Nearly One in Five Homeowners Expects to Access Home Equity to Supplement Retirement Income

Manulife Bank of Canada survey highlights:

  • Almost half of homeowners say debt is making retirement planning difficult;
  • Almost 50 percent expect to still be in debt at retirement;
  • Homeowners split on whether they will work or retire if they still have debt at retirement.

Waterloo, ON (Dec. 1, 2014) – Approximately one in five homeowners expects to access their home equity to supplement their retirement income as Canadians struggle to reduce their debt while also preparing for retirement, a new survey by Manulife Bank of Canada shows.

The Manulife Bank Debt Survey, which questioned 2,373 Canadians in September, found that nearly one in five homeowners sees their home as part of their retirement income equation, with 10 percent of respondents planning to stay in their homes and borrow against home equity and an additional 8 percent planning to downsize and use the excess equity to provide retirement income.

“Often homeowners think of their home equity as a fallback plan for retirement income,” said Rick Lunny, President and CEO, Manulife Bank of Canada. “The fact that one in five is proactively planning to use this strategy suggests they may be struggling to balance retirement saving with debt repayment.”

While being debt-free at retirement was a top financial goal for 81 percent of respondents, just over half were confident they would reach that goal. Confidence was lowest among those aged 50 to 59, followed closely by those aged 40 to 49, illustrating the struggle to become debt-free as retirement approaches.

When asked what they would do if they reached their planned retirement age and still had debt, just under half indicated they’d continue working full time or part time until the debt was gone. Of the 46 percent who indicate they’d retire as scheduled even if they still had debt outstanding, 26 percent would scale back their lifestyle until their debt is gone, 10 percent would sell assets to repay debt and 10 percent indicated the debt wouldn’t impact their lifestyle.

Interestingly, one-quarter of respondents said that they don’t consider their mortgage or vehicle loans to be part of their debt, showing that not everyone has the same definition of what it means to be “debt-free.”

What makes a successful retirement?

Being debt-free was ranked second only to having good health when respondents were asked what makes a “successful retirement”. Other factors crucial to a successful retirement were having sufficient income to maintain their desired lifestyle, being able to travel and keeping busy with a hobby or volunteer opportunity.

Nearly half of homeowners surveyed said their debt was making it difficult for them to prepare for retirement, while more than three-quarters of those polled indicated that having sufficient retirement income to maintain their lifestyle is important to a successful retirement. However, as with the “debt-freedom by retirement”, this is also an elusive goal for some – only 39 percent of respondents are confident that they will have sufficient income to maintain their desired lifestyle in retirement.

Homeowners that don’t adequately plan for retirement may earn substantially less once they have left the workforce, said Lunny. In addition, retirees who use home equity to supplement their retirement risk leaving no legacy for their children or grandchildren. If home values fall, they could end up further in debt and have negative equity in the house.

“Saving for retirement and paying down debt are both important goals – but they both draw from the same pool of money. Having a financial plan that addresses both needs is central to your financial health,” said Lunny. “To be successful, the plan must be tailored to the individual. A financial advisor is in a great position to help you create a plan that not only aligns with your goals and preferences, but also complements and supports your other financial goals.”

The importance of professional advice is highlighted by the survey finding that only 45 percent of homeowners are happy with how they have managed debt over the past year, and 15 percent indicated they are very unhappy with their efforts.

About the Manulife Bank of Canada Debt Survey

The Manulife Bank of Canada poll surveyed 2,373 Canadian homeowners in all provinces between ages 20 to 59 with household income of $50,000 or more. The survey was conducted online by Research House between September 8th and 19th , 2014. National results were weighted by province, income and age.

About Manulife Bank

Established in 1993, Manulife Bank was the first federally regulated bank opened by an insurance company in Canada. It is a Schedule l federally chartered bank and a wholly-owned subsidiary of Manulife. As Canada’s first advisor-based bank, it has successfully grown to more than $23 billion in assets and serves clients across Canada.

About Manulife

Manulife is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. We operate as John Hancock in the U.S. and as Manulife in other parts of the world. We provide strong, reliable, trustworthy and forward-thinking solutions for our customers’ significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers. Funds under management by Manulife and its subsidiaries were approximately C$663 billion (US$591 billion) as at September 30, 2014.

Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife Financial can be found on the Internet at

SOURCE: Manulife Financial Corporation