Have your clients underestimated how much they’ll need to fund their retirement?
Although it’s hard to put an exact figure on how much each individual will need, according to Scotiabank, many financial planners recommend having $1 million saved by the time you stop working. According to the Scotiabank Retirement Survey, however, the average Canadian expects to need $697,000 – a number considerably lower than that recommended by experts.
Regardless most Canadians currently in retirement or soon to enter have a shortfall in the cash flow they require to support their retirement lifestyle. Statistics Canada reveals a $20,000 shortfall between average annual expenses of $60,000 versus an average yearly income of $40,000. Further, the Broadbent Institute reports that 47% of Canadians between 55 and 64 don’t have an employer pension.
More Canadians are also entering retirement in debt
Many of your clients will also be entering retirement carrying debt. According to StatCan, 42% of families headed by someone 65+ are in this position — 13.9% are paying off a mortgage, and 37.4% are carrying consumer debt.
Paying off debt can be difficult for retired Canadians on a reduced income, especially when there are other expenses associated with aging. Healthcare expenses – such as home modifications, nursing care, and mobility devices – can be a particular source of concern for older Canadians. According to the Sun Life Health Index, just a third of adults are saving for a health emergency.
How you can help
While your clients’ debt-to-income ratio may not be ideal, their debt-to-asset ratio is probably far more healthy. 75% of Canadians 65+ are homeowners, and since real estate prices have risen nonstop since 2002, their homes represent a considerable source of wealth.
You can help them access this wealth using Income Advantage from HomeEquity Bank. Income Advantage is a reverse mortgage that helps your clients access up to 55% of their home’s value in tax-free cash. Funds are provided as a lump sum of at least $20,000, followed by regularly scheduled advances of $1,000 per month or $3,000 per quarter at a minimum. This structure makes it ideal for consolidating existing debt and then boosting your clients’ cash flow going forward. And since no repayment is required until your clients leave their homes or pass away, they’ll have even more money available to enjoy their retirement.
The funds received through Income Advantage are 100% tax-free, so they won’t affect your clients’ marginal tax rate or trigger OAS or CPP clawbacks. What’s more, since the program allows your clients to boost their monthly cash flow while keeping their investment portfolios intact and growing, they’ll have more set aside to cover healthcare expenses, make home renovations or even give an early inheritance to their children.
Finally, with Income Advantage, your clients can rest assured that they’ll maintain full ownership and control over their homes. And thanks to our No Negative Equity Guarantee, they’ll never owe more than the fair market value of their property.
If you’d like to find out more about how Income Advantage from HomeEquity Bank can help your clients live their retirement on their terms your Business Development Manager would be happy to provide you with more information. If you don’t have a BDM follow the link below to find one.
- Posted by amahajan
- On December 14, 2021
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