Featured Post from Retire with Equity

Welcome to Retire with Equity: Where a New Retirement Journey Begins

After decades in banking it's time to decode retirement for Canadians

Oct 18, 2024

5 min

Sue Pimento
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Summary: A recent study reveals that 40% of Canadians over 50 feel financially unprepared for retirement. Retire with Equity aims to address this issue by educating retirees on the importance of leveraging home equity. The initiative emphasizes transparency, financial literacy, and personalized guidance to help seniors make informed decisions and achieve financial security in retirement.


According to a recent National Institute of Aging study, almost 40% of Canadians over ​50 feel they are not financially ​prepared for retirement.  As a seasoned citizen myself, I know we can do better.  That's why we've created Retire with Equity.  It's time to help Canadians get the knowledge they need to make more informed financial decisions.


My observations from my time in the industry, enriched by the research I've done over the past few years, clearly reveal a growing retirement crisis in Canada.


I've worked in the banking and mortgage industry for over 25 years, specializing in equity lending, and spent the last 6 years as an executive at Canada’s largest Reverse Mortgage bank. 

Many people are struggling with mounting debt and no company pension.  And they are living longer. Additionally, the long-term care situation in Canada has many seniors looking to age in place in their homes. Strategies like downsizing and moving in with family are often too simplistic and have little appeal to today's seniors.  Some eventually, often begrudgingly, turn to home equity options such as reverse mortgages as a solution. However, Canadians are conservative by nature, and many think it is taboo to touch their equity (nest egg). Consequently, a reverse mortgage is a last resort.


76% of people over 65 are homeowners, many of which have built up a substantial amount of equity yet cannot afford to retire. (Source: Statistics Canada)


Income is the only way to solve the retirement crisis. Many are choosing to work longer to delay spending savings. Some need to pay off debt to eliminate payments that will free up cash flow. Others do not have enough savings to retire. I saw the stress this caused watching my Mother “do without” in her retirement.  With the benefit of experience, I now know there was a better way for her to finance her golden years.


The Retirement Problem in Canada is Dire


Many 55+ Seniors Don’t Have the Funds They Need: Many need an adequate budget and financial plan. And many don’t fully realize that employer and government pensions will fall short of their cashflow needs.


Home Equity Unlocks Opportunities, But It's Misunderstood: Many retirees don’t fully understand the short—and long-term impacts of their home equity financing decisions. They rely on biased, incomplete,  anecdotal information from friends and family.


Seniors Need to Be Cautious: Homeowners are especially vulnerable targets for misinformation and fraud. However, this demographic does not have time to recover from a financial mistake. Making the wrong choices that affect how they finance retirement and protect themselves could leave seniors without enough money later when they need cash for costly expenses like health care.


The Financial Industry Needs to Do More: There is a need for unbiased, transparent, and trusted sources of information on home equity options that are aligned with consumer interests.



Gone are the days of cookie-cutter retirement plans and guaranteed pensions. Every Canadian needs to proactively craft their unique vision and path for retirement. 



Banking on My Experience


The Retire With Equity mission is dedicated to helping retirees find the right combination of financial strategies to achieve their goals.


The Equity Advantage

One of the standout features of Retire with Equity's approach is our focus on home equity as a key component of retirement planning. For many Canadians, their home is their most significant asset, and unlocking its potential can be a game-changer. Whether through downsizing, refinancing, or reverse mortgages, Retire with Equity will offer guidance on integrating this valuable resource into a retirement strategy.


The Human Touch

At Retire with Equity, we promise to offer straightforward advice with a personal touch. It's not just about the numbers – it’s also about the dreams you have for retirement.  We will bring patience, empathy, and respect to every conversation. And we won't forget our sense of humour, as retirement is supposed to be fun.  We're committed to making things easy to access and understand, no matter where you are in life. 


Education is Everything

Two of our core values are empowering education and epic transparency. Our online resources, webinars, and workshops will be tailored to demystify the world of finance for retirees and soon-to-be retirees, increasing their financial literacy. We will bring transparency to the vital information reserved for the small print, answering the questions retirees don't even know to ask. Whether you're a financial guru or just starting to think about your nest egg, we'll have something for you.


A Senior-Friendly Approach

 Our approach will integrate technology with a user-friendly interface so that retirees can access their services without hassle. Gone are the worries of getting stuck in the weeds of complex interfaces or endless financial jargon. We bring "kitchen table" logic when explaining all financial details, no matter how complex the concept is.


