Why more seniors are opting to stay put rather than downsize their homes

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Advisors are seeing more of their senior clients opting to stay put in their long-time homes instead of downsizing to a smaller house or apartment condo setup.

“A lot of our clients are either not planning to downsize, or if they originally planned on it, they don’t end up doing it,” says Chris Ferris, certified financial planner (CFP) at Ryan Lamontagne Inc. in Ottawa. “Many wait until it’s necessary for health care reasons.’

Some clients are stymied by the process of buying and selling property, moving, land transfer fees and of course, downsizing furniture and other household items.

A recent report from the Canadian Foundation for Financial Planning found that people who have a strong emotional attachment to their house are more likely to want to remain in that house during their retirement years. Only 26 per cent agreed or strongly agreed with the idea of using their house to partially fund retirement.

He notes that older seniors may want to age in place, a stance that became more pronounced during the pandemic as some long-term care facilities came under scrutiny for less-than-stellar conditions.

“They’re reluctant to give up their house and independence,” he says. “There’s that fear of what happens if we have another pandemic?”

Some also consider the basic economics. For years, homeowners, especially those in major urban centres, counted on selling their house at top dollar and downsizing to a cheaper location, using the proceeds for retirement or other ventures. But with real estate sales slowing and high interest rates and inflation affecting the buyer pool, those days of easy money are over, says Mr. Ferris. Sellers may come ahead with a slight profit but not as much as before.

“Once they looked at the numbers, they’re not coming out as far ahead as they might have thought,” he says. “Selling at a large gain is nice, but they’re turning around and buying or renting in a more expensive market, too. That dissuades a lot of people.”

Jackie Porter, CFP at Carte Wealth Management Inc. in Mississauga, is finding similar sentiment with some of her senior clients.

“If downsizing is not going to put that much more money in their pockets, they’re asking is it really worth their while to sell?” she says.

So, instead, they shift gears and hold onto the family house, she says. They might bring their adult kids and their family under their roof or hope it becomes a family compound where kids and grandkids regularly come to visit.

Paying down debt and moving provinces

Some, of course, have no choice but to sell, downsize and relocate. Ms. Porter points to clients who may have overextended themselves with massive home renovation projects during the pandemic when interest rates were low, but are now faced with higher payments that are difficult to manage. Others may see selling as a last resort to pay down debt or eliminate it completely.

Adjustments may still be necessary along the way to maintain a lifestyle, especially in cases in which downsizing costs the same or even more. In certain scenarios, Ms. Porter might advise clients to consider working part-time to help with costs, and if they haven’t yet retired, pushing out their retirement date by a few years.

Her advice to clients is don’t downsize for the sake of downsizing, and know what you are downsizing to.

“Retirement isn’t a vacation; that’s going to be your new way of life,” she says. “Sometimes people move out to a cottage area where it’s nice to visit, but then [some clients] find there’s nothing really around if they needed care support, for example.”

Some of her clients are relocating to cities in other provinces such as Alberta as their money goes further there.

Ms. Porter has discussions with those clients about the softer but crucial issues such as familiarity with the city, support systems and health care.

“Money is important but to have a happy and fulfilling retirement, you need to be somewhere where you want to live and are engaged,” she explains.

“They’re more likely to be successful if they have children and friends in those areas.”

Everyone doing it ‘at the same time’

In some regions, such as Edmonton, where real estate didn’t experience major ups and downs over the [ast two decades, seniors are likely to downsize at some point, says Markus Muhs, senior portfolio manager with Muhs Wealth Partners at Canaccord Genuity Wealth Management Canada. His concern is that boomers who reside in Western Canada will all downsize at the same time, creating a shortage of smaller houses and condos or apartments.

“It’s going to hit them that everyone’s doing that at the same time,” he says.

Mr. Muhs hasn’t seen clients hoping to capitalize on the sale of their house to fund their retirement personally. Some may dither about condo fees, but he encourages them to calculate how much they would need to spend on lawn care, snow removal services and overall upkeep of the exterior of the building.

“They eventually realize that’s the reason they did downsize,” he says. “They want to be able to travel and leave that condo for a month at a time if needed.”

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