# Growth or Dividend - a case study for my retired parents



## wwwater (May 28, 2009)

My mom recently retired. She has some money in RRSP and we're trying to find a best way to optimize the use of her assets. 

Some info:

Parents age: 70 and 69. Both retired. Both healthy.
RRSP: $190k
Other asset: current house, approx $2.5M. The house has a mortgage / equity line of credit of $200k. LOC is approved to up to $600k @ prime rate (3.7%, floating).
Note: Parents want to stay in current house for as long as possible. However, they may have to sell if they max out the LOC amount.


After all their misc incomes, they need another $2k cashflow every month. We're discussing 2 options:
1) Invest the RRSP in some high-yield mutual fund, and withdraw monthly from the RRSP. (or as they will soon be required to when RRSP converts to RRIF at age 71).
2) Borrow from LOC, and invest the RRSP in a balanced growth fund.

Option #1 came from a financial adviser. She recommended something like the "CI Signature Diversified Yield II" fund ,and claimed the annual yield is 8.1%, or 6% net after all fees. I have not been able to verify this though. The rationale for this option would be to minimize racking up more LOC debt. By using a high yield fund it slows down the rate of the RRSP depletion.

Link of the fund fact sheet is here : http://funds.ci.com/GeneratePDF.aspx?FSID=11111&Language=en

The idea behind option#2 is that as long as the $190k is generating more than 3.7% of the LOC, then they are still in the positive. It shouldn't be too hard to do with ETFs, as I read the couch potato annualized return for the past 20 years is around 6% (obviously has ups and downs). I plan to invest such as VBAL or VCNS. Obviously the risk of this approach is there's no guaranteed return on the capital market.

How would you approach this if these were your parents?


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## Retiredguy (Jul 24, 2013)

wwwater said:


> My mom recently retired. She has some money in RRSP and we're trying to find a best way to optimize the use of her assets.
> 
> Some info:
> 
> ...



I'll leave it to others to respond to the bigger issue but if they live in BC they can defer the property taxes at a very favourable (simple interest) rate. If the house is 2.5m this might improve their cash flow by 500 month. The program was brought in for exactly that purpose, to help allow seniors to stay in their homes.


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## james4beach (Nov 15, 2012)

I'm hoping others with more experience than me can answer. But just to check that I understood their situation correctly, does this "balance sheet" look right?

RRSP: 190 K
House: 2,500 K
LoC: -200 K
Net worth: 2,490 K

I'm not saying this is the best fit for them, but one answer is to downsize: sell the house and move into a smaller place, or a less expensive city. The (new) house could be fully paid off and they could end up with spare cash left behind, which they can then invest. If they move into a 1,500 K house, they'd have 800 K left over to invest in _liquid assets_, not even counting the RRSP.

Now free of debt and no longer exposed to the danger of rising interest rates, that 800 K invested in one of several good one-size-fits-all funds would easily generate enough return to allow them to withdraw 2 K monthly cashflow (probably more) perpetually, for the rest of their lives.


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## OnlyMyOpinion (Sep 1, 2013)

It is impossible to give you an reasonable answer with the limited information provided.

But IMO, they didn't speak with a financial advisor - they spoke with a sales person trying to sell them a high MER fund.

With no growth, their $190k RRSP/RRIF would last 8 years if they are drawing $2k/month from it. With a 6% return (ignoring market risk) it will last 11-12 years.

They NEED a financial plan for their retirement years (generally to 95) that illustrates where their income streams come from, and what their monthly expenses are. They may have enough with the existing RRSP/LOC or they may need to make changes. Only after that should you be considering where/how to invest funds.


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## Longtimeago (Aug 8, 2018)

If I am reading this correctly (as per James4beach's balance sheet), then my mind boggles at the thought.

I would think that simple common sense would tell them what to do. Sell the house, get out of debt, buy a new house in a lower cost area, invest the balance of funds in a low/no risk way and sit back and relax.

When I read the line,"they need another $2k cashflow every month", I think, 'you've got to be kidding'. They don't need another $2k, they need to figure out that they need to live within their income and make the changes necessary to do so.

I'm flabbergasted at this post.


