Seniors and Debt: A Troubling Trend
Canada's seniors aren't immune from our great national problem
There was a time, not that long ago, when the notion of seniors being heavily indebted was nearly unheard of except in unique circumstances. Sadly, that idea has been rather shattered in recent times as seniors today in Canada are amongst the most rapidly-increasing debtor cohorts. Let’s take a look.
Statistics Canada does a Survey of Financial Security which jt updates periodically. It examines, generally, changes in debt, assets and net worth among Canadians. Deeper down, it looks at measures such as debt-to-income ratio.
Among the more disturbing findings from its last round:
· proportion of senior families (households) with debt was 42% - that’s up from 27% in 1999.
· proportion with mortgage debt almost doubled from 8% to 14%, and the share among those with consumer debt increased from 24% to 37%.
among senior families with debt, the median amount of debt was $25,000, up from $9,000 in 1999 (adjusted for inflation)
median debt-to-income ratio for senior families with debt more than doubled from 0.24 in 1999 to 0.52.
Also: seniors (65+) average non-mortgage debt rose from $14.6 billion in 2005 to $42.7 billion in 1029 (!). Just the near-tripling, then. (Much of that increase was in lines of credit, unsurprisingly.) Mortgage debt for the same period: $19.6 B to $85 B. Quadrupled. Yowza. (That’s seniors using their home equity to gift downpayments to their kids, likely.)
And from our own firm’s Hoyes Michalos’ Joe Debtor Study (of all our insolvency filings from 2023, just released in February), we at Hoyes Michalos (www.hoyes.com) found that seniors are in particularly bad debt trouble these days (https://www.hoyes.com/press/joe-debtor/seniors-and-bankruptcy/ ) :
Do not adjust your set. Yes, seniors’ credit card debt – and think how little seniors used to either use or need credit cards at all – the highest credit card debt of all age groups.
I wonder: are policy makers paying attention to this?
The cost of living has affected almost everybody other than the wealthy, and seniors are not immune to it. In fact, those seniors who were unable to amass a nest egg of wealth before retiring they may be the most vulnerable of society to it, since many pensions, whether public or private, are modest and not indexed to the cost of living.
(As an aside, vehicle debt for seniors has nearly tripled, from $3.4 B to $9.5 B 2005 to 2019. And as any of you who have ever heard or read anything of mine on the subject of cars when it comes to personal finances, this will come as no shock.)
TAX
As the Baby Boomer generation aged and started to retire, many of them didn’t consider the idea of taxation on government pensions like CPP and OAS. These pensions are subject to taxation like most sources if income. If you worked for 3 or 4 decades in a payroll job (which many Boomers enjoyed for employment in that era) where your tax was taken off at source, you just got used to it happening automatically. But maybe you started receiving CPP and/or OAS and it was paid to you in gross dollars, without tax deducted. You went along and spent that money for a year or two until you realized you then had a substantial tax bill, which many on fixed incomes (pensions) could not afford to repay in the short-term.
Then add that tax bill to the above-mentioned credit card debt etc. and you may have a real problem.
I used to do a lot of presentations at seniors’ groups about debt and taxes, and there was always much more time spent afterwards on answering audience questions than the main presentation itself.
The other issue that we see when it comes to seniors is how their debt situations come to light: usually not until it is nearly beyond their own capacity to repair it themselves. And why? Because seniors are the least likely age cohort to talk about their debts. That’s just the way they were brought up and lived – you don’t share details about your money, even with family and friends who may be in a position to assist you. The three subjects Canadians in general don’t talk about: sex, money and religion, and not necessarily in that order.
If you suspect a senior that you know or are related to is in financial trouble, I urge you to broach it with them if you can. This is tricky, of course, but if your instincts are right, I have found that many seniors in debt trouble actually appreciate the help.