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November 04, 2021

Mortgage burden crimps retirement plans: study

Tired of rising property taxes and empty rooms, 86 per cent of boomers are planning on moving to a smaller home when they retire.

However, even though they agree it’s important to pay off the mortgage long before then, only 43 per cent have actually done so, according to recent research from TD Canada Trust.

In fact, 54 per cent admit to having paid off less than half of the debt on their house, meaning they have a ways to go before thinking about retirement.

Truth is, pre-retirees today are carrying unprecedented levels of debt, which could become a big problem for them when they’re ready to stop working – which is why many financial planners caution homeowners against carrying mortgage debt into retirement.

In fact, retiring while still paying that monthly home-loan bill is a really poor idea, according to the Boston College Center for Retirement Research. 

Even though interest rates are still near record lows, paying down that mortgage debt (the median balance for Canadian retirees is actually around $82,000) is likely the best investment you can make as retirement becomes a reality, the CRR reports.

"It is unlikely that many retired households will be able to earn a return on risk-free investments, such as bank certificates of deposit, Treasury bills, and Treasury bonds, that will exceed the cost of their mortgage," says analyst Anthony Webb. 

And don’t be lured by any talk about mortgages being “good debt” – chances are they’re from U.S. sources.

Our neighbours to the south have been enjoying a substantial tax break on their mortgage interest for some time now. And while such a policy in Canada would be extremely popular, it’s unlikely to happen any time soon.

Do you see yourself carrying a mortgage into retirement? Or is that what’s keeping you working in the first place?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...