Client debt: Your latest roadblock?

Canada’s personal debt load could lead to a scanty retirement, fear some advisors

Canada’s personal debt load could lead to a scanty retirement, fear some advisors

As three-quarters of Canadians say they are up to their eyeballs in personal debt owing an average of almost $16,000, according to a new Ipsos-Reid survey, conducted in late August.

Personal debt load – which includes credit cards, loans and personal lines of credit, but excludes mortgages – has spiked from $2,779 to $15,920 this year compared to 2012, according to RBC’s annual debt poll, released Tuesday.

“People are looking at lines of credit in the wrong way,” says Marta Stiteler, an independent financial advisor in Toronto. “They (lines of credit) don’t have a beginning, middle and end. They have a beginning and a middle that goes on and on forever.”

Stiteler feels borrowers have conveniently forgotten that the balance on a line of credit is debt incurred and interest rates will fluctuate over time. “It’s as if they (borrowers) think they have an ethereal amount of money. But, they have to pay it back,” she says. “They are not thinking about what happens when interest rates go up. What’s wrong with an old-fashioned emergency fund?” (continued on Page 2.)


The study found that young people between 18 and 34 years old were worried about what they owed, perhaps weighed down by student loans; while those over 55 were more comfortable with their debt due to acquired savings. Despite this air of confidence, Stiteler says she is seeing more seniors retire with debt, attributing part of the problem to banks issuing mortgages to retirees.

“In my experience, if you spend less than you make, put money away and have some insurance you’ll win,” she says. “The clients I started with used that kind of strategy and they’ve seen $30,000 turn into $300,000. It’s the slow, boring investing that wins. The turtle wins the race.”

Financial educator, Jim Yih, identifies RSP withdrawals as another key contributor to retiree distress. “There’s a whole bunch of people living on withdrawals from their RSPs. They are now 60 and can’t retire. Do you want to be that person?” asks Yih. “When you look to the future, what are you going to do? Picture yourself."

According to the Ipsos-Reid poll, just 24 per cent of Canadians said they were debt-free, down two per cent from 2012.