# House-Rich Cash-Poor ...when senior parents run out of money



## Brian Weatherdon CFP (Jan 18, 2011)

I'm particularly thinking of seniors _(and before long the boomer generation too)_. Also the children nearing retirement who may have to support living expenses for Mom and Dad whose savings are gone. Then what remains is the house but no one can eat a house ...unless you look at the options of (i) home equity line of credit (for income), (ii) home equity line (to create annuity or other investment income), (iii) reverse mortgage. ... I've evaluated some options in another article too long for this space here (*) and I'm happy to share that. 

My questioning for the group is: 
a) have you encountered the house-rich cash-poor scenario among family or senior friends?
b) have you found solutions to help unlock an income to last confidently for life? 
c) would group members share the institutions they have found most helpful? ...& how/why.

My presuppositions from the outset include:
d) government will be incapable of resolving income deficit for many house-rich cash-poor Canadians.
e) family members may be stressed from their own circumstances and unequal resources.
f) adult-children may need wealth for their own retirement just when mom/dad need help.

I've experienced and seen this situation unfold for seniors in the past 20+ years. Discussing the issues and resources can unlock the problem and provide solutions ....and that includes facilitating family discussions to get this worrisome topic out of the closet.


(*) guaranteedincome4life.ca/blog/house-rich-cash-poor-retirement-income-strategies/


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## GoldStone (Mar 6, 2011)

Brian,

You are obviously here to promote your CFP business. Why don't you contact the owners of this fine forum and inquire about paid advertisement?

Your post is a sales pitch masquerading as a discussion. Personally, I find your marketing strategy rather sleazy. Just my opinion.


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## MoreMiles (Apr 20, 2011)

Get in the thread before the lock-down.


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## alingva (Aug 17, 2013)

GoldStone said:


> Brian,
> 
> You are obviously here to promote your CFP business. Why don't you contact the owners of this fine forum and inquire about paid advertisement?
> 
> Your post is a sales pitch masquerading as a discussion. Personally, I find your marketing strategy rather sleazy. Just my opinion.


It does not matter if the person promotes his/her CFP or not but the problem exists and the problem is huge. This question bothers me all the time (government will be incapable of resolving income deficit for many house-rich cash-poor Canadians) and I have no idea how Gov will resolve this issue. By increasing retirement age to 90? By increasing already high taxes? What else can they do? I do not know


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## OnlyMyOpinion (Sep 1, 2013)

Well we find it a relevant topic for discussion. We have parents (mid-80's) who seem so concerned about saving enough in case they have to go into assisted living or ltc that they spend very little. 
We've told them that their house would provide sufficient cash to cover it, but the want to 'leave it to the kids' (4). 
Eventually they may have to take the equity from it though. We've offered to bridge that period - buy the house from them at fmv so they'd have the cash in their hands, but also not be forced to sell, clean it out and move in a rush, one may still be able to stay at home etc. In other words have maximum flexibility.
Interested to hear of any ideas why this would not be recommended. We realize we'd take on real estate market risk with ownership. We wouldn't need to mortgage to cover it.


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## Ihatetaxes (May 5, 2010)

GoldStone said:


> Brian,
> 
> You are obviously here to promote your CFP business. Why don't you contact the owners of this fine forum and inquire about paid advertisement?
> 
> Your post is a sales pitch masquerading as a discussion. Personally, I find your marketing strategy rather sleazy. Just my opinion.


I disagree and just read blog he linked to which I found interesting. Yes its his business but with parents in this situation anything I can read about it is of interest to me. Others here are more blatant about self promotion of their businesses like Dogger1953 who ends every comment with "email me for more information for a fee" and don't seem to receive this criticism.


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## DayTek (Sep 26, 2013)

My parents are in their mid-50's and I do not know how they will survive their senior years financially. They have owned their house since 1989. You'd think they'd be popping the champagne being mortgage-free by this year...Nope, they still have another 15 years left on their mortgage. This is the manifestation of constant refinancing of car loans and credit cards onto their mortgage, coupled with obsessive cash spending. If they sold the house today, they _might_ break even on the mortgage...I don't know if it would cover other debts. My Mom lost her job a few years ago, so when they went to refinance recently, they were declined because of the decrease in income - The bank said they could do nothing for them and offered bankruptcy as an option. My Dad, being way too proud, would never go that route unless absolutely forced to. The day they sell is the day they have hit the ceiling and can't afford the interest payments any more. The way I see it, we better put a granny suite on our place, because retirement will not be so good for them if they can not learn to curb spending habits now - And "budget" has never been in their vocabulary.

