, loans and credit cards), while that jumps to 2.64 products among non-retired Canadians.
However, only 27% of retirees said they have made an extra lump sum payment toward their debt in the past 12 months—compared to the national average of 42% for non-retired Canadians.
“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,” said Christina Kramer, executive vice-president, retail distribution and channel strategy, CIBC.
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,” said Kramer. “While it’s a good sign to see that Canadians have made some progress on debt reduction entering retirement, it’s also clear that once you retire with debt, it can be harder to pay off your outstanding balances.”