Do you see your home as a retirement piggy bank? According to the 2014 Sun Life Canadian Unretirement Index, 24 per cent of Canadians surveyed expect to use their homes as their primary source of income after they collect their gold watch and leave the workforce.
However, 17 per cent of those surveyed don’t know if their home will act as their main source of retirement income, while the remaining 59 per cent said they aren’t banking on using their home as their primary source of income after they retire.
“Real estate will likely endure some difficulty with a slowing Canadian economy and a weak demand for the dollar,” said Sadiq S. Adatia, Chief Investment Officer, Sun Life Global Investments, in the news release.
“With an already overheated market, there may be additional pressures from upcoming retirees who feel they lack enough savings for their retirement. As a result, they may feel the need to downsize their homes for additional income due to these economic conditions.”
On average, Canadians expect approximately 10 per cent of their retirement income to come from home equity. They expect 30 per cent will come from government plans, 27 per cent to made up of their own savings, and 23 per cent to come from employer plans.
Canadians also believe they’ll be retiring sooner: 28 per cent expect to be retired at 66 while 56 per cent said they expect to keep working past the traditional retirement age. Altogether, the average age Canadians expect to stop working sits at 66, the lowest it’s been in four years. The average high peaked at 69 years in 2011.
Other studies have suggested many Canadians have a loose grip on their retirement savings plans. A 2013 survey by Investor Education Fund found two out of 10 Canadian households (aged 50 and over) had no idea how much they have saved for retirement – and half believed they will run out of savings in the first 10 years.
The survey also found that for more than half of households surveyed, their home is worth more than their savings. Three out of 10 said their home is worth at least 50 per cent more than their savings. Only one-quarter of respondents said they had savings worth more than their home, while two out of 10 believed them to be roughly equal.
In the United States, reverse mortgages are expected to gain popularity. In 2012, a MetLife Mature Market Institute suggested that Baby Boomers, aged 62 to 64, represented more than one out of five (21 per cent) applicants for reverse mortgages, compared to only about 6 per cent in that age group back in 1999.