Playing with Fire? Debt near Retirement in Canada

Nicolas Bédard and Pierre-Carl Michaud

Cahiers de recherche from Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques

Abstract: Because retired households cannot adjust quickly to shocks, for example by working more, they represent a vulnerable group when credit conditions deteriorate. We analyze the evolution of debt among households nearing retirement in Canada over the period 1999-2016. First, we find that debt as a ratio of income has risen considerably over that period and debt as a fraction of assets has also doubled even tough assets remain roughly five times as large as debt. Second, we report that mortgage debt has risen the most but that average mortgage payments have remained relatively constant over the period due to the downward trend in borrowing costs. Finally, we find that a small but significant fraction households are playing with fire, being vulnerable to a sudden rise on borrowing costs or a drop in house values which could jeopardize their standard of living in retirement.

Keywords: Household debt; mortgages; credit; retirement. (search for similar items in EconPapers)
JEL-codes: D14 D15 D18 J14 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-age and nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:lvl:criacr:1814

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