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Four paradigm shifts over my 30 years in personal finance:
- The rise and fall of mutual funds as the investment for all
- The democratization of investing through the rise of low-cost online brokers and trading apps
- The investification of home ownership
- And, the quietest of the bunch, capitulation to indebtedness as a constant in life
Evidence of this acceptance of perma-debt is plain to see in the data on people retiring with debt. It’s officially normal, and understandable, to retire with a mortgage or a significant balance on a home equity line of credit.
Now, for the warning label that should be stamped on any financial plan to retire with debt. If you plan to make payments on a mortgage, HELOC or loan in retirement, you’ll either need to save more in your working years, accept a lower standard of living or run the risk of running out of money. The money for those debt payments has to come from somewhere.
Boomers, you can dial down the urgency on the ‘get my kids a home’ project
One of the most useful things I did before retiring was to create a budgeting spreadsheet with one column listing our monthly household expenses while working full-time and another estimating costs after stepping out of the full-time work force.
You can ideally get by with less income in retirement because two big expenses from your working years disappear. One is retirement saving, which has to be financial priority in the years leading up to retirement.
The other expense that ideally drops away is debt repayment. In a perfect world, you kill off your mortgage several years ahead of retirement and reroute your biweekly or monthly payments into retirement savings. But it’s still a big win to be debt-free just in time for retirement.
If you have a $2,000 monthly mortgage payment in retirement, you need $2,000 in after-tax income to cover that expense. A B.C. resident with income of $85,000 from a pension and a registered retirement income fund would have a marginal tax rate of 28.2 per cent. That means it would take about $2,785 in regular income to generate enough the after-tax dollars needed to cover a mortgage payment.
I just looked at that retirement budgeting spreadsheet I mentioned earlier and, in our household budget, there are exactly zero monthly expenses as high as $2,785. The only thing remotely close is the monthly amount we put away for travel.
You’ll have a more relaxed and enjoyable retirement if your debts are cleared by retirement, but it has to be acknowledged that this isn’t happening for a growing number of people.
A survey commissioned last year by realtor Royal LePage found that 29 per cent of people planning to retire in 2025 or 2026 expected to continue making mortgage payments on their primary residence after retiring. Statistics Canada says 14 per cent of households with income earners aged 65-plus had a mortgage in 2016, compared with 8 per cent for 1999.
Another nugget from Statscan: Households aged 55 to 64 years recorded the strongest growth in average mortgage debt in the final quarter of 2025 at 6 per cent on a year-over-year basis. Two theories were advanced on what’s happening here: Older age groups may be increasing their mortgage debt to purchase an investment property, or to help adult children buy a home.
Using debt to build real estate wealth for you or your kids is a valid but imperfect strategy. For one thing, interest costs for mortgages today are expensive by standards of the past 10 years. Also, homes aren’t appreciating like they did a few years ago and there’s little sign of the next boom.
Here’s another problem with tapping real estate equity – it can be habit-forming. HELOCs have been accurately described as ATMs available any time. You just have to pay interest each month – repayment of principal can be delayed indefinitely.
In a recent episode of The Findustry, a podcast for the financial advisers that I’m co-hosting with certified financial planner Shannon Lee Simmons, I threw out the question of whether it’s a fail for advisers if their clients retire with debt.
Ms. Simmons said mortgages in retirement are becoming normal. “But how much more do you need in your portfolio to pay that mortgage?” she said. “I don’t know if people think about that.”
Rob Carrick is a personal finance expert and former Globe and Mail staff columnist.