My in-laws, also in their mid-50's, have rented their whole lives. They've declared bankruptcy once and are now in the process of filing a consumer proposal. My MIL did daycare for 25 years, but now does not work (long story) and FIL slaves to make ends-meat at a factory. Both will have no company pensions, RSPs or assets to live off of in their senior years. They know how to budget, but don't have the will power to stick to it. Their only saving grace may be an accident settlement for $500,000 max, but who knows when/if that is coming or if it will even make a difference; They've already proven they can't handle large sums of money well with an inheritance and partial settlement they received a few years back! So yeah, better add an in-law suite, because the way I see it, if financial habits do not change, my in-laws will be joining the party at our place as well.

"Family discussions" are off the table - My Mom doesn't deal with any of the money (except spend it) and my Dad gets mad and shuts off when I try to talk about it or provide advice. My in-laws have shown me their budget before to try and help (after years of asking us and other family members for cash loans to get by), but they need to downsize from the 3 bedroom semi with a finished basement they live in to have any opportunity of saving; They've made it clear that they will _not_ go to apartment living or geared-to-income housing.

Pride trumps rational thinking in both cases. I know that when we are entering mortgage-free bliss at 40, that will be about the time that both sets are struggling to adjust living with no work income. I try to not think about it too much and just love both sets of parents. I am hoping the idea of having to live with your children will be a wake up call to be more financially responsible...But it may be too late by then


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## Addy (Mar 12, 2010)

I don't think Brian is masquerading a business advertisement either. My husband and I are in our early 40's and starting to think of our retirement options. He will be eligible to retire in 13 years with his military pension. We are checking out other countries to retire to as we believe the cost of living in Canada to be too high for what we get in return.

We will most likely have our house paid off in 13 years (depending where he gets posted to with his work), so the plan is to sell it and invest the cash, or buy a smaller home close to where our daughter will be living to either live in during the summer or have our daughter live in and we will come visit.

Personally, as much as I understand seniors want to stay in their houses, they are better off selling and renting an apartment in a seniors building. Socially they will be much better off, as well as the conveniences offered, such as grocery services that are often informally (or formally) offered to residents who aren't as able bodied to go grocery shopping or drive to a grocery store.


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## sags (May 15, 2010)

Addy said:


> Personally, as much as I understand seniors want to stay in their houses, they are better off selling and renting an apartment in a seniors building. Socially they will be much better off, as well as the conveniences offered, such as grocery services that are often informally (or formally) offered to residents who aren't as able bodied to go grocery shopping or drive to a grocery store.


During my foray into a part time delivery service, I noticed that in the apartment buildings where seniors lived, there is a very strong feeling of community.

The lobbies were full of notices for "pot luck dinners"........"tea times"........"euchre parties".........and other activities.

On every floor at the elevators there was something to step out into...........a table with an ongoing jigsaw puzzle.........fresh flowers........

At Christmas time, the lobby and every apartment door was decorated.

Often I would see seniors in groups coming back from "bingo".......or walking down the corridor visiting with neighbors.

Those buildings felt like a community.............and the residents seemed happy.


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## Sherlock (Apr 18, 2010)

My parents live in a paid-off house and have no income but CPP/OAS/GIS. Yes it can be done. It takes almost their entire income to pay the tax, utilities, and buy food. But they have pretty much no other expenses. They never do anything or go anywhere, just sit around at home all day. Can't use the small amount of savings they have for a vacation because that money will be needed for a new roof. So if you're willing to accept a retirement in which you'll never go on vacation, never do anything fun, never be able to help out your kids financially (until you die and leave them the house), then you don't need to save for retirement, you just need to make sure you're mortgage free by the time you retire.


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## sags (May 15, 2010)

One thing I did notice, was that I seldom saw a man in the buildings.

So much so, that I jokingly asked a woman once, where all the men were hiding out.

She laughed and said......"oh honey, single men don't last long in here".............

It got me to thinking that if I were to become a single senior........I know exactly where I am going to live.

Imagine a building with hundreds of single ladies........from all different ethnic backgrounds.........offering the occasional lunch or dinner.

But it is kind of a truism, that single women will dominate the senior group in the future.

Maybe hanging on to the house is a "male" thing?


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## Sherlock (Apr 18, 2010)

LOL... If I find myself a single senior, I hope I'll still look good enough to snag me a 40-something woman or maybe even a 30-something.


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## Addy (Mar 12, 2010)

Sherlock said:


> LOL... If I find myself a single senior, I hope I'll still look good enough to snag me a 40-something woman or maybe even a 30-something.


Funny you mention this, we are (only considering) considering going to Thailand to see if it's some place we would want to retire. Western men, stereotypically older, balding, pot bellied, are in abundance there - and many with young (ie 20's and 30's) Thai girlfriends or wives. I don't mind it, if everyone is happy who am I to judge. Sherlock you may want to keep that in mind when you get old and grey and single


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## Sherlock (Apr 18, 2010)

Yes I have heard of older western guys going to thailand, russia, south america, etc, and finding they are able to get girlfriends much younger and prettier than they can get with in the west. Problem with all those girls in poor countries, though, is that they're not interested in you but your money. If another guy wealthier than you were to show any interest in them, they'd leave you for him. The same is true if the sexes are reversed: There have been stories of wealthy older western women going to south america or south asia and meeting young 30 year old men who charm them, then they get married, then of course they divorce them and the women lose a lot of money.

