One in five Canadian homeowners expects to access their home equity to supplement their retirement income, a new survey by Manulife Bank of Canada found.
"Often homeowners think of their home equity as a fallback plan for retirement income," Rick Lunny, president and CEO of Manulife Bank of Canada said. "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."
The Manulife Bank Debt Survey questioned 2,373 Canadians and found that nearly one fifth of Canadian homeowners factor their home into their retirement income plans, with ten per cent planning to stay in their existing homes and borrow against home equity and eight per cent planning to downsize in a bit to free up equity for retirement income.
Being debt-free at retirement was a goal for 81 per cent of survey participants; however, only slightly more than half of those are confident in their ability to do so. Confidence was lowest in among Canadians in their fifties.
For those who still carry debt by their planned retirement age, slightly less than half said they would continue to work full or part-time in a bid to pay down debt. Meanwhile, 26 per cent said they would make lifestyle changes, 10 per cent would sell assets and 10 per cent believe the debt wouldn’t impact their lifestyle.
“Homeowners that don’t adequately plan for retirement may earn substantially less once they have left the workforce," Lunny said. "In addition, retirees who use home equity to supplement their retirement risk leaving no legacy for their children or grandchildren. If home values fall, they could end up further in debt and have negative equity in the house."