November 24, 2016 / Published 8:00 AM EST / Tamara George

Using your home to fund your retirement - without selling

Canadians are living longer lives. Many software tools used by Financial Advisors calculate investment income to age 90. But these days, there’s a good chance of living past that age. And while longevity is a good thing, the added years can put a significant strain on retirement savings. 

Health care costs, in-home care or nursing facilities, market fluctuations, travel, home renovations, emergencies, and helping out family members are just a few things that can impact cash flow and the longevity of a financial portfolio. According to a recent CBC article, people are being advised to set aside more for retirement.

So where will the added money come from? According to Stats Canada, 40% of most Canadians’ net worth is in real estate – so your home may be the answer. But most owners don’t want to sell to fund their later years; a new survey by Manulife Bank says 79% of Baby Boomers want to stay in their current homes when they retire. However, 22% say their home represents over 80% of their wealth, with a further 18% saying it makes up 61-80% of their net worth.

Using home equity – in the form of a home equity line of credit, a reverse mortgage or a Manulife One account – is a cost-effective way for retirees to address cash flow challenges in retirement. Here’s an overview of how tapping into it can help:

  • Higher health care costs. As we age, the likelihood of medical costs becomes an increased risk. In-home care or placement in a nursing facility can be a significant burden for those who aren’t insured for these situations. Using your equity gives you choices. If you need a healthcare provider, you can choose to pay for one in your home. If one spouse needs long-term care, the other can remain in the family residence. At the very least, it gives you time to consider your options.
  • Market fluctuations. If markets are down when you retire, the lifetime of your portfolio can be shortened by years. Withdrawing income (tax-free) from the equity in your home during this market phase can be an option.
  • Large expenses. Renovations, travel, and helping family members are often larger, lump sum expenses. Taking the money from investments (particularly registered investments) can lead to significant tax implications. The withdrawal itself may be taxable. It may also bump you up into the next tax bracket, dramatically increasing the overall cost of that expense, and it may also impact the longevity of the portfolio. Using the equity in your home may be a far more cost-effective way to access the money you need.

Line of credit or reverse mortgage?

Accessing equity typically happens in one of two ways: a reverse mortgage or a home equity line of credit (HELOC), both of which are ways to defer the bulk of repayment to when you sell your home. Each option has its pros and cons – it’s important to consider where you are in life and what works best for your needs.

Uncover the #MortgageTruth and outsmart your debt with Manulife One. To learn more visit

About the Manulife Bank of Canada Debt Survey

The Manulife Bank of Canada poll surveyed 2,372 Canadian homeowners aged 20 to 69 with household incomes of $50K or more. The survey was conducted online by Environics Research between June 28 and July 8, 2016. National results were weighted by province, income and age.

More insights from the survey:

  • Nearly half of Canadian homeowners aren’t prepared for emergency expenses.
  • One third of millennials feel that mortgage rates are too high.
  • More than 4 in 10 homeowners are taking advantage of the low interest environment to pay down debt faster.
  • 41% of Gen X respondents are concerned about not being able to save enough for retirement.
  • Find more details here

This article was originally published as a LinkedIn Pulse Post by Jodi Henderson, Business Development Consultant, Manulife Bank.

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