I think if I were a senior and looking for a female companion I would try to find somebody in my own country, although I'd look for someone a bit younger. Women are much more willing than men to date much older partners. If a 60-something man dates a 40-something woman, nobody gives it a second thought.


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## Sherlock (Apr 18, 2010)

Or if you find yourself wealthy, you could always go this route: http://www.dailymail.co.uk/news/art...luffy-pink-dressing-gown-bid-young-bride.html


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## dawne (Jan 18, 2014)

Sherlock said:


> Or if you find yourself wealthy, you could always go this route: http://www.dailymail.co.uk/news/art...luffy-pink-dressing-gown-bid-young-bride.html


Sherlock, it looks like the wealthy Serbian in your link never heard this song: http://www.youtube.com/watch?v=SMwZsFKIXa8


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## Taraz (Nov 24, 2013)

Unless you only have one kid (and no debt) and the kids lives where you live, why would you ever want to "leave the house to the kids". 

Sell it. Cash is easier to divvy up.


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## sags (May 15, 2010)

Taraz said:


> Unless you only have one kid (and no debt) and the kids lives where you live, why would you ever want to "leave the house to the kids".
> 
> Sell it. Cash is easier to divvy up.


Good point. 

Having real estate in the estate guarantees the estate will have to be probated, the fees will have to be paid, and everything will be delayed by the banks, lawyers and courts for years.


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## fraser (May 15, 2010)

Actually....if you have an up to date will and your affairs are in order Probate can be very straightforward. I did Probate in BC for my mother's estate. We bought the kit and did it ourselves. Once we had done the prep work of an on line search, distributing the will to the heirs, and paying outstanding taxes, the Probate took 3-4 weeks from date of submission to the court. It was an easy process and we saved a good deal of money by doing it ourselves. 

We sold our house 18 months ago. We were going to buy again but we are having second thoughts. Houses constitute so much wasted space for us and are a large money drain. Condo living (renting) is starting to agree with us after 35 years of owning homes in various cities. I understand that some people do not want to leave their homes but surely they can become a millstone-financial and otherwise as one ages. And we are certainly making more after tax dollars on our capital than we would have on the house.


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## hystat (Jun 18, 2010)

OnlyMyOpinion said:


> We've told them that their house would provide sufficient cash to cover it, but the want to 'leave it to the kids' (4).


can't deny them that- they have decided what to do in retirement - sacrifice their lives for the lives of the next generation. Seems silly, but it's a free country. Sounds like that makes them happier than traveling or consuming. 

I have no kids - my wife has one, but she'll probably outlive him. She's only 18 years older than him and women in her family live 100+

So... I'll be very interested in reverse mortgage strategies in a decade or 3... I'm spending this house.


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## Nemo2 (Mar 1, 2012)

fraser said:


> And we are certainly making more after tax dollars on our capital than we would have on the house.


Doing a rough calculation wherein if we sold our small condo townhouse and rented an apartment/house @ approx $1,200 per month, all inclusive, we'd have to make approx 8.75% p.a. after tax on the money we'd get from selling the (mortgage free) townhouse, (with no possibility of future capital appreciation, but definitely with the 'threat' of increased rent).

Of course, for those with more of their finances tied up in housing, the necessary percentage would (probably) be lower, but for us it appears more expedient to hold on to what we have.


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## fraser (May 15, 2010)

I think that it depends where you live. The owner of the condo where we live is making about a 3 percent return-assuming the entire value is financed. But that is BEFORE she had to pay the recent $35K cash call on the condo. So,her return will really only be the capital appreciation-which will be about 7 percent in our market over the next two years or so.

The math is really making me think twice about buying. Conservative portfolio market returns were 16-17 percent last year. Alas, my we are expecting a grandchild and my spouse is going into 'maternal' mode when it comes to owning our own 'nest' as it were.


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## Four Pillars (Apr 5, 2009)

Taraz said:


> Unless you only have one kid (and no debt) and the kids lives where you live, why would you ever want to "leave the house to the kids".
> 
> Sell it. Cash is easier to divvy up.


I always thought 'leave the house to the kids' referred to the value of the house - not the physical property itself. If so, that would imply selling it and leaving the proceeds to the kids.


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## heyjude (May 16, 2009)

Four Pillars said:


> I always thought 'leave the house to the kids' referred to the value of the house - not the physical property itself. If so, that would imply selling it and leaving the proceeds to the kids.


Not necessarily. Some parents (mine included) want to leave the actual house to the kids, in the somewhat vain hope that they will return to live there. And for some, what this really signifies is that they just want to stay in familiar surroundings for the rest of their lives. 

