Canadians Overlook "Piggy Bank in the Home" for Retirement

Source: Why aren’t more advisors incorporating home equity into retirement plans?

Canadian home values have shot up over the past decade. But most folks don't think about tapping home equity for retirement income. A new study reveals why we're missing out on this funding source.

Finance professors surveyed Canadian retirees and financial planners on home equity release schemes. These allow access to a home's equity through loans, refinancing, downsizing or sale-leasebacks.

The findings? Very few retirees use home equity except as a last resort for emergencies. Yet, with longer retirements, failing to tap this "piggy bank in the home" could worsen income shortfalls.

"With the proper information, retirees can unlock home equity while still living at home," researchers said. But planners often prefer clients sell investments first.

A few barriers stand in the way. Retirees see home equity products as confusing. They also feel emotionally attached to their homes.

For planners, "mental accounting" bias is an issue. They view the home in its own box, apart from retirement planning. But this suboptimal strategy can leave retirees cash-poor.

Conflicts of interest may also deter planners from recommending equity release. After all, freeing up home equity can mean more assets for them to manage.

The bottom line? Canada faces a massive untapped resource in home equity. However, biases and barriers prevent its use in planning. With education and objective advice, equity release could provide a helpful income boost.

For full details, you can read the following article here: Why aren’t more advisors incorporating home equity into retirement plans?

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