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CBC Community reacts to real estate advice for retirement

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HomePic.gifA recent story that warned Canadians about relying on their house equity for retirement got the CBC Community talking.

A recent Bank of Montreal report says that almost one in three Canadians has decided to put their family home on the market upon realizing that they may not have enough money to retire comfortably. But experts warn that with the softening housing market, especially for large, single-family homes, this is worth a second thought.

The story provoked a lively discussion about the best way to save for retirement.

These comments agreed with the experts' advice to diversify investments:

  • "With the coming of the inevitable financial system collapse a house will always be somewhere you can live. A million dollars in a retirement account might not be worth anything. We have already been through this just a few short years ago where many people lost all of these so called investments. Don't put all your eggs in one basket," advised mikem121.

  • "So the moral is not to rely on any one form of investing to fund your retirement. If you have a pension, public or private you should still be saving on your own. Something very few people actually do. If you have a big house you shouldn't be counting on selling it for a bundle and moving into a smaller house to fund your retirement. You can have a collection of investments, pensions and housing downgrades to fund your retirement and then a bad result for one of the places your money is may not be a death blow for your whole plan," said AlexFinck.

Other comments questioned either the motives of the findings or the bank that published the report:

  • "This 'analysis' is preposterous. It might make sense if he's talking about people who bought property a few years ago as some kind of late term retirement plan. But is he suggesting that a home you lived in for 25 years will be worth less than you paid for it? Also, not only can a retiree downsize their home, they can downsize their town. Move to a rural municipality that still has significant amenities if you want to use the value of your home as your retirement income." says CapitalKid.

  • "Is this advice really a 'fox in the hen house' kind of situation? The people in this article are those who sell mutual funds, insurance, and equities. So they are telling people to beware of real estate investments, and that they need to diversify their portfolio. They talk about a 'softening' in the real estate market. Like there hasn't been a 'softening' in the mutual funds, equities and insurance markets over the last 5 years. As far as I am concerned, their advice is bunk," said Tired-of-it-all.

  • "When I compare my RRSP investments to my real estate investments the obvious conclusion is that real estate is a way better and safer investment. Even if the housing market cools to some degree this will still be true several times over," said Science Boy

This comment from Facebook was supportive of downsizing for retirement:
  • "Opting for a smaller house when you are retired is a good thing on every level. I have lots of money and I am retired, I am 60 but sold the big house for a townhouse...just makes sense and I do save money," said Maureen Miklos Hodges.

orangutan offered this comment:

  • "Sold for $480K last month and moved into an apartment. Now I have no debt, minimal expenses and an investment nest egg. My 1 bedroom apartment suits my needs perfectly."

Finally, this young home buyer is excited about the potential of a cooling housing market:

  • "Is it possible that the demand for large single-family homes is down because most are simply unafforadable to the young families who would want a house like that? Where I live real estate is still ridiculously high, and a nice, large single family home would cost at least $400,000. That's out of the price range for many young families, including mine. A cooling market for these such houses is welcomed by me - maybe then we could afford to have a larger house," said PeanutBear.

Thank you for all your comments and replies. Please continue the conversation in the comments thread below.

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