In 2006, the Office of the Superintendent of Bankruptcy (OSB) commissioned a study called -- Growing Old Gracefully, An Investigation into the Growing Number of Bankrupt Canadians over age 55.
You can find the disturbing details of the study on the OSB website. From the results it appears the largest contributing factor for seniors getting into financial trouble is the same as for other demographic groups – credit card debt.
Flash forward a few years and the situation appears to be little changed, as the effects of the Great Recession of 2008 still have not worn off. In fact, for seniors as a group, you could make a strong case that their situation has worsened substantially.
First, there are those seniors 55 and above who lost their jobs. The chances of them getting new employment are slim at best. What employer is willing to hire someone only a few short years away from leaving the workforce? In the face of reduced income, seniors rely on credit cards for daily expenses until the available credit runs out.
Second, income growth has been stagnating for some Canadians for years, leading to more reliance on credit cards. Many seniors left with only a government pension when they retire find themselves with two unattractive choices. They can either reduce their standard of living or increase their credit spending. Those who choose the latter inevitably end up in financial difficulty, although not all end up in .
There is yet another reason more and more seniors are in trouble in their golden years, and it is the saddest of all. In increasing numbers, Canadian senior citizens are sapping their own financial resources to help their adult children weather tough economic conditions.
Some seniors included the value of their homes in their retirement planning, with the intent of moving into smaller living quarters and investing the proceeds from the sale of the homes. When faced with the choice of refinancing an existing low balance mortgage or taking out a new one on a home with no mortgage to help children in deep financial distress, what do you think they will do?
For younger Canadians with excessive credit card debt, the possibility of income disruption poses a serious threat. But for huge numbers of seniors in Canada, income disruption at retirement is not a possibility; it is reality. With the exception of some higher income earners and some with substantial private retirement plans, most Canadians will have to learn to do with less when they retire. To a great degree, how much less is a function of how much debt you carry with you into retirement.
If you are approaching retirement age, you need to give serious thought to reducing your current household debt to put yourself into a better position to enjoy your golden years without the fear of a Canada bankruptcy.
The latest figures also show the impact of new rules introduced in September, 2009, that have shifted the balance between bankruptcy filings and restructuring proposals.
The bankruptcy superintendent said 43,268 consumers filed debt-restructuring proposals in 2010, up 18 per cent from 36,640 cases in 2009.