Affording Retirement Living: 4 Financial Considerations

“How can I afford retirement living when the costs seem high?” When you first hear how much your local retirement residence costs per month, you may automatically assume you can’t afford it—however, there may be some key financial considerations for retirement living you haven’t considered which may make the lifestyle more achievable than you think. Let’s take a closer look.

Unlocking the potential of your home’s value

What financial benefits can I get from selling my home for retirement?

What many people may not realize is that they may be sitting on an asset worth hundreds of thousands of dollars—if not more—which can help them achieve the lifestyle they want in their retirement years! Think about what your home is worth. When you sell it, the proceeds are tax free and can be invested, going to work for you while you enjoy your new retirement community.

Let’s look at an investment example. If you sold your home for the national average of $500,000 and invested the proceeds in a low-risk portfolio of investments, such as GICs and bonds, earning 3%, that’s potentially $15,000 a year, or $1,250 a month. If you were able to take on a little more risk and get an average annual return of 4%, that’s $20,000 a year, or just about $1,700 a month. Those returns could go a long way when it comes to offsetting your monthly rental costs in a retirement community, so it may be something you want to explore.

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Balancing monthly expenses for retirement living

How do monthly expenses in a retirement residence compare with staying at home?

Ask yourself: how does that compare to the monthly cost of your local retirement residence, and what expenses will go away once you move in? Consider the costs of things like:

  • property taxes
  • Utilities
  • Home maintenance costs like replacing a roof or windows, appliances, and regular upkeep and repairs, both major and minor
  • Cleaning or meal services
  • Snow and lawn care maintenance
  • Miscellaneous expenses like groceries, entertainment and transportation

You’ll likely find that these expenses add up to more than you think, and show living at home is anything but free.

Leveraging personal property for investment

In addition to your home, have you considered any personal property you have and whether it would be worth selling it to invest? Think about a cottage or trailer you might have, an art collection you no longer want to hold on to, or perhaps a car, boat or other recreational vehicles. I recommend consulting with a realtor or appraiser for an accurate estimate of any property you’re considering parting with.

Just think: if you sold those assets—let’s say they are worth $200,000—and invested them in a portfolio earning 3% per year, that’s potentially $6,000 a year!

Government financial programs and tax credits

What government programs and tax credits are available ?

It’s important to explore any and all avenues in this regard, as government assistance can help you offset your monthly rental costs in a retirement residence. Consider researching the following:

  • CPP, known as The Canada Pension Plan, is one of two social insurance programs the federal government offers. If your spouse has passed away, you may also be eligible for the survivor’s pension benefit.
  • Old Age Security Pension, Guaranteed Income Supplement, Allowance and Allowance for the Survivor
  • The Federal Attendant Care Tax Certificate, which allows older adults to claim medical expense costs for “attendant care.” If you or a spouse receive any care services in a retirement residence, your rent can potentially be reduced when you file your taxes.
  • Financial support options available to veterans, as well as support benefits for seniors according to their province of residence.

When in doubt about whether or not you can afford the lifestyle in a retirement residence or while exploring retirement living, consider reaching out to a Certified Financial Planner, who can help you understand how far your money will go in helping you achieve the retirement years you want and deserve.

image of Financial expert Kelley Keehn sitting on a couch

About Kelley Keehn

Kelley Keehn is a Personal Finance Educator, author, speaker and media personality with over 20 years of experience in the Canadian finance industry. She’s the Consumer Advocate for Financial Planners Canada and serves on many other prominent financial committees. Over the last three years alone, she has conducted over 800 television, radio, and print interviews on a multitude of financial literacy topics. Her mission is to help Canadians feel good about their money.

Articles By Kelley Keehn

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