Nearly half of Canadian seniors say that home equity is a vital part of retirement planning.
And three quarters (76%) of those 55+ don’t want to downsize from their current home.
From this data, it’s clear that equity take-outs will be pivotal for seniors who want to survive retirement on something more gourmet than mac and cheese.
These new stats come from HomeEquity Bank, and they highlight how real estate continues to play a foundational role in supplementing retirement cash flow for a growing number of retirees.
In the past, more seniors sold their homes and downsized, using the proceeds to help fund retirements. That was “long considered the right thing to do,” HomeEquity Bank’s survey says.
Today, “Downsizing isn’t as attractive as it used to be,” HomeEquity Bank President and CEO Steven Ranson said, adding that there is now more risk associated with moving and finding another suitable home.
That’s supported by a recent survey from the National Institute on Aging, which found nine out of 10 Canadians want to stay in their homes as long as possible in their golden years.
Rates are based on a $300,000 mortgage.
A Breakdown of Retirement Income
It’s easy to understand why so many are looking to housing as the Golden Goose for their retirements. You can start by analyzing average incomes.
Consider a 65-year old earning income from the Canadian Pension Plan (CPP), Old Age Security (OAS) and an RRIF/annuity.
In January 2021, the average CPP income for new 65-year-olds was $736.58. The maximum amount a regular retiree could receive at 65 was $1,203.75.
Meanwhile, the average monthly payout from OAS is a measly $618.45.
And while it’s difficult to get an accurate gauge on average RRSP withdrawals, a 2019 BMO study found the average Baby Boomer’s (57- to 75-year-olds) RRSP balance was $178,664. Annuitized with a typical low-risk yield, that might provide only $765 in monthly income.
Talk about living off a fixed income.
Our sample senior above might receive just $2,120 per month. Tough to pay all the bills, travel and treat your grandchildren at that income level.
This is exactly why many believe reverse mortgages will explode in popularity over the coming decade, us included. That’ll be especially true if reverse mortgage rates stay rock-bottom and home prices keep trouncing inflation.