Gordon Powers

Whether home equity should be counted as an asset that you can tap in retirement is an often debated topic among financial advisors.

Most retirement planning software programs don't consider personal real estate and, in looking at the few that do, it's clear that there's no agreed-upon method for calculating its impact on future retirement income.

As a result, when asked just how much they plan to shave off their home's value, and how they're going to get at it, most people only have a vague plan that usually overestimates what their home is likely to be worth.

My take is that a house is an asset you live in, not live off, and, despite a jarring stock market slide, it is not a substitute for a diversified retirement portfolio. This is particularly true when you consider that many older Canadians — about one in three according to estimates from RBC — still have significant mortgage debt.

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Thanks to historically low interest rates, many of these folks have been able to refinance their mortgage and reduce their monthly payments to levels they feel they can handle in retirement. But having done it once means that there's only so much equity left to work with down the road.

Longer term, it's hard to see housing prices keeping pace with the growth of the past two decades. Not only is Canada's population aging, but those replacing today's retirees can expect to earn less than their predecessors — leaving many of them with less to spend on a home as a result.

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At best, your house should be viewed as a source of funds that can be tapped into if other retirement savings run dry. But if you still think you'll be looking for more income from the family home, you might want to:

Move to a smaller home and invest the rest. The option of downsizing, or trading down to a less expensive house or condo, holds understandable appeal in that it frees up money that only exists on paper.

As well, having less square footage to heat and cool should lower your utility bills; your property taxes will shrink; and you'll face fewer maintenance costs.

Remember, though, real estate values can go down as well as up. And housing prices vary sharply across different regions. One couple I know banked $250,000 in equity over a weekend and couldn't be happier in their townhouse. Unfortunately, only a few months later, their prior neighbours found themselves with considerably less cash in hand after their sale and were actually faced with moving before they could find a place that really suited them.