A few years ago I attended a wedding where the 30 year old groom, in his speech, thanked the bride's parents for giving them the land on which to build their new home, and stated that they intended to raise a family and stay there for the remainder of their lives. That completely spooked me. How could he be so certain? A lot can happen in 50 years.


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## AltaRed (Jun 8, 2009)

heyjude said:


> A few years ago I attended a wedding where the 30 year old groom, in his speech, thanked the bride's parents for giving them the land on which to build their new home, and stated that they intended to raise a family and stay there for the remainder of their lives. That completely spooked me. How could he be so certain? A lot can happen in 50 years.


That is emotion (and gratitude) speaking. No one with a sane mind could mean that literally for the reasons you say. 

I think the 'house rich, cash poor' syndrome in the context the OP has presented it is pretty typical of folks in their 80s and 90s today. They saw the 'horrid' institutions their own parents grew old and eventually died in and they fail to realize what many of the seniors (and 55+) residences are like today. It took effort by my bro and I to get our mother into one of these newer style inviting and socially wonderful residences...but once there, she has never looked back. Maybe those now in their 50's, 60's and 70's will know when to throw in the towel on the ol' homestead. There is plenty of opportunity to downsize at least once along the way after becoming empty nesters and putting the new found cash into an investment portfolio. To me, a house is more bricks and mortar (and boat anchor and money pit) than it is a 'nest'.


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## Siwash (Sep 1, 2013)

DayTek said:


> My parents are in their mid-50's and I do not know how they will survive their senior years financially. They have owned their house since 1989. You'd think they'd be popping the champagne being mortgage-free by this year...Nope, they still have another 15 years left on their mortgage. This is the manifestation of constant refinancing of car loans and credit cards onto their mortgage, coupled with obsessive cash spending. If they sold the house today, they _might_ break even on the mortgage...I don't know if it would cover other debts. My Mom lost her job a few years ago, so when they went to refinance recently, they were declined because of the decrease in income - The bank said they could do nothing for them and offered bankruptcy as an option. My Dad, being way too proud, would never go that route unless absolutely forced to. The day they sell is the day they have hit the ceiling and can't afford the interest payments any more. The way I see it, we better put a granny suite on our place, because retirement will not be so good for them if they can not learn to curb spending habits now - And "budget" has never been in their vocabulary.
> 
> My in-laws, also in their mid-50's, have rented their whole lives. They've declared bankruptcy once and are now in the process of filing a consumer proposal. My MIL did daycare for 25 years, but now does not work (long story) and FIL slaves to make ends-meat at a factory. Both will have no company pensions, RSPs or assets to live off of in their senior years. They know how to budget, but don't have the will power to stick to it. Their only saving grace may be an accident settlement for $500,000 max, but who knows when/if that is coming or if it will even make a difference; They've already proven they can't handle large sums of money well with an inheritance and partial settlement they received a few years back! So yeah, better add an in-law suite, because the way I see it, if financial habits do not change, my in-laws will be joining the party at our place as well.
> 
> ...


This is why I am absolutely convinced there will be a major correction in the housing market.. Interest rates could even decline and we'd still see a correction…

I know lots of people like your parents… my parents are in the 70s and have literally run out of money…living on pension… no RSPs/RIFs... about to sell a home they've been in a long time… But they've take n out 100K HELOC so they won't have much after they buy another home and pay back that HELOC.. 

I think people will be forced to rent…


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## Dave (Apr 5, 2009)

Interesting discussion. My parents are not ready for retirement and I do not mind providing them with a roof and food in their old age because as a family we have always helped each other out. The major problem that we have is that my father does not take care of himself. I know that he will run into health problems, it is just a matter of time. In addition, finances are a huge taboo for him and he is unable to plan or to save. All the savings that my parents have stashed away together with the paid for house are our planning with my mum. Due to his stuborness, I have very little empathy for him so he will be on his own if he has any special needs. How will my parents cope ? Many generations have survived before us without fancy means or nursing houses so I am not too worried. They will never go hungry but I am very aware that their futur may not be rosy and they will be cash poor. 

Dave


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## Four Pillars (Apr 5, 2009)

heyjude said:


> Not necessarily. Some parents (mine included) want to leave the actual house to the kids, in the somewhat vain hope that they will return to live there.


Fair enough. But regardless of intentions - the house will get sold and proceeds divided (in most cases).


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## heyjude (May 16, 2009)

Four Pillars said:


> Fair enough. But regardless of intentions - the house will get sold and proceeds divided (in most cases).


Many decisions are based not on rational thought, but on emotion and wishful thinking.


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## Brian Weatherdon CFP (Jan 18, 2011)

Fear, worry, and love blend together in so many posts shared on this subject. 

Income-worries touch our hearts directly or indirectly through family or close friends, and senior persons whom we admire & love. Such lives, who have touched me directly over the years, are reflected in other stories I share along the way. I'm very grateful for your thoughtful reflections & sharing on this... 

