Tips on paying down debt in retirement

In a perfect world, we’d all retire debt free. But the majority of Canadians today are retiring with some debt. In fact, the Financial Post reports a sharp increase in the number of seniors seeking debt relief, and it’s understandable. Carrying debt can be overwhelming, especially on a reduced income.


Fortunately, there are tools and resources you can use to help you get your debt situation under control, no matter what stage of life you’re in.

Take control of your finances

Thanks to historically high-interest rates, the soaring cost of living, and longer retirements due to growing life expectancy, ensuring your retirement income goes the distance is more important than ever.

And unfortunately, according to a recent Equifax poll, people aged 65 and older are more likely than younger adults aged 18 to 34 to be anxious about making ends meet (73% vs. 40%).

As dull as it sounds, one of the most critical factors in managing your finances in retirement is developing and sticking to a budget. The likelihood of falling behind on financial obligations, spending beyond your means, or being forced to borrow to cover day-to-day expenses decreases when you closely monitor your inflows and outflows.

Set financial boundaries

Along with the death of a spouse, and unexpected or unplanned expenses such as medical bills and divorce, helping adult children is one of the most common reasons seniors are in debt. Putting your financial needs first (yes, even before your children) can help set you up for a financially healthy retirement. Setting financial boundaries can look different for everyone, but if you don’t know where to start, consider avoiding new debt, choosing a hard spending limit, or simply saying no when a family member asks for money.

Pick a debt payment strategy that will save you money

Higher interest rates result in greater borrowing costs, so once you know exactly what you owe, the required minimum payments, and the interest rate for each debt, pay off your most expensive one first. The less money you’re forking out on interest, the better.

Look into consolidating your debt

Suppose you have several different high-interest debts to pay off. In that case, you might save on interest by consolidating them into one loan.

Debt consolidation is a great method to not only reduce your monthly payments but to lower your interest rate too.

Borrow against your home equity

As the debt-to-income ratio rises, more Canadians are tapping into home equity to optimize cash flow. A reverse mortgage, for example enables homeowners aged 55  to borrow up to 55% of the value of your home.

Because borrowers are not required to make monthly mortgage payments, you can pay off all your debt without worrying about paying back the loan until you move or sell your home.

And in some cases, when the reverse mortgage has paid off outstanding debt, there may still be money left over to meet other financial needs.

Seek professional advice

Since repayment can be more difficult on a reduced income, you need to manage your retirement debt load carefully. If ignored, debt poses an increasing threat to both your finances and your general well-being.

If you feel like you’re drowning in debt, consider asking for help. You can reach out to an accredited not-for-profit credit counselor, a financial advisor, or a licensed insolvency trustee. They can even help with repayment through a debt management plan. Just make sure it’s a reputable organization.

Retiring with debt can be very stressful so don’t panic if you find yourself in this circumstance. You can always find a solution to pay off your debt and live a more comfortable life in retirement.

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Zandile Chiwanza

Zandile Chiwanza is a personal finance journalist and a financial wellness educator on a mission to improve financial health and wellness among Canadians. She channels her financial savvy and apt for writing into a clear but thundering call to action: Get your mindset and money right. Her words have appeared in the Globe and Mail, CBC, Refinery29, and much more.