by Dan Adair, Island Savings Brentwood Bay –
According to the Government of Canada’s most recent statistics, 11.4% of seniors (65 and older) declared bankruptcy in 2016. The number appears to be on an upward swing – in 2014, 10.9% of seniors reported insolvency, compared to only 9.2% in 2012. Yes, there are several factors influencing this trend, but nevertheless, seniors need to be vigilant when it comes to managing their finances in the golden years. Here are some common pitfalls and advice for navigating them.
Beware the easy money trap. The attractiveness of easy money – borrowing at low interest rates – as well as borrowing beyond our means is usually thought of as a stumbling block for younger Canadians. But seniors aren’t immune to falling into the debt trap. Saddling yourself with debt later in life or during retirement years can be a problem, largely because your income is likely to be fixed (pensions and retirement savings) and much less than it was during prime earning years. This also applies to co-signing loans for family members or friends. Know that as a co-signer, you could be on the hook for the debt if the loan isn’t paid.
You may be retired, but your financial plan isn’t. Thorough and thoughtful financial planning is essential, regardless of age, because life circumstances may change. Review your financial plan at least once a year to make sure it reflects your current life situation and things you anticipate in the near future.
Get a second opinion on financial advice from loved ones.Family and friends may be well-intentioned with their financial advice – but could be drawing on past experiences that aren’t likely to happen in today’s financial services marketplace. Hear their advice, but confirm with a trusted financial advisor in the industry who knows the current landscape.
Be careful with joint account scenarios. There can be good reason for having a loved one as a joint account holder on your bank account. For example, a trusted family member or friend might help manage bill payments and a joint account makes this easier. But putting a joint holder on your account carries substantial risk because it gives this person access to all the money in your account. So trust is paramount – carefully consider the character of those you want to have access to your accounts. Ask yourself how well you know them. Newly-met friends or long-lost family members are not good candidates for joint access, nor are family members who have a history of financial mismanagement.
Dan Adair is Branch Manager at Island Savings’ Brentwood Bay location and has more than 20 years of experience in financial services and providing personal financial advice.