I hope this discussion of House-Rich Cash-Poor _(in these valued threads & the link in opening post)_ can help people consider their options (financial wellbeing, personal lifestyles, family health).

BW


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> heyjude said:
> 
> 
> > ... A few years ago I attended a wedding where the 30 year old groom, in his speech, thanked the bride's parents for giving them the land on which to build their new home, and stated that they intended to raise a family and stay there for the remainder of their lives. That completely spooked me. How could he be so certain?
> ...


Why not?

My brother-in-laws family all live within five miles of each other, except for one sister. He also had moved away but as soon as job came open in his field, there was no doubt he would move back as he was constantly searching for a reasonable job at home.

Some want top dollar so that they are willing to relocate, including other countries. Others want family to be close and will do a lot to stay in the same area. IMO, it's the same thing - just a different focus/goal.


Cheers


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## MoreMiles (Apr 20, 2011)

I saw this show, Alaska Man or something like that... generations of family live on the same homestead.


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## marina628 (Dec 14, 2010)

I am originally from Newfoundland and most of us moved away from home because of better jobs etc but we all love to go back home.I can't live back there year round because the weather would not be too kind on my body but I am so happy so many of our school friends and my cousins have returned to build our summer homes or buy property for retirement.It is always nice to have a plan for such important issues .


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> Why not?


Because no one can make that commitment without knowing the future. Family/job/health crises, marriage failure, etc. No one knows where they will be for certain a year from now, never mind 50-80 years. Statements like that ARE emotion and/or gratitude and meant to be taken figuratively, not literally.


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## Eclectic12 (Oct 20, 2010)

^^^^^

.... and some deal with it, staying where they are so that there are five generations in the same town and others spread across the globe. Regardless of location, all of that stuff happens as that is all part of life.

I'm not sure why some preferring to stay in one spot as long as humanly possible and others proactively seeking their fortune should either spook or reassure anyone.


Cheers


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## donald (Apr 18, 2011)

My last house I lived in(sold it)was in a quite pocket neighborhood just within city limits and both my neighbors to the right side of me were/are(actually one has pass away)owned a home free and clear and from convo's knew both men had a small pension/oas/cpp anyways.....It seems to me they were pretty happy.
Both these gentleman spent a large portion of time doing non expensive things I doubt it was hard for them to even spend 15 bucks a day(general assumption/guess)
A common day was a wake up around 9,meet the ''boys'' at the coffee shop,tinker around the yard in the afternoon and I am assuming maybe have a basic home cooked meal and watch tv and lights out by 9pm......not glamorous and not jet-setting but really what exactly would be expected of these men even if they had $ or not(both were windowed)often chatted with them and that was basically(from my perspective)how they generally spent their days(I think they were just happy to be healthy)
Point being and maybe this is depressing but what need would a house rich/cash poor 80 yr old have the need for a six figure income anyways?I don't think these guys were lusting to go to the Bahamas ect......prob very typical average day(ie the days are pretty simple)


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## donald (Apr 18, 2011)

Sort of the seen it done been there nothing new under the sun?Both these guys loved to talk to me about the old ''days'' or would chat about very local politics ect
Happy talkative of their childen/grandkids ects......maybe they were just ''good'' pulling up the lawn chair in the back yard ect(maybe that is sad I don't know!)


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## hboy43 (May 10, 2009)

Hi:

My parents won't run out of money due to nice pension and low needs/wants. Unfortunately, my father recently has predicted TEOTWAWKI financially and has sold all his stocks I think and gone to vast holdings in gold and silver. Anyone here following me will know my feelings on gold LOL. I explained my feelings on gold and he was as impressed as the gold bugs around here. The potential inheritance won't make any difference in my life one way or the other, but I suspect my brothers will miss the wealth that is likely being destroyed. Last we spoke on the matter, he was almost back to break even, so I can thank the heavens he didn't come up with this idea at $1900/oz.

Anyhow, I think one cannot really understand what it is to be old until one gets there, so I am of the opinion that the default response is to just leave them be if at all possible if they seem happy and are not harming themselves or anyone else. God only knows what strange things I will be doing if I ever get old.

hboy43


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## sags (May 15, 2010)

Most of the people I know who headed into retirement with a lot of plans, never got around to doing most of them.

My in-laws bought a home "in town"...........never lived in it, were going to buy a home in Arizona.........never did. 

My dad would putter around his mobile home in the winter............and then go up to the trailer for 3 week at a time in the summer and fall.

Most retired people are content to keep it simple. A normal life..........without the intrusion of work, is how I would put it.

I am happy NOT to be busy. That is why I retired, and why I refuse to join any charities, organizations, clubs or activities that have the dreaded SCHEDULE.

Racing around working and taking the kid somewhere every night............for all those years, was enough for me.

