Top 5 Strategies for Late-Stage Retirement Planning in Canada

Elderly couple talking to financial advisor in kitchen

Nearing retirement can be daunting and have many Canadians feeling unprepared, leading to a scramble for solutions that can secure financial stability during those golden years. If you’re in this situation, you should know you’re not alone. According to a 2023 retirement survey from the Healthcare of Ontario Pension Plan, close to half Canadian baby boomers age 55-64, have $5,000 or less in retirement savings.

Here are 5 practical financial strategies to support late-stage retirement planning and making the most out of your situation:

Understand your financial picture

First, evaluate your savings, expenses, and expected retirement income. According to a 2023 Deloitte Canada report (Running Out of Time), a significant number of Canadians are not prepared for retirement due to insufficient savings and rising retirement costs.

 Review your spending and expected needs to see if there are any retirement income gaps, and if you identify any, there are two solutions to consider:

(1) saving more by working for longer, and

(2) adjusting your lifestyle spending.

The latter doesn’t mean penny-pinching every purchase in retirement, but reducing extra spending where and when you can: vacations, luxury goods, eating out, and others. Living within your means and prioritizing spending can stretch your retirement savings.

Maximize government benefits

For many Canadians, government benefits like Canada Pension Plan (CPP) and Old Age Security (OAS) form the backbone of retirement income. An often-overlooked strategy is deferring these government benefits. Opting to start CPP at 70 instead of 65, can result in a nearly 50% increase in monthly payments.This provides a stable, lifelong financial safety net from the government, making it a cornerstone for those entering or already in retirement.

Explore annuities and other guaranteed income products

Annuities and other guaranteed income products offer a solution for predictable and potentially lifelong income. These products can supplement government benefits and personal savings, ensuring a steady income stream that can cover essential living expenses and adapt to inflation over time. In recent years, the interest rate environment has made annuities even more attractive, as they’ve increased how much money insurers are willing to pay out. According to a Globe & Mail article Looking for secure retirement income? Now is a ‘special time’ for annuities by Rob Carrick, “… the best annual payout today [2023] is close to 20% higher than the $5,328 payout back then [2019]…”. Moreover, product innovations like the Longevity Retirement Fund are adding further alternatives to this space. Some of these solutions have the potential for income guarantees with increasing payouts over time.

Consider downsizing or utilizing home equity

For many Canadians, their home value represents a significant portion of their retirement assets. Downsizing or leveraging home equity through a reverse mortgage provides a way for you to access the wealth built up in your home as a financial boost. This strategy can free up cash to cover living expenses, invest in income-generating assets, or even fund long-term care needs. Unlike downsizing, reverse mortgage products such as HomeEquity Bank’s CHIP Reverse Mortgage, can provide the benefit of getting access to cash while staying in the comfort of your own home.

Access the value of your home. Receive up to 55% of tax-free cash! Get a quote today!

Revisit your investment strategy

If you’ve been diligent with your retirement nest egg, investment strategy adjustments can play a pivotal role in bolstering your retirement savings. Transitioning to low-cost exchange-traded funds (ETFs) and focusing on a diversified portfolio can offer a balance between increased risk and return. Reducing investment fees and optimizing asset allocation can lead to substantial savings over time. Considering the longevity risk and the potential for market volatility, a well-thought-out investment strategy can provide the necessary growth and security for your retirement funds. You may require the guidance of a financial advisor to help you carefully craft your strategy.

The CHIP Reverse Mortgage as your Retirement Income Solution

Canadian homeowners aged 55-plus can cash in up to 55% of their home’s value with a reverse mortgage. Like a regular mortgage, a reverse mortgage is a loan secured against your home, but it has some unique advantages for retirees:

  • You can cash in your home equity either in a lump sum or in monthly payments, which can give your retirement income a significant boost.
  • You don’t have to make any mortgage payments: you only pay back what you owe when you sell your home or move out.
  • Because there are no mortgage payments to make, you won’t lose your home through defaulting on mortgage payments.
  • A reverse mortgage is typically easier to qualify for than a regular mortgage or home equity line of credit.

You can find out how much you could qualify for with a CHIP Reverse Mortgage by calling us at 1-866-522-2447 or by using our reverse mortgage calculator.

Related Post