Debt: The new four-letter word for seniors

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Students who graduate with high debt levels and young couples with mortgages at very dangerous levels are a staple of the news media. What often passes below the radar is the increasing debt of seniors. Ipsos Reid has found that the portion of the population over 65 owing money has risen from 47 per cent in 2009 to 52 per cent in 2014. This is same time period over which the percentage of seniors in poverty rose.

Although the current poverty rate among the elderly is significantly lower than in the 1970s, the increase documented in Statistics Canada data -- from 3.9 per cent in 1995 to 12.3 per cent in 2010 -- is troubling. Among the elderly, the biggest jump occurred among elderly women. Between 2006 and 2010, 160,000 more seniors were said to be living as low income. Of that amount, almost 60 per cent were women.

In some cases, debts are compounded by job loss heading into retirement. Canadians were second only to Australians in saying that they had semi-retired because of a lack of job prospects.

When the job loss is a result of major illness, the results can be catastrophic. There is a great temptation to use credit cards to buy things or even to pay outstanding debt on another credit card.

Increasingly people at or in retirement age are staggering under debt loads. Traditionally this age group was largely debt free as the mortgage was paid off and the kids had moved out of the house. Today they are often supporting adult children not only in school but after they graduate. The lucky ones are assisting with a down payment on a home; the unlucky ones are supporting unemployed or underemployed sons and daughters.

The average debt load in Canada is $100,000. While half of retirees with debt owe less than $25,000, about one-sixth of them are in debt for more than $100,000.

Banks love to lend to seniors because it is very profitable, and with loans like CHIP reverse mortgages, at almost no risk to them. Ads seem to offer free money to do anything you want, from home renovations to trips to grandkids' education. No payments asked until you leave or die. But then the bank will own all or almost all of your home.

For those seniors who do not own their own home and rely on Old Age Security (OAS), Canada Pension Plan (CPP) and Guaranteed Income supplement (GIS), there are payday loans. You can get $100 for a two-week loan for only $23 in B.C. People may think that is only 23 per cent interest but on an annual basis it is approximately 600 per cent. Worse than loan sharking which itself is illegal.

Seniors have the highest level of outstanding debt among people filing for insolvency in Ontario -- including the largest balance of unpaid payday loans.

Seniors accounted for 10 per cent of all insolvencies -- up from eight per cent four years ago -- and had the highest level of unsecured debt at the time of their insolvency, averaging $69,031 each. That is 22 per cent higher than the average unsecured debt of $56,545 for all people filing for insolvency.

Most seniors are highly committed to repaying their debts, and turn to payday loans to cover payments on credit cards and other loans. Payday lenders will lend to people whose only income comes from government OAS and CPP payments, knowing seniors are guaranteed to get those funds.

In addition to having the highest payday loans outstanding, people over 60 also had the highest unpaid credit card balances at the time of their insolvency. Credit card debt for those over 60 averaged $33,355 per person, compared to $28,006 for debtors aged 50 to 59, and $21,491 for those 40 to 49.

Insolvent seniors also have the highest unpaid tax bills owed to the Canada Revenue Agency. Many seniors are surprised to discover they owe money at tax time on their pensions and other income sources, because they were accustomed to having ample tax automatically taken off their paycheques while they were working.

Seniors' growing level of debt is a real concern but it could be a sign of things to come for today's working-age Canadians who are only now starting to dig themselves into debt to afford student loans, cars and houses.

Retiree Matters is a monthly column written by members of the Congress of Union Retirees of Canada (CURC) that explores issues relevant to retirees, senior citizens, their families and their communities. CURC acts as an advocacy organization to ensure that the concerns of union retirees and senior citizens are heard throughout Canada.

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