If you don't do much...........you really don't need a lot of money.


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## sags (May 15, 2010)

hboy43 said:


> Hi:
> 
> My parents won't run out of money due to nice pension and low needs/wants. Unfortunately, my father recently has predicted TEOTWAWKI financially and has sold all his stocks I think and gone to vast holdings in gold and silver.
> hboy43


On the other hand........maybe your dad has been around long enough.........and seen enough, to get "the feeling" that things aren't quite right in the stock market and decided to get out now. I understand that most people today don't think much of holding gold..........but history shows there aren't too many years that gold prices go down. It happens and gold prices can drop a lot............but when I was a young adult.........gold was $30 an ounce and people thought THAT was nuts.

Perspective over time..........

Just saying.


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## Eclectic12 (Oct 20, 2010)

sags said:


> Most of the people I know who headed into retirement with a lot of plans, never got around to doing most of them.
> 
> My in-laws bought a home "in town"...........never lived in it, were going to buy a home in Arizona.........never did.


Interesting ... most of my relatives exclaim that now that they are retired - they have no idea how they had time to work! Their activities have a wide range including my cousin who recently came back from a tour of the Arctic. Even for local activities, they mention things they wanted to do but never seemed to have an open enough schedule to do them.




sags said:


> ... If you don't do much...........you really don't need a lot of money.


Or if one has wide interests where the activities are balanced, there's a lot the can be done for little money. 


Returning to the original questions - few of my relatives are house rich and cash poor (I can think of two of twenty some odd).

The income is from the same sources are when they were working - by living within their means (though savings has less priority than when they were working).

For the few that are this way - where they are willing to learn about finances, income, etc., then education seems the most effective.


Cheers


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## Nemo2 (Mar 1, 2012)

Eclectic12 said:


> Interesting ... most of my relatives exclaim that now that they are retired - they have no idea how they had time to work!


Most of the time, my wife & I just hang out together......and suddenly the day's over......it's like "Wow, what happened?"

Right now we, (mainly she), are finalizing our next trip, and she's ("My wife, the Geek"), figuring out how to download books, etc, to the two (on sale) e-readers we just purchased (saves the extra weight of carting books in our luggage)........but basically we do what we want......if we want to do something, we do it...if we don't want to do _anything_, we don't do anything.....(we're also happy with our own, and with each other's, company).

(I'll be 72, six months from tomorrow.....stopped working 25 1/4 years ago.....and have never, even for a nanosecond, wished I was still 'gainfully employed'.)


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## Eclectic12 (Oct 20, 2010)

^^^^

I think part of it ... for my relatives at least, was that they did activities before retiring. So where some of their colleagues were lost without work activities, they suddenly had more time for longer trips or more of what they enjoyed.


As I think of one of the two house rich, cash poor relatives - I'm not sure they fit the OP's profile too closely as they are currently running with what for most is a low income. Once they pay off their mortgage - yes their income will drop in retirement but a bit chunk of their expenses will.

In either case, between future inheritances and with how well the rest of the family has done - it should be a manageable burden compared to what I read posted here or in newspaper "retirement snapshot" articles. Time will tell ...


Congrats on doing and enjoying what you want ...

Cheers


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## nathan79 (Feb 21, 2011)

My mom definitely falls under this category. She owns her house and a rental apartment outright, but has little other assets.

My dad passed away 12 years ago and she gets a small survivor benefit (really a pittance). She's never really worked a normal job, so no pension or CPP. She's currently making do on about 15K a year. She will be 65 in four years so I guess the amount will go up a little.


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## OhGreatGuru (May 24, 2009)

The current OAS is about $6580/yr. If her other income remains at $15K she will be entitled to a small GIS. Currently, GIS & OAS combined for someone with $15K other income would be ~$7500/yr.


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## nathan79 (Feb 21, 2011)

OhGreatGuru said:


> The current OAS is about $6580/yr. If her other income remains at $15K she will be entitled to a small GIS. Currently, GIS & OAS combined for someone with $15K other income would be ~$7500/yr.


Not bad. She's used to making do with less, so I imagine she could live quite comfortably on that amount.


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## Brian Weatherdon CFP (Jan 18, 2011)

Eventually health costs also hit one's financial security in retirement. In "Life Horizons Analysis" (some resources if you google that) we typically say people want to live large in early retirement, followed by sedentary years with lower spending, and then health costs hit with increased frailty. _In fact 85% of lifetime costs for health hit in the last 5 years or so of our living..._

Nathan79 and others mention that some may happily live on a low fixed-income through the early & middle years of retirement. It will remain costly however to manage personal health in later years. At home, or in a home, health supports are costly. If you've run a business you know overall health inflation is nearer 10% ...and if you watch the fiscal situation of provinces and the country as a whole then you know government will be paying less and less of this bill over the years ahead.

