Is Selling Your House the Key to a Comfortable Retirement?

If you are like a number of Canadians who are either at or close to retirement age, a significant portion of your net worth is tied to your home. For many of us, owning our own home is a symbol of success. We remember the first house we bought, the years of forced saving which come with paying down the mortgage, and the increased cash flow when we don’t have that expense in our budget any more. Now that you have finally got the mortgage monkey off your back, selling your house make any sense?

Three Retirement Scenarios for Homeowners

If you are a homeowner approaching retirement, here are three scenarios to consider:

Sell your home early on to provide cash to fund your retirement years. Many people are in the “house-rich and cash-poor category,” and this scenario can make good sense for them.

Sell your house partway through retirement. This is scenario which typically occurs for most people, as they sell their home to fund some type of assisted living arrangement.

Don’t sell the house at all. If you have sufficient other assets, you can continue to own your own home throughout your retirement.

Relocate to a Less Expensive Area

Your retirement dollars will go further if you move to a less expensive community. This is your opportunity to live in a different part of your city, province or even move across the country if you wish.

Gain Access to Non-Registered Funds

The money you make from selling your home is tax free and you can use them to open up a non-registered investment account. Once the account is in place, the money is treated differently from an RRSP (Registered Retirement Savings Plan) or a RRIF (Registered Retirement Income Fund). Both of these investment plans are fully taxable if you choose to withdraw funds from them. By having investments in registered and non-registered accounts, you will be able to smooth out your income during your retirement and still meet your cash flow needs.

Budgeting is More Stable

If you renting your home, you know what your fixed expense is each month. Homeowners must budget for expenses like the cost of a new furnace, roof, appliances, or any number of other things which need to be attended to. These expenses are along with annual costs, such as property taxes.

Downsizing

Selling a large home and buying a smaller one can make sense for a number of people. You may no longer need to hold onto the same size house as when you were raising a family. Keep in mind that once you take into account legal fees, the real estate commission, and property taxes owing, you may not end up with as much in your pocket as you were originally anticipating.

Can selling your house help you achieve a comfortable retirement?