A new RBC survey says home equity is playing a more prominent role in Canadian’s retirement plans. More than half (55 per cent) of non-retired Canadians age 50+ said they expect to leverage the equity in their home as a source of retirement income (up from 49 per cent in 2018), with 52 per cent stating they would downsize or rent instead of owning to bring in more income if needed in retirement (up from 36 per cent in 2018).
The research also found that one-quarter (25 per cent) of these not-yet-retired Canadians would borrow against the equity in their home if needed, and a further 12 per cent believe they would rent out a part of their home for additional funds.
“We spend most of our working years saving for retirement and when the time comes, we hope the savings will provide us the freedom to enjoy the lifestyle we want,” says Nicole Wells, VP, home equity financing for RBC. “More and more, we’re seeing Canadians rely on their home as part of their retirement plans. Whether it’s rightsizing or accessing equity in your home, if your residence is part of the journey to retirement, it’s important to be sure you understand the path that will get you there.”
The research also showed that debt is a reality of retirement for 19 per cent of non-retired Canadians age 50+ and, of these, 62 per cent anticipate they will still be paying off their mortgage into their retirement years.
Further compromising their retirement nest eggs, through additional consumer research, RBC says it found that Canadians are funding their children’s lives into adulthood (28 per cent of first time and prospective home buyers purchased or plan to purchase with the assistance of family). The majority (76 per cent) of parents report they are still supporting their 18- to 35-year-old children – with those who do spending an average $5,623 per year to provide this support. Forty-five per cent of parents also fund living expenses – which includes mortgage payments – for their adult children. More than one-third (36 per cent) are concerned that supporting their adult children will impact their retirement savings.
“When it comes to the home and retirement plans, it’s not a one size fits all approach and it’s not a one-and-done plan,” says Wells. “As we’re seeing parents support their children later in life, that can come with a major impact to savings and retirement plans. The best approach is to start thinking ahead, long before retirement is within reach.”