About one in five of homeowners says they will have to use their home equity to supplement their retirement income, according to a survey by Manulife Bank of Canada published December 1.
The Manulife Bank Debt Survey of 2,373 Canadians found that nearly one in five homeowners sees their home as part of their retirement income equation, with 10 per cent of respondents planning borrow against current home’s equity and eight per cent planning to downsize and use the excess equity as retirement income.
The bank also reported that many respondents were still struggling with debt as they approached retirement:
- Almost half of homeowners say debt is making retirement planning difficult.
- Almost 50 per cent expect to still be in debt at retirement.
- Homeowners who expected to still be in debt on retirement were split on whether they will retire anyway (46 per cent) or keep working to pay down the debt.
“Often homeowners think of their home equity as a fallback plan for retirement income,” said Rick Lunny, president and CEO of Manulife Bank of Canada.
“The fact that one in five is proactively planning to use this strategy suggests they may be struggling to balance retirement saving with debt repayment."
Although being debt-free at retirement was a key financial goal for 81 per cent of respondents, only just over half were confident they would reach that goal. Confidence was lowest among those aged 50 to 59, followed closely by those aged 40 to 49, which Manulife said illustrated the struggle to become debt-free as retirement approaches.
Of the 46 per cent who indicate they’d retire as scheduled even if they still had debt, 26 per cent said they would cut back until their debt is gone, 10 per cent would sell assets and 10 per cent said the debt wouldn’t impact their lifestyle.
One-quarter of respondents said that they don’t consider mortgage or vehicle loans to be part of their debt, said Manulife, showing that not everyone has the same definition of what it means to be “debt-free”.
