Using your home equity to supplement your retirement savings is not only a good idea, it is increasingly becoming a necessary part of retirement. For many seniors who started retirement planning late in favour of buying homes and starting their families, tapping into home equity may be the best way to afford the lifestyle you want when you have finished working.
The problem with home equity is that you’re always going to need a place to live. That’s one reason financial planners count your home as a personal asset, not part of your retirement savings. However, many seniors will find that their home is their single most valuable asset. Real estate is a valuable alternative asset in any portfolio, and it makes sense to tap into it. Here are some ways you can sensibly make use of that money.
Downsize to Capitalize
With Toronto home values what they are, many seniors in the GTA are sitting on homes that have appreciated considerably in the last few decades. One great way to add to your retirement fund is to downsize into a smaller place or a rental, and invest the proceeds.
There are a few downsides to downsizing in Toronto. If you choose to rent, that’s an ongoing, monthly cost you will have to pay, and you will go from stable housing to some level of uncertainty. You may be “renovicted,” a growing trend in Toronto in which tenants who have always paid their rent get evicted so landlords can avoid rent controls.
Cut Costs by Moving Somewhere More Affordable
Toronto and the GTA are the most expensive places to live in Ontario. Even moving into a smaller home can be surprisingly expensive and leave you with less money than you had planned. You can maximize your returns by moving outside of the GTA in southern Ontario.
Move into a Senior Residence
A much more stable way to downsize and rent is moving into a retirement residence purpose-built for seniors. With the availability of more senior residences focused on independent living, it can be a great way to cut down on your costs and responsibilities. Retirement residences such as All Seniors Care Living Centres offer a blend of independent and assisted living, making senior housing a more appealing option.
With residences across Ontario and Canada, you can find affordable senior housing in a top retirement destination. Learn more about All Seniors Care residences in southern Ontario, including London and Stratford. Enjoy world-class amenities for seniors such as access to healthcare and cultural activities at a much more affordable price than Toronto.
Renting Your Home
One alternative to selling is renting out part or all of your home. You can turn your home into an income-generator without having to sell the equity. If you’re looking forward to leaving the home to your family, renting out a basement suite or the entire home will supplement your retirement income but leave your equity intact. The City of Toronto is taking steps to make it easier to add a rental unit to your home so it may be worth looking into this option.
There are many ways you can take advantage of the value of your home by downsizing in Toronto to support your retirement goals. Talk to a financial advisor about which choice is right for you.
You might be interested in reading “Ryan Coyle Toronto Real Estate Challenge“.