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## fireseeker (Jul 24, 2017)

Hi wwwater,
A few thoughts:
--The mutual fund suggested to you is more than 40% invested in bonds. It is essentially a balanced fund. Given that, its MER is hideously expensive at 2.33%
--The fund's yield is meaningless. It's the total return that counts. It makes no difference to your parents whether they get the money they need each month from the yield or from redeeming units.
--Given your parents' income needs, even the total return isn't that meaningful --the RSP will be depleted in roughly 10 years. Whether it's 8 years or 12 years does not address the bigger issue.
--Drawing on the LOC while protecting the RSP is a very risky strategy. Essentially your parents would be employing leverage. If markets tank, the RSP may shrink significantly while at the same time their debt would be increasing.
I suggest tackling this in the following order:
1) Examine monthly expenditures for potential savings to lower the $2K shortfall
2) Defer property tax, if they are able and haven't already done that
3) Give strong consideration to selling the expensive house for cheaper accommodation
4) If they don't sell, invest the RSP conservatively (at least 50% fixed income) and begin drawing it down as needed. The conservative approach is because the money is needed in the next 10 years.
5) Once the RSP is depleted, your parents then return to point 3) above. If they still don't want to sell then -- when they will be roughly 80 -- they can start drawing on the LOC. Taking $25K a year from the LOC will mean another $350K in debt by the time they are 90 (counting interest as well), but they should still have substantial house equity.
At that point they will be approaching the finish line of life. Staying in the house may no longer be feasible, for both health and financial reasons. But they should still be well-fixed for the final stage, whatever it looks like.
Good luck.


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## OnlyMyOpinion (Sep 1, 2013)

Longtimeago said:


> ... I would think that simple common sense would tell them what to do. Sell the house, get out of debt, buy a new house in a lower cost area, invest the balance of funds in a low/no risk way and sit back and relax...


^+1. I agree that this path needs to be seriously discussed and considered. Like you, the thought of being aged 70 with insufficient income and $200k of debt while living in a $2.5MM house is unfathomable. Based on wwwater's comment on their desire to stay in the house alap, it sounds like this is currently a nonstarter for some reason. I have known seniors willing to make the move and downsize, and others who adamantly will not. 

Either way, the concern is that they don't really have any plan and are going to leave their children and estate executor holding the bag instead of being proactive and responsible. If one of them dies, does the other have sufficent income or must the house be sold then - will they agree to sell it - is there an acting PofA in place or planned for - under what terms are the LOC/mortgage due upon death, is the executor in a position to sell the house to settle those debts in a timely manner or is there life insurance in place, etc...

LOTS more to understand than just 'growth or dividend'.


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## RBull (Jan 20, 2013)

Some great points above from all. Couldn't agree more. 

Massively house rich 2.5M and cash poor (negative financial asset balance, 200k debt) and needing 2K more income going into retirement!!! Everything in one asset that generates no cash flow. Is this also in a bloated housing market like VCR?

Indeed much more important considerations to start with and fix beyond "growth or dividend".


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## james4beach (Nov 15, 2012)

Just brainstorming here. Is it possible to take out a ~ 800 K fixed rate mortgage against such a property? Instead of having the LoC at variable rate. If the owners refuse to sell the house, they're going to have to borrow against it.


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## wwwater (May 28, 2009)

Thanks everyone for your inputs. I appreciate it.

I understand it appears unfathomable, but it's not. Indeed my parents' house is located in a decent neighborhood in Vancouver. They purchased the place decades ago with a fraction of the price today. It's not like they recently poured everything they had into this house and then decide to let their cashflow run dry. 

I did table the option to downsize a few years ago and made them go out and check out alternative accommodations. However it didn't work out because:

1) They're socially connected to the area, so moving to a 'much cheaper' location is not really an option. (or at least, highly unfavorable). 
2) Much smaller places, such as 2br condos, costs close to $900k. Half duplex in Burnaby easily run upwards of $1.5M. One doesn't gain much by downsizing within the neighborhood.
3) The current house has a basement that's rented out. It's generating some income already. Suppose they move to a strata, they'd lose that income and would have to pay a few hundred in condo fees per month.
4) Other irrational reasons, such as how they perceive they'd be perceived among friends if they had to sell their place for money, etc.