Stories that Inspire

From coast to coast, Retire with Equity will share personal stories that help educate and motivate Canadians. We want to show you visible proof that it's always possible to rethink and revitalize retirement plans. Hearing from fellow Canadians who have successfully navigated the retirement waters offers hope for those still planning their way. Feelings of guilt and shame are common among retirees searching for retirement options. Learning about countless other retirees in similar situations often alleviates this guilt and shame. 


Join the Revolution


Retire with Equity is more than just a company—it’s a movement. Canadians across the country will join in and transform their retirement years into the best chapter of their lives. Empowered by new tools and expertise at their fingertips, they will not just survive but truly thrive in retirement.


As an "Equity Advocate," I pledge to help Canadians navigate the complexities of retirement in ways that educate, inspire, and entertain.  I look forward to the conversation.  Please subscribe to our regular updates and follow us on social media.  Here's to the best years ahead!


Don't Retire---Re-Wire!


Sue

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Sue Pimento

Sue Pimento

Founder | CEO

Focused on financial literacy and retirement strategies. Authoring new book on home equity strategies to help seniors find financial freedom

Pension ReformInterest RatesHome EquityMortgagesReverse Mortgages

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Drops in the Bank of Canada rate will not solve housing affordability.

Summary: The Bank of Canada’s interest rate cuts won’t resolve Canada’s housing affordability crisis. Factors such as skyrocketing home prices, unaffordable down payments, and stagnant wage growth are other primary challenges to address.  A personal example offered by the author shows how the price of her Toronto home surged over 1,000% from 1983 and 2024 while her wages during the same period rose only 142%. While some see this issue as a consequence of Baby Boomers remaining in their homes, it's more nuanced than that.  We have systemic barriers in Canada that necessitate targeted policy changes. It’s time to tackle affordability and implement effective solutions. The Bank of Canada met today, to determine interest rates for the last time this year. They announced a drop of .50 basis points. This is part of a broader effort to stimulate economic growth in Canada, which faces challenges, especially a softening labor market and persistent inflation.  Why Should You Care? 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During my orientation at Bell Canada, my supervisor told me to sign up for their stock option program. She said I would never miss the money or regret signing up for the plan. She was right. When I purchased my home, there was enough money in my stock account for a down payment and closing costs. My interest rate was a terrifying 12.75%, yielding a mortgage payment of just under $670 monthly. The lender deemed this affordable based on my $18,000 annual wage. Life was good. This was in 1983, when the minimum down payment for a home purchase in Canada was typically 10% for most buyers. However, a lower down payment could be possible with mortgage insurance (provided by organizations like Canada Mortgage Housing Corporation (CMHC), which allowed buyers to put down as little as 5%, provided they qualified for insurance. This was commonly available for homes under $150,000, with stricter terms for higher-priced homes. If you had a higher down payment of 25% or more, mortgage insurance wasn't required, and you could avoid extra costs associated with insured mortgages. This was part of broader efforts by the government to make homeownership more accessible, especially amid the high interest rates of the time. So let's do the math. Circa 1983 I first needed to prove that I had saved $3,175 in down payments and $953 in closing costs for $4128. In the 2.5 years I worked at Bell Canada, I saved $4,050 (including Bell Canada’s contribution) in stocks. I also had another $5,000 in my savings account. $9,000 was enough to complete the transaction and leave me with a healthy safety net. Fast forward to 2024 Let’s compare what the same transaction would look like today. Using the annual housing increase cited on the CREA website, the same house would be valued at approximately $700,000 today. Interest rates are much lower today, at 4.24%, yielding a mortgage payment of $3,545. 1. The down payment rules have changed. For the first $500,000, The minimum down payment is 5%. 5% X 500,000=25,0005\% \times 500,000 = 25,0005% X 500,000 = $25,000 2. The minimum down payment for the portion above $500,000 is 10%. 10% X (700,000−500,000) = 20,00010\% \times (700,000 - 500,000) = 20,00010% X (700,000−500,000) = $20,000 3. Total minimum down payment: 25,000+20,000 =4 5,00025,000 + 20,000 = 45,00025,000+20,000 = $45,000 Thus, the minimum down payment for a $700,000 home is $45,000. Here is the comparison: 1983 Scenario  2024 Scenario  Variance Purchase Price: $63,500                               $700,000                                           up 1002% Down Payment: $3,175                                 $45,000                                             up 1317% Loan Amount: $60,325                                  $655,000                                           up 986% Interest Rate: 12.75%                                   4.24%                                                down 200% Monthly Mortgage Payment: $670                $3,545                                               up 