Are you in your 50s and carrying debt?

You’re not alone

Did you always imagine you would be debt-free by your 50s?  Are you surprised, and disappointed, that you’re not?  You are not alone.  A recent consumer debt survey found that Canadians in their 50s have an average of $108,675 in household debt.

Your 40s can be expensive years.  You may be paying down a mortgage, maintaining a home, saving for retirement and your children’s education – not to mention keeping up with everyday expenses.  On top of this, you may have hit a few bumps along the financial planning road – a job loss, divorce, an illness or death in the family.  It is not surprising that many people in their 50s are struggling with debt.

Among respondents in their 50s who have debt, only one in three expect to be debt free by age 60. While most people expect to retire in their early 60s, more than half surveyed indicated that should they reach retirement age and still have debt, they will continue to work until they are debt free.

Strategies to reduce your debt

Consolidate debt – It is not uncommon for people to have multiple sources of debt.  By consolidating you may be able to secure a lower interest rate and pay down debt sooner.  One particularly effective product for debt consolidation is the all-in-one account.  This type of account allows you to combine your mortgage, personal lines of credit and any other debts you may have at one low competitive interest rate.  By combining your debt and savings in a single account, your savings could reduce the overall debt balance and therefore reduce your interest payments.

Evaluate the price vs. cost of big-ticket items – A lot of people don’t truly understand how much debt costs.  Credit card debt is typically the most expensive and could have an interest rate of 20% or more.  It is important to understand how much extra in interest costs you wind up paying on top of the purchase price of big ticket items.  For example, the price of a new dining room set may be $3000, but if you put it on your credit card at 18% and take six months to pay if off; it will end up costing you $3,280.

Consider downsizing early – Do you feel house rich and cash poor?  If your children have left home and you no longer need the extra space, you may want to consider moving to a smaller home.  By downsizing early you could save interest, property taxes, stress and upkeep, pay down debt and put more money away for retirement.

Work with a financial professional – Across all the age groups surveyed; only one-third of Canadians seek professional advice when it comes to debt and cash flow management.  However, research shows that nearly three in four people who get debt and cash flow advice from an advisor have a plan for becoming debt free.

If you need help implementing strategies to address these types of challenges leading into retirement; give me a call.

Have a great weekend,

Tracey

Source:  Solutions Fall edition 2012, Manulife Investments