The fact that they decided not to sell a few years back and that housing appreciated more than 10~15% a year for the past few years doesn't build me a strong case to tell them to sell now and move into a condo.

Fireseeker and retiredguy gave some solid suggestions. Many thanks. They're already deferring the property tax. I'll work with them to try to prolong the RRSP and keep the debts at bay until they absolutely have to draw from it.

I, the son, has their PofA when they pass. But I"ll still need to have a discussion with them should one of them pass first or what their wish is when they max out the LOC and are forced to sell.

Such heavy topics but unfortunately unavoidable.


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## OnlyMyOpinion (Sep 1, 2013)

wwwater said:


> ... I, the son, has their PofA when they pass. But I"ll still need to have a discussion with them should one of them pass first or what their wish is when they max out the LOC and are forced to sell...


There is no PofA upon death, the responsibility falls to the executor of the will at that point. 
Hopefully they both have a current will, a power of attorney for property, and a power of attorney for personal care in place.

A power of attorney for property is in effect while the individual is still alive. Depending on the type of PofA they have setup, it can be in effect while they are still capable of handling things themselves, but it allows you to assist them with their finances, bills, etc. (and gradually take over the task if necessary later). Or it can be setup so that it is only in effect if they become unable to act on their own (a stroke, dementia, etc.).

The point I was making is that they and you should understand the impact upon their income and house/financial situation in the event that one of them passes. For example, if one of them is handling all the finances and they were to pass, if the remaining spouse is not capable of handling them and has no PofA in place, you may have issues trying to step in and deal with banks on their behalf.

Then, when both have eventually passed and the executor is dealing with the estate, how is the indebtedness against the house intended to be discharged (insurance, sale of house, etc.)

I know this whole subject is often not spoken about in families, so this may not be possible but it is worth pursuing to try to ensure their long term well-being..


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## Karlhungus (Oct 4, 2013)

Their best option is to sell the house and invest the proceeds into low cost index funds. at 2.5 million @ 4% withdrawal rate it would generate $8300 per month and they could rent any place they wanted in vancouver.


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## james4beach (Nov 15, 2012)

wwwater said:


> 2) Much smaller places, such as 2br condos, costs close to $900k. Half duplex in Burnaby easily run upwards of $1.5M. One doesn't gain much by downsizing within the neighborhood.


I think downsizing from a 2.5 M home to 1.5 M offers a viable solution. When you wrote the above, did you mean that such a 1.5 M half duplex option is the kind of house they might consider? Downsizing 2.5 M to 1.5 M It unlocks the money (let's call it 1 M ignoring transaction friction) *which can indeed* provide their cashflow needs of 24 K/year.

Thus their total cashflow could be CPP + OAS + any pensions they might have + steady withdrawals out of this freed up value

Thinking more broadly. I can sympathize, my parents are around the same age, and I've also tried helping them. Giving advice to my parents is awkward and I'm trying to avoid doing it. Perhaps you might consider finding a good *fee-only* financial advisor, having your parents see this person, and then paying for the session.

Taking it further, being a good offspring, perhaps you can even meet with the potential advisor, evaluate them in person, ascertain whether they are actually a paid mutual fund salesperson, ask how they are paid, ask them to disclose all their potential conflicts of interest. Maybe get them to evaluate your own situation and use that as a trial run/interview.

PS that stuff you heard about the high yield mutual funds is really bad information, stop seeing that person. They are so far off that I don't even know where to begin.


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## Longtimeago (Aug 8, 2018)

wwwater said:


> Thanks everyone for your inputs. I appreciate it.
> 
> I understand it appears unfathomable, but it's not. Indeed my parents' house is located in a decent neighborhood in Vancouver. They purchased the place decades ago with a fraction of the price today. It's not like they recently poured everything they had into this house and then decide to let their cashflow run dry.
> 
> ...


I had hoped that in a further response, you would provide a better picture. You have done so to a degree but have still left out some very pertinent information. 