429% Wage: $18,000                                             $43,500                                              up 142% Gross Debt Service Ratio: 44.6%                 97.8%                                                up 119% Time to Save for Down payment: 2 years                                                           12.4 years                                        up 520% *Please note that this example does not include mortgage insurance The real problem As you can see, housing was much more affordable for me in 1983 and far from cheap in 2024. During the past 41 years, wages have increased by 142%, yet interest rates have dropped by 200%. But the most significant impact on affordability has been the over 1,000% increase in housing prices. So why is all the focus on interest rates? At the risk of oversimplifying a complicated issue, I believe the media often uses interest rates as a "shiny penny" to capture attention, diverting focus from deeper housing affordability issues. This keeps the spotlight on inflation and monetary policy, aligning with economic agendas while ignoring systemic problems like down payment barriers and the shortage of affordable homes. Indeed, a movement in interest rates often has an immediate and noticeable impact on borrowers' affordability, making it a hot topic for news and policymakers. However, the frequency and consistency of the Bank of Canada meetings on interest rates give the impression that rates are the primary issue, even though they are just one part of a complex system. For example, even if the Bank of Canada dropped interest rates below zero, it would do little to solve today’s homeownership affordability issue. The real problems: 1. Down Payment Challenges: With housing prices skyrocketing, the 5%- 20% down payment required has become insurmountable for many, particularly younger buyers. High rents, stagnant wage growth relative to home prices, and rising living costs make saving nearly impossible. 2. Lack of Affordable Starter Homes: Due to profitability and zoning restrictions, housing developments often prioritize larger, higher-margin homes or luxury condos over affordable single-family starter homes. 3. Misplaced Generational Blame: Blaming Baby Boomers for "holding onto homes" oversimplifies the issue. They are staying put due to limited downsizing options, emotional attachments, or the need for housing stability in retirement, not a desire to thwart younger generations. 4. Political Challenges: Addressing structural issues like zoning reform or incentivizing affordable housing construction requires political will and collaboration, which can be slow and contentious. A broader lens is needed to understand and address the actual barriers to home ownership. Interest drops are merely a band-aid solution that misses the central issue of saving a down payment. The suggestion that we have an intergenerational issue needs to be revised. The fact that Baby Boomers are holding on to their homes should not surprise anyone. However, Real Estate models that predicted copious numbers of Baby Boomers selling their homes to downsize got it wrong. Downsizing was a concept conceived in the 1980s. Unfortunately, it did not account for record-setting home price increases or inflation, leaving it undesirable for today’s seniors. Although this is a complex issue, a few suggested solutions are worth exploring. What can be done? Focus on Policy Innovations: To create housing, increase supply, curb speculative investments, and provide targeted assistance for builders to build modest starter homes. To create rentals, homeowners should also receive income tax incentives to build Accessory Dwelling Units (ADUs). These could be used as affordable rentals or to house caregivers for senior homeowners. Today, The federal government announced a doubling of its Secondary Suite Loan Program, initially unveiled in the April 2024 budget. This is a massive step in the right direction. To create down payments, adopt a policy allowing first-time home buyers to avoid paying tax on their first $250,000 of income. Then, they could use the tax savings as a down payment. Focus on Education and Advocacy: Include a warning that helps consumers understand that withdrawing from RSPs results in a significant loss of compound interest related to withdrawals and how this can harm income during retirement. Encourage early inheritance to create gifted down payments. Normalize the concept by emphasizing the benefits to the giver and the receiver. Educate the public on using financial equity safely and create down payments as an early inheritance for their heirs. This will shift the conversation and initiate an intergenerational transfer of wealth that empowers the next generation to own a home. The Bottom Line While the Bank of Canada interest rate cut may ease some financial strain for homeowners with variable-rate mortgages, it will do little to address the core issue of housing affordability. The media's fixation on interest rates as a "shiny penny" distracts from more profound systemic barriers, such as the inability to save for a down payment and the lack of affordable housing stock. These challenges require targeted policies, structural reforms, and intergenerational collaboration to be tackled effectively. The focus must shift from short-term rate adjustments to long-term solutions that prioritize accessibility and affordability in housing. Without meaningful action, homeownership will remain out of reach for many, perpetuating the cycle of financial inequity across generations. Dont't Retire... Re-Wire! Sue

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