BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

October 31, 2012 09:00 ET

REPEAT-BMO Retirement Institute Report: Canadians Should Not Rely on Their Homes to Help Fund Retirement

- One-in-three Canadians identify a comfortable retirement as their number one financial goal to achieve over their lifetime.

- However, 40 per cent are not confident in their ability to save for retirement and 41 per cent may use the sale of their home to make up for the shortfall

- Relying on your home to fund retirement could be a risky venture; personal savings must play a more significant role in retirement preparedness

TORONTO, ONTARIO--(Marketwire - Oct. 31, 2012) - The BMO Retirement Institute today issued a report which found that, while Canadians' top financial goal to achieve over the course of their lifetime is to live comfortably in retirement, many are not confident that they will save enough to achieve this. As a result, one-third of Boomers will or plan to sell their home to help fund their retirement.

The report, Home Sweet Home or Retirement Nest Egg?, examines the relationship between Canadians' readiness for retirement and their attitudes regarding home ownership:

  • One-third (32 per cent) believe that living comfortably in retirement is the most important financial accomplishment to achieve over a lifetime.
  • However, 40 per cent are not confident that they can save enough to fund their ideal retirement lifestyle; 29 per cent anticipate having to delay their retirement or work part-time during retirement due to a shortfall in savings.
  • Forty-one per cent consider the equity they are building in their home as an alternative source of funding for retirement.

"The reliance on home equity to fund retirement is no surprise, given that almost half of Canadians say that their home is their biggest financial asset and, on average, accounts for half of their total net worth," said Marlena Pospiech, Retirement Strategist, BMO Retirement Institute. "While it is true that, in the past, Canadians have enjoyed a stable housing market and increasing real estate values, there is no guarantee that this trend will continue. As a result, individuals shouldn't count exclusively on their homes to fund their retirement and should be focused on building up their personal retirement savings."

According to the report, one-third of Boomers who intend to sell or have sold their home will or have done so to supplement their income in retirement.

Boomers may face a number of challenges when deciding whether to stay in their home or to sell it and downsize.

Market fluctuations: The majority (87 per cent) of Boomers have seen their homes rise in value; nearly half report gains of 50 per cent or more. But, considering the rapidly aging Canadian population, and more Boomers retiring and selling their houses, home prices could fall.

Attitudes toward home ownership: Canadians are torn between holding on to their "castle" vs. treating it as a retirement asset. According to the report, 45 per cent of homeowners do not intend to sell their home, and 34 per cent are unsure if they will sell it prior to or during retirement.

Lending standards: Should they materialize, tighter lending policies and the risk of higher interest rates could reduce the number of eligible homebuyers and motivate people to buy smaller, less expensive houses. In fact, they may lead to people not buying a home at all, which could impact the housing market.

Carrying mortgage and debt into retirement: Recent survey data suggests that many Boomers are carrying mortgages or other debt into retirement. Consequently, Boomers may not have accumulated as much home equity as they would like and may be more vulnerable to an increase in interest rates.

"If your retirement is only a few years away, it is wise to try and pay off your mortgage before you enter retirement," said Laura Parsons, Mortgage Expert, BMO Bank of Montreal. "On the other end of the spectrum, for younger Canadians entering homeownership, it's important to consider options that will ensure mortgage debt can be paid down faster and well before their retirement years."

Ms. Parsons added that choosing a shorter amortization and taking advantage of pre-payment privileges where possible is one way to achieve a mortgage-free retirement.

BMO advises Canadians to be cautious about relying too much on their home equity to fund retirement. Instead, she suggests monitoring and taking action to reduce household debts and increasing personal savings for retirement by establishing a sound financial plan. Such a plan should incorporate regular contributions to a Registered Retirement Savings Plan (RRSP) and creating a diversified portfolio that includes cash, stocks, mutual funds, exchange traded funds (ETFs), guaranteed investment certificates (GICs), and/or bonds.

To view a copy of the full report, please visit:

Get the latest BMO press releases via Twitter by following @BMOmedia.

*Sources for all data and findings referenced in this release can be found in the report at

About the BMO Retirement Institute

The BMO Retirement Institute was established in 2008 to conduct research on retirement issues and provide thought-provoking insight and financial strategies for individuals planning for, or currently in, their retirement years.

Contact Information