Much of this boils down to having financial strategies to enjoy the life you choose ...including resources for personal dignity and care during later years. The House-Rich Cash-Poor focus (opening comment) offers discussion points for families and their advisors. 

PS: on the "gold" discussion; can't eat it; can't dwell in it.
Might have value; might not. Could call gold a "monkey metal".
Visit the zoo & see if you can guess where monkeys will move next.

PPS: to those who have retired and achieved their quiet satisfaction, and to those who live large because they've practiced a lifestyle along the way that prepared them for the retirement they can afford and can fully enjoy, awesome*!* Keep showing us the way. Be our example of Greatness in fulfilling one's personal retirement dreams


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## Brian Weatherdon CFP (Jan 18, 2011)

By the way if you experience difficulty getting a bank to approve the Home Equity LoC as discussed above, be sure you or your advisor include Manulife Bank in your consideration. They offer an easy approach & good terms for unlocking home-equity for Income. 

Don't get discouraged if one institution hesitates to approve. 
I'll value if you can share other experiences on this.


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## fraser (May 15, 2010)

After we retired we sold our home. Not because we needed the money but because we wanted to downsize from a very large home to something much smaller, easier to maintain, and that we could walk away from. We did it, put our things in storage, and travelled for six months. Only one vehicle remained in storage.

While travelling, four people that we knew all passed away within weeks of each other. Three were totally unexpected. They were in their mid-late fifties. Those deaths had an impact on us. We decided that since we had the financial resources we should do what we wanted to do.

One year later now renting but still looking for the right place to buy. Travel comes first. It was Arizona and the Caribbean over Christmas, Thailand in the winter. It will be Southern Europe for 6/7 weeks in Sept. Oct, and Thailand/Australia next winter. In between now and Sept. we have a first grandchild arriving but his will not impact our plans to any great extent. We think we have another 10 years left for our type of independent travel. But who knows. So, we need to get it all in. And travel planning consumes more of my time than looking for a new home to buy. Our current 2br. rental condo is just fine....and we can walk away from it on a moments notice. 

We feel that we need to make these remaining years 'count' in terms of our wants and desires. We do not know what tomorrow will bring.


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## dubmac (Jan 9, 2011)

My only experience has to do with a family acquaintance. He's 78, no kids, no family (other than a distant relative whom we know), border-line mental illness (hoarder). worked for a bank for around 25 years, then, because he wouldn't adapt in the age of computers, he was "retired". He lives in a 1 bdrm condo, and has drawn down on his home equity through reverse mortgages (to fund travel and trips each year) to the point where he doesn't have much $ left. He has prostate issues (cancer?), and is largely bed-ridden. His neice is looking at options for assisted-living residences -and these options are limited.


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## wert (Jan 26, 2014)

Sherlock said:


> My parents live in a paid-off house and have no income but CPP/OAS/GIS.


Same as my Mom, who also had her property tax deferred (which is allowed here in Vancouver anyway). Sold her property and invested in a balanced ETF portfolio. After rent and increased income taxes, and the loss of GIS, she is no better off. Seems the government policy encourages seniors to hold on to RE.


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## MoneyGal (Apr 24, 2009)

wert said:


> Same as my Mom, who also had her property tax deferred (which is allowed here in Vancouver anyway). Sold her property and invested in a balanced ETF portfolio. After rent and increased income taxes, and the loss of GIS, she is no better off. *Seems the government policy encourages seniors to hold on to RE*.


Government policy encourages *everyone* to hold onto RE in the form of a primary residence. It just doesn't incent seniors to sell.


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## Brian Weatherdon CFP (Jan 18, 2011)

Thanks Wert, and yes I agree totally MoneyGal. Therefore many will need clear discussions on how to remain in their home while safely accessing their home-equity to gain a low-cost, reliable income to support their living expenses. 

Hoping the options in the opening piece offer resources that families and advisors can chew on to help create the best individual solutions for those in need.
BW


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## investordude (Dec 14, 2012)

Parents are in the same difficult situation. Mother hasn't worked for 20 + years (age 57) she makes a few dollars by -ironically- assisting wealthy seniors in cleaning or preparing meals. Either way, she won't collect any retirement benefits, if so, very little. Dad ( age 65) lost his job a few years ago had to take a pay cut making 11 bucks an hour (was making 18 bucks before) and still works by cleaning apartment buildings. They have no assets besides their 17 year old car and semi-detached house (which they still owe 150,000 with 15 years left to be paid). No savings, no RRSP, no TFSA nada. Collects $500 in CPP, still waiting for his OAS. He has no choice to continue to work until he has his house paid off ... at his age, not sure he will make it. Their income is enough to cover their house expenses so they depend on these jobs.

