Canadian Boomers Ponder Retirement, Mortgages and Moving

Baby Boomer Couple in Front of HomeLooking at the largest and most wealthy segment of Canada’s population, several major banks have been researching what the baby boomers are planning to do as they head to their retirement years. Studies have looked at their mortgage situation, whether they plan to downsize or move out of the province or the country and exactly when they intend to retire.

Boomers, born between 1946 and 1965, represent more than 10 million Canadians, almost a third of the entire population. They started turning 65 in 2011.

A TD Canada Trust report says that 39 per cent of boomers who plan to retire in the next three years still have a mortgage on their home, but two-thirds of boomers say they will retire mortgage-free.

“If you’re approaching retirement and still have a mortgage, it’s important to examine your options to make sure you can pay it down,” says Farhaneh Haque, director of mortgage advice for TD Canada Trust. “There are repaying strategies that can help you pay down your mortgage faster such as increasing payment amounts or frequency and supplementing regular payments with lump-sum amounts.”

Of those boomers who plan to move, 41 per cent say they won’t need a mortgage for their new home. Sixty-eight per cent say they will put down as large a downpayment as possible, 44 per cent will increase the frequency of their payments and 34 per cent will opt for a shorter amortization period.

“As part of your overall retirement planning, speak to a mortgage expert, in addition to your financial planner, about ways to balance paying down your mortgage and building your retirement nest egg,” says Haque.

A CIBC report suggests that younger Canadians – those aged 25 to 34 – believe they will be able to retire based on savings that they will accumulate over their working life. But boomers aged 55 to 64 are not so sure.

“As Canadians get closer to retirement, many are finding they have not achieved the retirement savings goals they set for themselves, which could lead to Canadians either working longer than they anticipated, or making adjustments to their retirement such as reducing expenses to stretch income further,” says Christina Kramer, a CIBC executive vice-president. “These findings demonstrate the importance of having a plan in place and making progress toward your goals every year, to give you the flexibility to make choices about when and how you retire.”

On average, CIBC found that most Canadians believe they will retire at age 63. Only 15 per cent of those aged 25 to 34 believe they will carry debt into retirement, but in the 55 to 64 age group it’s 31 per cent.

With almost 40 per cent of Canadians planning to move when they retire, there should be plenty of work for real estate agents during the next decade. In B.C., 43 per cent say they will move as part of their retirement strategy. Twenty-four per cent of B.C. residents will downsize to reduce their housing costs. In Ontario, almost 30 per cent will downsize because their current home is too big, but another 30 per cent say they won’t move soon because they believe their home will increase in value.

In Ontario, 17 per cent of boomers say they won’t be moving because they still have adult children living at home and they need the space.

“If you have adult children living at home, consider asking them to help with the mortgage payments. If they are living with you to save money, their contribution to your household finances would probably still be less than they would pay in rent elsewhere,” says Haque.

A BMO study asked boomers where they plan to retire, and found that 85 plan to stay in Canada. Five per cent plan to move to the U.S., with Arizona and Florida the most popular destinations. Quebecers were most likely to consider a move to the U.S.

Boomers in Alberta, Manitoba and Saskatchewan are most likely to say they would move to another province, with B.C. the most popular destination. Residents of B.C. and Ontario are the least likely to consider moving to another province.

BMO points out that moving to another province or to the U.S. may have major implications on your finances and estate planning. “For instance, a continuing power of attorney that is valid in Ontario is not necessarily accepted in Florida or Arizona, and a will that was prepared when you and all your assets were situated in Quebec may no longer be adequate when you reside elsewhere,” says the BMO report.

“If you plan to move to a different Canadian province, a review of your health care coverage, provincial tax differences and the adequacy of your estate plan is crucial.”

BMO says those under 65 years are twice as likely to move as those 65 and older, and men are more likely to relocate than women. The top reasons for moving? The weather, financial reasons and proximity to family and friends.

Written By Jim Adair

  • Movers

    There are many things to consider when entering retirement.  While working, income is steady and generally higher than when you retire.  This forces people to make decisions about there they live and how they will spend their retirement.  From the statistics we can see that, many times seniors have to downsize.