Almost a quarter of Canadians say they are planning on using their homes as
their primary source of income once they are out of the workforce, according to
a survey from Sun Life Financial.
“It’s not something we would recommend per se, it is a bit of a surprise,”
says Sadiq Adatia, chief investment officer of Sun Life Global Investments,
about the retirement strategy being considered by 24% of Canadians. “People
should be counting on their retirement savings and not really looking at their
home. A home is something you can have and carry forward with you.”
Any retirement strategy involving accessing the equity of the home could mean
selling it or at the very least getting a new mortgage on the property or a
Mr. Adatia thinks the downturn in the stock market in 2008 may have affected
people’s retirement plans and has them turning to their homes to pick up the
Rising home values have helped many Canadians approaching retirement feel
like they have created a pretty big nest egg. The Canadian Real Estate
Association said last month the average home in the country sold for $388,553 in
January, a new high and a 9.5% increase from a year earlier.
On average, Canadians expect 10% of their retirement income to come from
their home. Government pension plans on average are expected to supply 30% of
retirement income, 27% is to come from personal savings, 23% from employer
plans, 5% from inheritance and 6% from what is called other sources.
Even with their optimism over accessing their home equity, only 28% of
Canadians expected to be retired by 66. Another 56% of Canadians expect to work
past retirement age with 65% of those people saying they will need to.
“The average expected retirement age in Canada has hit its lowest level in
four years – it’s 66 this year down from a high of age 69 in 2011,” said Kevin
Dougherty, president of Sun Life Financial Canada. “With people living longer
and more Canadians expecting to retire sooner, it’s important to look at what
savings you will need to be fully prepared.”
Mr. Adatia thinks a retirement plan involving selling your home might work
for people who bought a few years ago, it might not work for people buying
“I know my own parents bought their home 30 years ago and at an extremely
dirt cheap price,” he said, adding the older people can afford to absorb a
downtown in the market if it happens. “If you’re 40 and bought your home five
years ago, you can’t afford that hit.”
Sun Life’s view on real estate is the market is inflated and there might be a
significant decline in prices, making renting a viable option. The company says
homes are selling for on average six times personal income, compared to a
historical average of four times.
“Do you want to overextend yourself at the peak of the market?” said Mr.
The survey was conducted by Ipsos Reid between Nov. 12 to Nov. 20 and is
considered accurate to within two percentage points.
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