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Saturday, September 23rd, 2023

Mortgage debt threatens boomers’ retirement plans

Mortgage debt threatens boomers’ retirement plans

Calgarian John Hunt, 64, says he would love to be retired, but is still carrying a $125,000 mortgage.

Calgarian John Hunt, 64, says he would love to be retired, but is still carrying a $125,000 mortgage.

Nearly half of Canada’s baby boomers are still paying down their mortgage and view their level of debt as an obstacle to reaching their financial goals.

A poll released Wednesday by CIBC and conducted by Harris-Decima said that as the country’s largest demographic moves closer to retirement, 46 per cent of Canadians aged 45 to 64 are still working to pay off their mortgage. The poll also revealed 75 per cent still hold some form of debt.

Calgarian John Hunt, 64, is continuing to work part-time to keep himself busy, pay off his $125,000 mortgage and have some spending money.

He’s an example of a generational shift in thinking and circumstance when it comes to holding a mortgage.

“I’d love to be retired. But I’m not. . . . At this age, if I didn’t have this mortgage I probably wouldn’t be working. I’d probably be relaxing a lot more.”

“When I was younger I went through a divorce so then I started over again. But it’s one of those things that I’m not worried about having a mortgage. I basically try to live for the day,” said Hunt.

“I do like putting money away in a mutual fund . . . My parents’ generation, they always wanted to pay things off. I guess that was essentially my hope when I started out many, many years ago to have no mortgage when I got older, but then as I got older, my situation in life changed. I realized we’re going to go along and live life the way it’s supposed to be. If we get it paid off, we get it paid off. If we don’t, then there are options in place to make sure that there are no debts for family.”

Hunt said substantial life insurance coverage and the increased value of his home would take care of that in the future.

Karen Blomquist, a mortgage associate with Mortgage Intelligence in Calgary, said a large percentage of her clients who are in their late-40s to middle-to late-60s do not have their mortgages paid off.

“And I can’t believe how many first-time homebuyers are in that age group, as well,” she said. “I think – if we even look at ourselves – we want it all. We want it now. Baby boomers like to live the good life, I guess. They spent a lot more time living than saving than maybe the previous generation. Perhaps more so than the previous generation, they’ve put money into RRSPs, stocks and mutuals that the previous generation hasn’t done because it wasn’t available.”

Among boomers in the CIBC survey who reported holding some form of debt, 42 per cent see their debt as an obstacle to achieving their financial goals, although many boomers (64 per cent) see themselves as making good progress toward paying down their debt.

Despite the increased importance of building their savings in the years leading up to retirement, the poll also revealed boomers with debt are not any more likely than other Canadians to be taking extra steps toward debt reduction: only 47 per cent of boomers have made at least one lumpsum payment toward their debt this year versus 46 per cent nationally; 44 per cent see themselves as making sacrifices to better manage their debt versus 46 per cent of all respondents.

“As boomers near retirement, managing and eliminating debt to allow for savings growth is a priority, and while it’s encouraging to see progress being made, these poll results show there is room for boomers to take further steps in this direction,” said Colette Delaney, CIBC’s senior vice-president of mortgage, lending, insurance and deposit products. “There are simple strategies those approaching retirement should consider, from making principal payments toward their mortgage to implementing a budget to help keep their debt repayment and savings on track.”

The poll results show that boomers still have progress to make on paying down their mortgage and other debt which will allow them to accelerate their retirement savings, said Delaney.

“Paying off your mortgage sooner can free up significant cash flow each month, which in turn helps you build your retirement savings faster and ultimately achieve the retirement you want for you and your family,” she said.

The results were based on a telephone survey of 890 Canadians between the ages of 45 and 64 between June 30 and July 10. The results are considered to accurately represent the population within this age group within 3.3 percentage points, 19 times out of 20.


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