In 2016, at the height of the real estate boom, Jeannie and Doug Rae sold their West Vancouver home, bought an oceanfront home on the Sunshine Coast and banked money for their retirement nest egg. Like many Baby Boomers, leaving behind traffic congestion, the high cost of housing and the stress of living in the city was very appealing.
Stuart Gray, director, RBC Financial Planning Centre of Expertise, says there are many things Canadians need to think of before moving to a small community. NextHome caught up with Gray to get advice on everything from what to consider before making a move to whether or not selling your home and downsizing can fund your retirement.
Nexthome: What are some of the things to consider before selling a city home and making the move to a smaller community?
Stuart Gray: You may want to remain close to family and friends who live near you now, as well as your dentist, your doctor, your pharmacist, your library, your community centre. What will a move mean to your family, your friends, your community connections? What essential services does the smaller community offer? For Boomers and seniors, there is an added consideration: Even moving a half-hour away can prove challenging as you get older in retirement, as you may no longer be as physically mobile, or able to drive.
NH: How much money should you make on the sale of your home to make the move to a smaller community a smart one?
SG: Working with a financial planner can walk you through some budget scenarios and help ensure you have a financial plan in place, so you know your options and can make an informed decision. You may have an RRSP and/or a pension – but those are investment/savings vehicles; they aren’t a plan on how the money can be used. How will changing where you live fit into that plan? Until you make a plan – starting first and foremost with the lifestyle you would like to lead in retirement – you won’t know what finances you’ll need in retirement. This will have a big impact on your options when you retire, including where you’ll live. With the significant increase in real estate values in many Canadian urban centres, the money that goes into your pocket after the sale of your home can be used to purchase a more moderately priced retirement home or condominium and you can use the remaining cash to generate as income to supplement your existing retirement resources. Also, many retirees are looking to rent rather than buy. Your financial planner can help you consider the benefits and considerations that impact your personal situation.
NH: What are some of the expenses associated with making this kind of move that people don’t consider?
SG: Selling your home may give you easy access to funds from the equity in your home, but moving comes with costs which can sometimes take up a huge chunk of money. As examples: fees to prepare your home for sale, land transfer taxes, legal fees associated with selling/buying a home, moving costs, costs for hooking up hydro, cable, mail redirection.
NH: What do you recommend people do before putting up a for sale sign?
SG: You need to make an informed choice. For some, it may be an impulse decision to pack up and move away from the city to a smaller community. Do your homework before making a commitment.