Finances with Kelley Keehn: How far will my money go in a retirement residence?

If you’re considering moving into a retirement residence, you’re likely wondering how far your money will go. It’s a natural question to have, yet not always an easy one to answer on your own.

Assessing affordability

I weighed in with Jason Heath, fee-only Certified Financial Planner with Objective Financial Partners Inc. to crunch the numbers for us.

“Let’s say the retirement residence you’re interested in comes in at a monthly cost of $4,500 per month,” Heath says. “That may seem like a lot of money to someone who has not paid rent or a mortgage for many years. But for someone receiving the maximum Canada Pension Plan (CPP) and Old Age Security (OAS) pensions—about $21,000 per year—they may only need about $200,000 of proceeds from a home sale to fund six years of costs in a retirement residence. This assumes the monthly cost increases by 3 per cent annually, as well as a 3 per cent annual return on the home proceeds.”

What about markets in Canada where homes sales have skyrocketed in recent years? “For homeowners in expensive housing markets like Vancouver or Toronto, where the average detached home price is well over $1,000,000, they may be able to use the resulting investment income from a home sale alone to fund the cost of a retirement residence,” explains Heath.

What about higher care costs?

For some older adults exploring retirement living, they may require a higher level of daily care in order to live well, such as assisted living or memory care services. Heath takes this case study into account too: “If someone’s care costs were higher—say, $6,000 per month—and a person’s home proceeds are $295,000 for example, that might fund six years of assisted living or memory care. This assumes maximum Canada Pension Plan (CPP) and Old Age Security (OAS) entitlement and a 3% return on the home proceeds.”

Determining if you can afford retirement living

If you’re trying to understand how far your money will go, I recommend you consider working with a Certified Financial Planner who specializes in income planning projections to help you. These folks can look at your total assets, all income at your disposal, rates of investment return on your current assets and the selling of your home, rates of inflation, how much the cost of living will affect your savings, and tax benefits and federal support available to you.

An important step in the process and one you can explore on your own is visiting several retirement communities in your area to determine the lifestyle and level of support that best suits your needs, and then determining how much that costs. Next, you can sit down with your planner so they can ensure that all of your costs now and projected into the future can be carefully assessed and will go the distance with you.

It’s important to note that some seniors have significantly more home equity than might be required for an extended stay at a retirement residence, and could still leave an inheritance for their beneficiaries if desired!

Where to live, how to live best, and how to pay for it all can be tough decisions with many answers. But with a bit of planning, you and your family can achieve the peace of mind you need to commit to a lifestyle change for the better.

For more financial advice about retirement living, visit my page on chartwell.com.


Kelley Keehn About Kelley Keehn

Kelley Keehn is a Personal Finance Educator, author, speaker and media personality with over 20 years in the Canadian finance industry. Her tenth book, Talk Money to Me, published by Simon and Schuster, will be available in December 2019. 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.


The information provided in this video and on Kelley Keehn's page on chartwell.com is for informational purposes only. It should not be considered legal or financial advice. You should consult with your own legal, tax and/or a qualified financial professional to determine what may be best for your individual needs. The views, thoughts and opinions expressed belong solely to Kelley Keehn, and not necessarily to Chartwell Retirement Residences or its affiliates.