Canadian retirees don't want to downsize but can they afford not to?

Canadians are enjoying longer and more active retirement years and moving to a smaller home might not be part of the plan.

While convention may be for older homeowners to sell-up in later life and downsize, perhaps from a detached family home to a condo, there is an increasing trend towards ‘ageing in place’ among Canada’s (soon-to-be) retirees – but can they afford to do that?

A new report from HomeEquity Bank and the National Institute on Ageing (NIA) reveals that 79% of over 55s think that current government run and regulated retirement savings plans do not provide adequate savings to prepare for a comfortable retirement.

Meanwhile, more than 7 in 10 of those aged 45+ say that the pandemic has made them more concerned about their family’s financial security and wellbeing and almost one quarter do not think they have adequate financial resources to cover their own living expenses over the next five to ten years.

Additionally, while 42% of over 45s say they may be expected to cover living expenses for loved ones in the next 5-10 years, almost half of respondents say they don’t have the financial resources to look after ageing parents and 22% do not have the financial resources to look after their spouse.

Reverse mortgages

With 93% of respondents saying they want to age in place, it’s perhaps unsurprising that HomeEquity Bank has reported $1 billion in originations of its CHIP Reverse Mortgage product for the first time.

The 2021 figure is 28% higher than in 2020, helped by larger equity reserves built up in the red-hot Canadian housing market.

HomeEquity Bank announced in September its acquisition by the Ontario Teachers’ Pension Plan Board, a transaction due to close mid-2022 subject to regulatory approvals.

Ageing in place comes at a cost

While Canada’s ageing population is living longer, it does not necessarily mean a healthy retirement.

Care costs are expensive and for those hoping to age in place, in-home care costs are often underestimated.

The HomeEquity Bank/NIA research reveals that 49% of respondents think in-home care for themselves or a loved one would cost $1,100 per month and 37% think it would cost $2,000.

But, for example, the cost of round-the-clock in-home care in Ontario could be as much as $25,000!

While federal and provincial government programs will fund care for many, there will be some who will need additional care that must be funded by themselves or loved ones.

This means that the cost of long-term care should be considered within retirement planning.