As immigrant parents, they took a chance by coming here to give me (their only child) a better chance in life. I am very grateful for the sacrifices they've made for a better future, but now, it's my turn to return the favour. I'm worried that they will not have a chance to enjoy their retirement years...they will simply work until they pass... I have entertained the idea of them selling their house and living with us (my wife) so they can enjoy their retirement life...go travel, go back home and visit family but because of my dad's pride and stubbornness; he refuses to be "bailed out" by his only son. His work-hard attitude gets the best of him and he doesn't let it go no matter how old he gets! Live by the sword, die by the sword.


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## Homerhomer (Oct 18, 2010)

Reverse mortgage from children to parents may be worth considering in some of these situations, parents get to stay in their home, there is no proceeds to invest therefore it doesn't affect the pension supplements, and the bank is not making any money of them.


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## rikk (May 28, 2012)

I agree Homer ... I do not like the idea of these mortgages, there's the fee of say $2K, and the 2% to 4% higher than regular mortgages rate my understanding ... borrow $60K, owe $120K in let's say 7 years ... as if $60K would last the 7 years ... and I'm thinking after say 25 years, you'd have no equity left in the home at all, effectively selling it for ... $60K. I'd sell before I'd have anything to do with a deal like that ...


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## Homerhomer (Oct 18, 2010)

rikk said:


> I agree Homer ... I do not like the idea of these mortgages, there's the fee of say $2K, and the 2% to 4% higher than regular mortgages rate my understanding ... borrow $60K, owe $120K in let's say 7 years ... as if $60K would last the 7 years. I'd sell before I'd have anything to do with a deal like that ...


You agree but you would rather have nothing to do with it? hmmmm, I am confused ;-)
Since I am suggesting a transaction not involving a bank but between family members the interest rate can be set at a low rate if the kid wants to help out the parent ;-) Not sure what would be the minimum legal fees to set that up.


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## andrewf (Mar 1, 2010)

As Rick Mercer described them: "Canadian Cardboard Box Plan".


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## rikk (May 28, 2012)

I agree with you Homer ... with a family member, friend absolutely, I'd do it and at a 0% rate ... I updated my post with some, ok, quick numbers, but geez what those guys are doing is imo criminal.

Getting off topic a bit ... I'd hold a mortgage on the house (versus some other type of loan) so that if the house were to be sold, I'd have a good chance (nothing's for sure) of having the loan returned. I'm sure the family lawyer could draw up such a mortgage for not that much.


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## Northern1 (Nov 27, 2014)

*interesting....*



Homerhomer said:


> You agree but you would rather have nothing to do with it? hmmmm, I am confused ;-)
> Since I am suggesting a transaction not involving a bank but between family members the interest rate can be set at a low rate if the kid wants to help out the parent ;-) Not sure what would be the minimum legal fees to set that up.


A google search lead me here, somewhat comforting to know I am not alone. Anyways, long story short, my sister and I are going to the bank with our mom in a few hours to see what they can offer my Mom using her cottage as collateral. After disability, survivor's benefit and soon to be OAS etc. I figure my Mom will need an *extra* $600-$800/month to live a somewhat comfortable existence in the GTA. She was also hoping to pay off her debts, about 20K. 

Anyways, I started thinking the ideal situation would be to buy it from her (getting a mortgage of my own), then she would have a nice nest egg to invest and live off and not have to worry about making loan payments etc. However, in the back of my mind I started to think, why wouldn't I just supplement her income instead of the bank supplementing it? 

So Homer, is this something that can actually be done with a lawyer, arrange a "mortgage" between family members?I guess one thing that is advantageous with a bank solution is the bank will always be there, and if I got sick or died there could be some issues.

Thoughts? 

Also, if your wondering about my sis, she is house poor in the city and wants to enjoy the property without putting any money into it or sacrificing her lifestyle. So, I see it as inevitable of having to buy her out anyways.


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## Eclectic12 (Oct 20, 2010)

rikk said:


> ... with a family member, friend absolutely, I'd do it and at a 0% rate ... I'd hold a mortgage on the house (versus some other type of loan) so that if the house were to be sold, I'd have a good chance (nothing's for sure) of having the loan returned. I'm sure the family lawyer could draw up such a mortgage for not that much.


As a mortgage is a loan, I'd expect one would have to at least charge the minimum interest rate that CRA prescribes to avoid any issues with CRA.
http://www.thebluntbeancounter.com/2011/07/1-prescribed-interest-rate-loan-great.html




Northern1 said:


> ... However, in the back of my mind I started to think, why wouldn't I just supplement her income instead of the bank supplementing it?
> So Homer, is this something that can actually be done with a lawyer, arrange a "mortgage" between family members? ...


These links say that where one can qualify for a mortgage, one can use RRSP funds to buy the mortgage (where one's RRSP makes the money not the bank).
http://www.mr-arms-length-mortgage.com/what-is-it/
http://www.boomerandecho.com/pros-and-cons-of-holding-your-mortgage-in-your-rrsp/


If one can do it with assts from a highly regulated RRSP - I don't see why one couldn't do it with taxable funds.


Cheers


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