A New York Post article reflects upon a new reality in regards to retirement.
“Now 80 is the new 60 when it comes to retirement. Many older workers who finally clock out have sharply underestimated their financial needs in retirement, raising the specter of personal financial disaster.”
This is actually a normal progression when you consider we are living longer. The problem is the effect it has on overall employment and upward mobility in companies.
“By putting off retirement the Baby Boomers are a large reason for the high levels of unemployment for those looking to enter the workforce. According to the latest Bureau of Labor Statistics the rate of joblessness in people 20- to 25-years old is 12.5 percent, twice the rate of people 25 and older.”
Further complicating the issue of retirement though is debt.
“A survey released Tuesday from Manulife Bank found that 49% are confident they’ll still have some debt in retirement, including mortgages, compared with 51% who say they anticipate being debt-free at that stage.”
Mortgages tend to be looked on as “good” debt, as homes are considered an investment and do not depreciate in value over time… or so some believe.
“The agency forecasted Tuesday that home prices across the country are in for a “soft landing” and will either flatten out or slightly decrease over the next five years. It estimates that current prices are overvalued by up to 26 per cent in some regions and could fall by as much as 10 per cent in some places.”
“Fitch Ratings said the Canadian economy will be exposed when this happens, as many homebuyers have financially stretched themselves to borrow for their home purchase and will be in for a shock once interest rates start to climb.”
No one knows if this will happen any time soon but its better to act than react. It is important to not rely solely on the equity in your home as your retirement investment.