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Avoiding debt and financial instability at retirement 9 · Thursday, December 20, 2012 OAKVILLE BEAVER · www.insideHALTON.com I t is time to view personal debt with a new perspective as you approach retirement. Debt levels are at historic highs. This is particularly true for people over age 50. As a result, another dimension is added to the retirement formula. How do we handle debt on top of the other normal challenges of generating enough cash flow to support our desired lifestyle during retirement? The main financial objective upon retirement is to transition from spending your employment cash flow earnings to spending cash flow generated from retirement sources. The first source of income is from the government. This includes Old Age Security beginning at age 65 and the Canada Pension Plan that you will elect to start at some point during your 60s. Most of the remaining cash flow comes from your own investments resulting from years of contributing to a RRSP and additional savings that you have made during your working years. Those who are fortunate to have an employer sponsored pension have an additional source of predetermined income. These pensioners are often not as concerned about stock market volatility because their pension income is not subject to declining stock market values. Most of us agree, it is a luxury to have a steady stream of pension income every month. As good as it is to have a regular source of income, can you imagine the difficulty if you had a negative pension? Instead of money flowing in every month you would have money flowing out. Negative pensions do exist and it is called debt. Debtholders have money exiting their bank accounts monthly in the form of interest payments and principal repayment. Debt does not care whether you are retired or not. For some, this is a recipe for failure. Others will be able to manage because of their strong financial position. However, that position may be temporary. Unlike the pre-defined pension benefits that flow to a pensioner, the Dollars & Sense By Peter Watson rate of interest you pay on a loan @OakvilleBeaver may be subject to interest rate @NewsHooked increases. @DavidLea6 If you owe $100,000 at an inter@DominikKurek est rate of three per cent, your inter@BeaverSports est payments will be $3,000 per @Halton_Photog year. The actual debt payment you make is most likely to include Call Today, Dance Tonight! some repayment · Personalized, one-on-one lessons from highly trained of the loan so the professional dance teachers. payments will be · A great way to socialize, exercise and meet new friends. higher. · Attend daily group lessons and fun-filled practice parties · Couples and Singles Invited What hapPhone today and make an appointment! pens to your financial situation once the current historic905.849.0707 low interest rates 9 Lakeshore Rd. West, Oakville increase closer What you do on the dance floor is Our Business! www.arthurmurray.com www.arthurmurrayoakville.com to the normal rates and double to six per cent or higher? The tempting, current low interest rates are enticing a generation of aging baby boomers approaching retirement to abandon that normal financial conservatism. One of the legacies of this generation will be how personal debt levels got the better of them and caused financial hardship during retirement. Many will wish, in hindsight, they had not made the mistake of carrying the burden of debt into retirement. For those with debt, it's advisable they consider their financial stability during retirement. Take positive action now instead of waiting until it is too late. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. Follow Oakville Beaver staff on Twitter The Gift That's a Lifetime of Fun! ©AMI Celebrate the holidays with everything Apple in downtown Oakville Visit us in downtown Oakville at 249 Lakeshore East or call us at 905.849.0737 www.Core 1 .ca Downtown Oakville