Do you remember the Golden Girls? Did you think this could become a way of life in Canada? Would you even consider this as an option? Here’s the thing:
COVID-19 has many Canadian rethinking their retirement plans. From a recent CIBC poll, reported by Insurance Portal, ‘four out of 10 Canadians are worried about how this pandemic will affect their savings and retirement plans’. Global News reported that 8 million Canadian are rethinking their retirement.
A recent article from Investment Executive, “Retirement is becoming increasingly fraught as many of the traditional supports are eroded. There are fewer workplace pension plans and historically low interest rates are reducing retirement income. More than 95% of Canadians start taking their CPP/QPP benefits at 65 or earlier, and fewer than 1% wait until they’re 70.”
40% who intended to downsize their their home are now unsure of the right time to make this move, and here’s where my thought process and scenario comes in. I am talking to that percentage of people that are not sure they can retire in the lifestyle they want and wish to maintain a certain level of cash flow and independence.
First and foremost, talk to a professional before making any move and make sure this move will improve your cash flow or maintain your lifestyle because those of us retiring are expected to live to the average age of 80.2. Do you have enough money to support yourself, without work, until then? Do you have sound investments?
Without further adieu, here’s my possible scenario:
The Golden Girls scenario
Purchasing a home with 3 or 4 people and sharing the expenses so that cash flow is greater. You will be, if done right, financially more secure. The purchase can be made through the sale of the current home(s). Plus, the remaining equity from the purchase of your old home can be reinvested.
The other plus - you will still maintain your independence.
Please take into account that you do not need 2 kitchens, 2 living rooms, etc. A bigger home may not necessarily have to be in the cards.
Possible pitfalls to this:
Planning to live in such an arrangement requires the parties involved to be careful and to do their due diligence before they enter into any legal contract.
- Sorting out the legal side:
Reading the following excerpt from the Government of Ontario helps explain the legal side:
There are different ways to co-own a home. For example, you can do it as a group of individuals or by setting up a corporation (which can take different forms). Co-owners either have:
- equal shares of the property and equal decision-making power
- different levels of shares and decision-making power
Every co-owner is on the property’s ownership title, either as “tenants-in-common” or as “joint tenants.”
If a tenants-in-common co-owner dies, the ownership does not automatically go to other owners. Their share of property becomes part of their estate.
If a joint tenant co-owner dies, surviving co-owners inherit the deceased’s share of the property.
- Finding the right people to live with:
Is it feasible?
Sure - again, if done right. It could be a good idea for those still wanting to seize all the opportunities life holds for them and who do not shy away from living with those they trust.
With the competitive real estate market we see now, this option could lift the financial worries off your shoulder and allow you to enjoy your retirement fully. At the time of this writing, it has been reported that those between the ages of 30-55 and 20% of Canadians over the age of 55 have been unable to contribute to their retirement savings since the pandemic began. It makes sense to have a solid investment.
For more information or comments on this article or real estate, please give me a call or drop me a line.
The following articles were used as a reference in the writing of this blog: