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Just curious, hadn't really thought that anyone would do this, but after reading the following article, I guess it does happen.

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgage-burden-overshadows-retirement/article1540364/

Perhaps some of you closer to retirement could give some input on this article.
I'm about 4 1/2 years away from retirement and plan to be debt-free. Unfortunately due to a hefty medical bill that threw a wrench into all my carefully thought out plans, I have a loan now. Thankfully it will be paid off in a year and then I can return to power saving mode.

Most of my friends however, don't grasp how beneficial it is to be debt-free when they retire. I've been told that retiring with no debt is the "old fashioned way" and no longer necessary.

I have 3 retired friends, aged 68 to 71, who all have mortgages and no intention of trying to pay them off. Two do fine with their payments but the third is struggling. She constantly laments that she wished she'd made better financial choices when she was younger.

Many in my own age group (50s) still have ridiculously high mortgages and car loans and just don`t understand the benefits of paying them off and saving money for retirement. They have no idea how much they`ll need to supplement public benefits or how much their private pensions will be. They can barely live on their current salaries so trying to live on much less in retirement will come as a shock. They think they`ll be able to keep their homes with mortgages, travel and so whatever they want to do without having saved a dime.

We`ve had many discussions over the years about retirement and I`ve directed them to resources to help them learn how to get a better handle on their finances. But as they say, "You can lead a horse to water but you can't make him drink."

We're all in the same profession, have earned the same salaries for the past 30 years and all raised kids on our own. Yet because of how they've managed their money, they'll be working at jobs they dislike for longer than they anticipated. Or, they may retire and be shocked that they don't have enough money for even basics after making their payments.
 

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Debt and retirement don't mix very well. This includes investment leverage in my view. The sooner you pay the loans off the better off you will be. Seems trite but I think important.
 

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If you are spending other people's money like a drunken sailor, why would a person quit doing it simply because they retired? They never really intended to pay it back anyway ... or should I say, they never created a plan to pay it back. Same thing.
 

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...

Many in my own age group (50s) still have ridiculously high mortgages and car loans and just don`t understand the benefits of paying them off and saving money for retirement. They have no idea how much they`ll need to supplement public benefits or how much their private pensions will be. They can barely live on their current salaries so trying to live on much less in retirement will come as a shock. They think they`ll be able to keep their homes with mortgages, travel and so whatever they want to do without having saved a dime.
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I just can't understand this. How hard is it to figure out that if your work income stops one day then you will need something to replace it? (or a significant part of it at least).
 

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Many in my own age group (50s) still have ridiculously high mortgages and car loans and just don`t understand the benefits of paying them off and saving money for retirement. They have no idea how much they`ll need to supplement public benefits or how much their private pensions will be. They can barely live on their current salaries so trying to live on much less in retirement will come as a shock. They think they`ll be able to keep their homes with mortgages, travel and so whatever they want to do without having saved a dime.
My parents are like this and it concerns me very much. For the sake of their senior life, it's not a good thought.
 

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I think about this issue very frequently. I'm pretty sure I've said this in another thread here someplace: I sometimes wonder if people are just fundamentally much more optimistic than I am.

I mostly think about that in reference to mortgages. In Toronto, where I live, the "norm" (at least in much of my peer group) is to have what seem like enormous mortgages to me - with $500K or more of mortgage debt in your mid- to late-40's.

Maybe people are just earning way more money than I am, or they have some other plan to pay off that debt, or they just don't actually have a plan to pay it off.
 

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Maybe people are just earning way more money than I am, or they have some other plan to pay off that debt, or they just don't actually have a plan to pay it off.
I think it's basically the ostrich mentality -- just stick your head in the sand and pretend the problem doesn't exist. My brother and sister-in-law are university professors and have a huge mortgage that they told me they will "never pay off." My other brother is 61 and has nothing saved for retirement (he did have about $40K saved but he lost his job last year and has been using the money to live on).

I think for many people, just dealing with today and their immediate needs is challenging and draining enough that they don't have the time or energy to think clearly about the future and start planning for it.
 

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I mostly think about that in reference to mortgages. In Toronto, where I live, the "norm" (at least in much of my peer group) is to have what seem like enormous mortgages to me - with $500K or more of mortgage debt in your mid- to late-40's.
Wow, I can't imagine.

