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Four paradigm shifts in my 30 years in personal finance:
- The rise and fall of mutual funds as an investment for all
- Democratization of investing through the rise of low-cost online brokers and trading apps
- home ownership investment
- And, the quietest of the group, surrendering to indebtedness as a constant in life.
Evidence of this acceptance of permanent debt can be clearly seen in the statistics of people retiring with debt. Retiring with a significant balance on a mortgage or home equity line of credit is officially normal and understandable.
Now, for the warning label that should be stamped on any financial plan for retiring from debt. If you’re planning on making payments on a mortgage, HELOC or loan in retirement, you’ll either have to save more in your working years, accept a lower standard of living or risk running out of money. The money for those loan payments will have to come from somewhere.
Boomers, you can reduce the urgency of the ‘get my kids home’ project
One of the most useful things I did before retiring was to create a budgeting spreadsheet that listed our monthly household expenses while working full-time in one column and projected costs after exiting the full-time workforce in another column.
You can ideally live with less income in retirement because two of the big expenses of your working years disappear. One is retirement savings, which should be a financial priority in the years leading up to retirement.
Another expense that ideally gets reduced is loan repayment. In an ideal world, you eliminate your mortgage several years before retirement and divert your biweekly or monthly payments to retirement savings. But being debt-free just in time for retirement is still a big win.
If you have a monthly mortgage payment of $2,000 in retirement, you will need $2,000 in after-tax income to cover that expense. A BC resident with an income of $85,000 from a pension and a registered retirement income fund will have a marginal tax rate Of 28.2 percent. This means it will take about $2,785 in regular income to generate the after-tax dollars needed to cover the mortgage payment.
I just looked at that retirement budgeting spreadsheet I mentioned earlier and, in our household budget, there are exactly zero monthly expenses up to $2,785. The only thing that doesn’t match up remotely is the monthly amount we set aside for travel.
Your retirement will be more comfortable and enjoyable if your debt is paid off by retirement, but it must be acknowledged that this is not the case for an increasing number of people.
A survey A study commissioned last year by realtor Royal LePage found that 29 percent of people planning to retire in 2025 or 2026 expect to continue making mortgage payments on their primary residence after they retire. statistics canada says 14 percent of households with income earners over the age of 65 had a mortgage in 2016, compared to 8 percent in 1999.
one more Gold nugget From StatsCan: Households ages 55 to 64 experienced the strongest increase in mortgage debt, averaging 6 percent on a year-over-year basis in the last quarter of 2025. Two theories were developed on what is happening here: the aging group may be increasing their mortgage debt to purchase investment property, or to help adult children purchase homes.
Using debt to build real estate for yourself or your children is a valid but imperfect strategy. For one thing, interest costs on mortgages today are expensive by the standards of the past 10 years. Furthermore, homes are not appreciating like they did a few years ago and there is no sign of the next boom.
Here’s another problem with tapping into real estate equity – it can be habit-forming. HELOCs are accurately described as ATMs available at any time. You just have to pay the interest every month – repayment of the principal can be delayed indefinitely.
in a recent episode The Findstree, In a podcast for financial advisors that I co-host with certified financial planner Shannon Lee Simmons, I addressed the question of whether it is a failure for advisors if their clients retire with debt.
Ms Simmons said mortgages were becoming common in retirement. “But how much more do you need in your portfolio to pay off that mortgage?” He said. “I don’t know if people think about it or not.”
Rob Carrick is a personal finance expert and former Globe and Mail staff columnist.