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stefan ayache

Mortgages: More than half of Canadians to carry household debt into retirement | Mortga... - 1 views

business.financialpost.com/...to-retire-with-mortgage-survey

shared by stefan ayache on 17 May 12 - No Cached
  • The one thing Canadians won’t be retiring anytime soon is their mortgage debt
  • Bank of Montreal says 51% of Canadian homeowners plan to carry their mortgage into their retirement
  • times have changed and he believes Canadians can handle the burden
  • ...12 more annotations...
  • People are more sophisticated in their approach to personal finance today than the previous generation
  • People are living longer, working longer and making real estate plans longer or further into their lives
  • Another trend, one which was not considered by the industry before, is people moving into more expensive, upscale homes after retirement
  • Another part of the trend could very well be strategic. With rates on a five-year closed mortgage at about 3.5%, paying down that debt might not seem as high a priority for many homeowners
  • The extremely low level of interest rates is acting both as an inducement for people to take on more debt than they would have in the past and on the flipside not encouraging them to save as in the past
  • People could end up working longer and it might also mean there will be that much less equity in the home you’ll be leaving to heirs
  • could also reflect the longer amortizations the mortgage industry saw
  • Traditionally, mortgages were amortized over 25 years, but that number ballooned to 40
  • the issue is how it’s affecting retirement with half of Canadian homeowners saying their debt load was hindering their ability to plan and save
  • Canadians need about 70% of their pre-retirement income to maintain the same lifestyle
  • By 60 to 69, 25% of those people still have a mortgage
  • real estate prices continue at all-time highs
Kevin Mao

Are low interest rates causing low savings rates? | Fox Business - 0 views

www.foxbusiness.com/...ates-causing-low-savings-rates

interest rates savings retirement

shared by Kevin Mao on 17 May 12 - No Cached
  • recent study found that nearly half of American workers are not contributing to any form of retirement plan.
  • People who fail to save money will pay for their short-sightedness in the future, but the decline of savings can also be seen as a logical response to a low-interest-rate environment
  • 49 percent of respondents said they were not contributing to any retirement plan
  • ...12 more annotations...
  • average personal savings rate in the U.S. slipped to 3.9 percent in the first quarter of 2012 -- the lowest level in over four years
  • With savings account interest rates near zero, people are left with little incentive to save.
  • With interest rates running well below the rate of inflation, money in a savings account or other deposit vehicle is actually losing purchasing power with each passing day
  • you have to consider one additional factor: inflation.
  • Bond yields are not much higher, and stocks haven't been very rewarding so far in the 21st century either
  • However, getting the most for your money is only one consideration. Having resources to support your retirement is also an important function of saving, and in this respect people with low savings rates are not behaving rationally.
  • while low interest rates may seem to discourage saving money, they actually make it more imperative.
  • other important point of this context is that outside of the government, most people no longer have an employer pension plan to fall back on.
  • shift from defined benefit to defined contribution retirement plans put the responsibility for saving solely on the employees
  • people seem to have responded to this trend by saving less rather than more
  • by choosing more immediate consumption over saving for retirement, people are supporting their current lifestyles at the expense of the future.
  • this is a decision that many will regret once that future arrives
  • Kevin Mao on 17 May 12
     
    An article about how interest rates influence saving habits.
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