Retiring on Pension with Debt: What You Need to Know
If you or someone you love is in debt and about to retire, there are some important factors you’ll likely need to consider and probably more than one question you’ll want to have answered. To help you move forward, here are the answers to some basic questions about retiring with debt in Ontario.
How will debt affect my retirement?
The idea that retirement equals financial freedom unfortunately just isn’t true anymore. In fact, more Canadians are retiring with mortgages, car payments and credit card debt today than they did in the past. In fact, 30% of bankruptcies in Ontario are filed by seniors, and more than 40% of Canadian seniors report having debt. The good news is there are proven methods that can reduce the financial burdens of retirees.
Can my pension be garnished by collectors?
The short answer is no. Creditors are only allowed to garnish wages. Income derived from social assistance or government pensions are not considered wages and therefore are untouchable. In Ontario, credit card companies and other creditors are not allowed to touch your pension.
Should I use my pension to pay down my debt?
You may be eligible for payments under the Ontario Retirement Pension Plan (ORPP). However, the ORPP was developed as a supplementary income source for Ontarians without an employer pension plan and/or who don’t contribute to an RRSP.
Using your pension for debt repayment has its pros and cons and should be carefully considered. Fortunately, the licensed insolvency trustees at D. & A. Macleod can help you navigate these complicated waters to help you find a way forward.
What should I do if I’m retiring with debt?
Protect yourself by opening a bank account not affiliated with your credit cards. This way, the credit card company can’t just dive into your bank account to get a payment.
Knowing that your income can’t be seized, you may want to avoid bankruptcy as you’d be protecting yourself only from creditors who can’t garnish your wages. Bankruptcy has its drawbacks, and you may prefer debt consolidation or a consumer proposal. A licensed insolvency trustee can help you throughout the process.
We’re Here to Help – Call D. & A. MacLeod Today!
Our team of experienced licensed insolvency trustees at D. & A. MacLeod understand the stress and anxiety that comes with living off a pension while debt collectors are calling. Contact us today in Ottawa or at a location near you to book an appointment and find out how we can help you regain your financial footing in your retirement years.