Many homeowners struggle to balance retirement, debt repayment: survey

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Close to 20 per cent of homeowners in a new survey say they anticipate having to leverage the value of their home equity to supplement their retirement income.

The online poll conducted for Manulife Bank of Canada indicates that 81 per cent of respondents said being debt-free at retirement is a top goal, but just over half were confident of reaching that goal.

Almost half of homeowners surveyed said their debt levels were making it tough for them to prepare for retirement.

The poll indicates that 10 per cent planned to stay in their homes and borrow against home equity while another 8 per cent expected to downsize and use the money from the sale of their homes to provide retirement income.

"Often homeowners think of their home equity as a fallback plan for retirement income," Manulife Bank of Canada president and chief executive officer Rick Lunny said.

"The fact that one in five is proactively planning to use this strategy suggests they may be struggling to balance retirement saving with debt repayment."

Homeowners who use home equity to supplement their retirement risk leaving no legacy for their children or grandchildren and – what's more – if home values fall they could end up even more in debt and having negative equity in the house, Mr. Lunny said.

Only 39 per cent of those polled expressed confidence they will have enough income to maintain their desired lifestyle in retirement, according to the findings published Monday.

Asked what they would do should they reach retirement age and still have debt, just under half said they would continue working full- or part-time.

Of the 46 per cent who said they would retire as planned even with debt still outstanding, 26 per cent indicated they would live more frugally until debt-free, 10 per cent would sell assets and 10 per cent said there would not be any impact on their lifestyle.

One quarter of respondents said they don't consider their mortgage or vehicle loans to be part of their debt, a sign that not everyone shares the same definition of what "debt-free" means, according to Manulife.

The poll is the latest bit of evidence buttressing the argument made by many – including the Bank of Canada and federal finance ministers – that debt levels for many Canadians are too high and that financial difficulties could ensue when interest rates rise.

The survey is based on responses from 2,373 Canadian homeowners in all provinces between the ages of 20 and 59 with household income of $50,000 or more. The survey was conducted online by Research House between Sept. 8 and Sept. 19. National results were weighted by province, income and age.