Canadians are living longer, and while the idea of downsizing during retirement has always been seen as a logical step, the implications might be more complicated than they seem. It’s becoming increasingly appealing for them to remain in their current homes rather than downsizing to a smaller residence.
The Financial Challenge
Downsizing seems simple: sell a property, purchase a smaller one, and pocket the difference. The reality reveals hidden costs that diminish the expected gains: transaction and legal fees, taxes, moving expenses, renovations, monthly fees, and more. For retirees living in cities, finding a home that is significantly cheaper than their current one can be also challenging.
The Logistical Factors
The practical factors of downsizing can also have a big impact. Deciding what to keep, sell, or donate is time-consuming and can be emotionally and physically exhausting. Households do not downsize into apartments until the age of 85 according to a report Millennials in the Greater Toronto and Hamilton Area: A Generation Stuck in Apartments?) by the Centre for Urban Research and Land Development at Toronto Metropolitan University. This might be because finding a smaller suitable home that meets their needs for accessibility and convenience is becoming more challenging. The logistics of moving, coupled with the challenge of adapting to a new environment makes the prospect of staying put more appealing.
The Emotional Attachment to the Home
Many people perceive their home as not just a physical space but a symbol of their life’s work, and a familiar comfort zone full of memories. The emotional cost of leaving behind a family home, neighbours, local businesses, and community ties should not be underestimated. The sense of belonging and identity that comes with a long-term home, coupled with the stress associated with moving, may be a great deterrent for downsizing.
The Social Fabric: Importance of Support Systems
The support systems that seniors have in place – proximity to family, friends, and healthcare providers – are crucial in their overall quality of life and emotional well-being. A recent report (Leveraging Equity in Residential Property to Provide Retirement Income) from the University of Lethbridge shows that 42% of participants see their current home as “the place they would like to stay during retirement”.
Another report (Making Canada the best place in the world to age by 2030: a senior-centric strategy) from Deloitte Canada, mentions that 91% of Ontario seniors hope to stay in their own home for as long as possible. The fear of isolation and the challenge of building new relationships can be significant factors in opting to stay in their current home.
Aging in the Right Place Has become feasible
Every case is different, which should make every process different too. A National Institute of Ageing report (Ageing in the Place: Supporting Older Canadians to Live Where They Want) mentions that the decision should be based on each person’s personal preferences, circumstances, and care needs.
With advancements in home technology and the availability of in-home care services, aging in place has become more feasible. Home modifications can improve safety and accessibility, allowing seniors to live independently in their homes for longer. Feeling comfort and autonomy while remaining in their own home outweigh the perceived benefits of downsizing.
Should you downsize or stay at home during retirement?
The decision to downsize or stay home is deeply personal. For Canadian seniors facing this choice it’s crucial to consider every aspect carefully. Consulting with financial advisors, family members, and healthcare professionals can provide valuable insights and help make informed decisions that best suit their needs and desires.
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.