If their income were high enough to pay that off in 10-15 years (I would like to imagine this income for myself!), then more power to them.

But more likely for the majority that they are either very optimistic, or upside down birds.
 

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I think it's basically the ostrich mentality -- just stick your head in the sand and pretend the problem doesn't exist. My brother and sister-in-law are university professors and have a huge mortgage that they told me they will "never pay off." My other brother is 61 and has nothing saved for retirement (he did have about $40K saved but he lost his job last year and has been using the money to live on).

I think for many people, just dealing with today and their immediate needs is challenging and draining enough that they don't have the time or energy to think clearly about the future and start planning for it.
I think a large mortgage is what often ruins people in their quest for retirement, particularly if they want to retire early. What I find amusing about your brother's comment is that he simply doesn't care that he'll be in debt in retirement. Looking at the "big picture", we're eventually all going to die (maybe sooner than we expect), so what's the big deal if we're in debt in retirement? Sure our kids (if you have any) may not receive a cash gift when you pass, but they should be worrying about taking care of themselves and not relying on parents for income. So, although I'm a saver and have a personal early retirement goal, I understand how your brother and sister-in-law think... in the end it doesn't really matter... I personally feel it's whatever decision makes you sleep better at night.
 

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It doesn't help that the government sets up senior's programs like Guaranteed Income Supplement, prescription drug benefits, first in line for low income housing, not to mention the 10% off for seniors, everywhere you look.

I am not without heart for our senior citizens, but the problem is, we see some poor unfortuneate senior who either couldn't or didn't save enough for retirement and so we throw money at them and then turn around and ask "gee why do we have so many seniors that didn't save enough for retirement?" Duh !
 

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Yes exactly eagle. We're headed down a very slippery slope when we plan to die with debt. Realistically what happens is those seniors, many with some type of disability, become a social case and start lobbying the gov't for more money or changes to accomodate them. I have a fundamental problem with that because I do not feel my taxes should support seniors, disabled or not, who are poor as a consequence of their financial mismanagement earlier in life.

People in this country have really got to stop being so dependent on the gov't to take care of them. Look after yourself!
 

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I am not without heart for our senior citizens, but the problem is, we see some poor unfortuneate senior who either couldn't or didn't save enough for retirement and so we throw money at them and then turn around and ask "gee why do we have so many seniors that didn't save enough for retirement?" Duh !
I've lost track of how many of my friends and acquaintances either don't have an RRSP or don't contribute enough to their RRSP for retirement.

Personally, I think that they're robbing from Peter to pay Paul -- they're enjoying the "easy life" now, but will pay for it in their golden years.


K.
 

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I think this one of the better reasons to support expanded CPP. It helps with freeloading as people are forced to save a higher minimum of their income. Doesn't help so much with people who earn little during their working years.
 

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I am sure a case can be made for investment leverage in retirement. But in my opinion returns are risky enough that they shouldn't be multiplied through leverage when you are retired. I'm sure some advisors would recommend otherwise?
 

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I mostly think about that in reference to mortgages. In Toronto, where I live, the "norm" (at least in much of my peer group) is to have what seem like enormous mortgages to me - with $500K or more of mortgage debt in your mid- to late-40's.
I know exactly how it is with mortgages. I was in that situation when I lived in Vancouver over 10 years ago. Fortunately for me, my employer gave me an offer I couldn't refuse to move to Ottawa. With the difference in real estate prices, I am now mortgage free. And am loving Ottawa.

I recently paid off all my debts (car, line of credit, etc.). In these uncertain economic times, I think it is much better to be a lender than a borrower. Makes me sleep better at night. Makes me more prepared for retirement. Probably will not return to Vancouver when I retire. Nice place to visit, too expensive to live there.

I do not belong to a defined benefit pension program so am planning to rely on my savings for retirement income. Give us a heads up, MG, when your book is to be released.

PS. I have become more conservative in my investing as retirement creeps up on me. Whereas I used investment leverage earlier in my career, I have stopped that. I still have a fair amount of equity, but I tend to favor dividend yielding cos.
 
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