Research has shown that more than half of Canadians aged 50 and older have collided with unexpected events that have impacted their finances and/or retirement plans. Whether you’re planning on selling your home or staying, here are four ways to tap into your home for added security during retirement.
1. Sell and Rent
An easy way to get money out of your home is to sell it and put the cash into an investment that will boost your yearly income. But before you do so, factor in expenses (real estate agent fees, lawyer fees, moving costs, etc.). It’s also important to decide on the volume of risk you’re willing to take in investing.
2. Sell and Downsize
Another effective way to boost your retirement security is to sell and downsize — it’s easy logic. However keep in mind that your needs might change as you age. For example, you might decide it’s absolutely necessary to avoid homes with a steep set of stairs. It’s imperative that you think strategically about your next destination.
3. Become a Landlord
Ever thought of converting a portion of your home into an apartment? Well, doing so can increase your monthly income substantially. However you need to decide you’re cut out to be a landlord – that means being available all hours of the day and being able to find the right tenant.
4. Get a Reverse Mortgage
This is a mortgage that is given to people who own property at 55 years or older. The borrower doesn’t pay back the loan until he or she sells the home.The loan is tax free and any interest you pay is deductible. But there are some drawbacks to this approach – you have to pay interest on the loan and the penalties can be heavy if you decide to cancel.
Medical science is thriving and life expectancy is higher than ever. As such, it’s important for all of us to be prepared for rich, long lives – no matter how far or close our senior years are. Before you settle on a retirement game plan, consider these four ways to the extend the life of your retirement income.
1. Prepare for Rising Health Costs
The longer you live, the bigger the impact of potential health costs. Retirement home living is heavy on the wallet (can go up to $5000 each month) and medication is also expensive if it’s not covered by insurance. Stay ahead and find out probable costs by doing a little research on local health facilities. Decision-making and budgeting are much less stressful when you have cost estimates on hand to consider
2. Consider Inflation
For those on fixed incomes, inflation can really become a thorn in one’s side. One way to offset the blow is to delay collecting certain streams of income. Both CPP and OAS are indexed to inflation, thus creating an opportunity to have a higher level of inflation indexing — if one chooses to delay collection. This will in turn also offer a higher level of benefits.
3. Work Part-Time
Although it might sound like a burden, working part-time before full retirement is an effective way recharge your mind and your wallet. Earning a couple thousand dollars a month extra can greatly reduce the draw-down on your portfolio.
4. Estimate Your Life Expectancy
Finally – estimate your life expectancy. While it can sometimes be a difficult thing to think about, having an idea of your longevity will immensely ease the process of planning. Go through history and consider the age of grandparents, parents, uncles, aunts and cousins. It’s not uncommon for seniors to live beyond 90, and if that’s the case, you need to be ready for that outcome.
Wealth Management is a carefully designed strategy to help you meet your financial needs and goals, one of them being financial independence. The ability to live your life as you choose with a secure financial backing for you and your family is considered, by many, the ultimate success.
1. Financial Literacy
Research has shown that people who are financially literate end up with more wealth than those who are not. There is a strong monetary incentive for becoming financially sophisticated. Taking the time and effort to become knowledgeable in the areas of personal finance and investing will pay off throughout your life. Make use of the knowledge your financial advisor provides. Financial learning and financial independence are lifelong endeavors.
2. Think Long Term
The level of your wealth should be measured by the length of time you could maintain your standard of living without an additional pay check. In other words, if you had to stop working right now, how long could you maintain your current lifestyle needs? The principles of gaining financial independence seem simple, although we all know it is in the application that we occasionally stumble. Spend less than you earn. Keep investing. It is important to take a long-view focus as you work towards your financial goals. It takes more than a few weeks to achieve financial independence.
3. Good Debt vs. Bad Debt
Consumer debt is the bane of financial independence. Borrowed money should only be used for investing, not to finance lifestyle needs. ‘Bad debt’ is used to finance consumables and other lifestyle preferences. ‘Good debt’ could be termed as strategic loans used to invest, or money used to make more money. Your gains need to be greater than your borrowing costs; borrowing to meet short-term desires is counterproductive.