What is their total current income? Obviously, their outgoings are $24k higher than that, we can do that math ourselves. But if you were to for example tell us that they have no private pensions, only CPP, OAS, basement rental income and maybe some GIS, for a total income of say $50k per year before income tax, and therefore outgoings of $50K + $24k = $74k, that would really give us a better picture and understanding. If on the other hand you told us they had a total income of $150k and outgoings therefore of $l74k, that's an entirely different picture. 

In the first scenario, I would say they need to get a grip on reality. They're cash poor and caring about what 'people would think' (I was wondering if that would come up) if they had to sell the house and move, is something they cannot afford to care about. In the second scenario, they need to get a grip on their spending and learn to live within their means. ie. the $150k.

Do they own a second property in Arizona, big boat, RV, expensive golf memberships, 2 new cars, etc. Where is their income going?

All I am reading so far is property rich, cash poor perhaps but they may also be property rich, cash rich, and just plain lousy at living within their means. You need to clarify for us wwwater. You may find it difficult to talk to them about the subject but there is no reason for you to find it difficult to talk here in plain language.

To me the whole LOC, RRSP, growth or dividend, mutual find salesperson vs. real financial advisor, etc. are all just RED HERRINGS obscuring the basic picture which you haven't given us yet.


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## wwwater (May 28, 2009)

From my understanding, their projected spending is $4k / month.

Their after retirement income are:
- $1k -> OAS, CPP, etc, 2 people combined. I've asked them to take a closer look at this, and GIS, etc.
- $1k -> Basement rent.

Total income is $2k. Hence $2k / month short in cashflow.

No private pension. No other assets that I know of. Probably some savings but I don't know the exact number. Probably modest anyway.


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## Longtimeago (Aug 8, 2018)

Well now you have added started to add some clarity to the picture wwwater but at the same time you raise questions as well.

While in theory they might only be eligible for $1k between them from CPP and OAS, the GIS would most definitely take it above that. You would need to spell out how long they have lived in Canada, whether they both worked and for how long, what kind of job/income they earned while working. From that some calculation fanatics here could probably ball park what they should be getting from CPP, OAS and GIS.

But the basic picture is clear. They are property rich and cash poor. You most definitely need to get them to sit down with a tax and estate planner who knows what s/he is talking about and is not just a mutual fund salesperson as you have already been advised above, to avoid. 

From my perspective, given the numbers of $2k income and $4k expenses, they simply cannot afford to not sell the house if it is indeed worth $2.5M. The good news is that if that have that much capital, they can enjoy a very comfortable retirement in a lower cost house in a lower priced area. Just get them some professional financial help as soon as possible.


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## My Own Advisor (Sep 24, 2012)

Humm....house rich, cash not so much.

If they do not want to move...._at all_....then I would consider drawing down RRSP now to kill debt. If rates continue to increase, they'll be in a very tough spot in future years whereby interest payments may eventually be > cash flow from RRSP.

Start drawing down RRSP now, killing debt with it. 

They are VERY lucky they have the $2.5 M house. Lottery.


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## Pluto (Sep 12, 2013)

1.You should try and get them to a fee only financial adviser. 
2. Rising interest rates have and will put a damper on increasing house prices, so the market value of the house will inch downward, while the interest on the loc will go up. Hmmmm. Wonder how much the $ amount of interest would be on some hundreds of thousands of borrowed money. Living off of borrowed money will accelerate their financial demise. The smart thing to do is stay out of debt, and that seems to mean, sell the house. 
3. On a million dollars they should be able to get around 40,000 per year in low taxed dividends. 

However, I think the best, and first step is to get a fee only financial adviser in Vancouver so they can see what their options are. (Google "fee only financial adviser" Vancouver) I'm shocked they did no planning during the last few years.


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## OnlyMyOpinion (Sep 1, 2013)

MOA, I agree with LTA that as wwwater provides more info, they just don't appear to have the cash flow to carry an expensive house in Vancouver. 
If they kill their debt with the RRSP then they have one less source of income and are left with only $2k/mo if I have understood correctly.

The only other way to stay in their house and have sufficient income would be take an actual chip reverse mortgage, accepting that the value of the house will be much less once it is sold or comes into the estate. That is what they are designed for, but it is an expensive way to provide cash flow. 

OP says _"mortgage / equity line of credit of $200k. LOC is approved to up to $600k @ prime rate (3.7%, floating)"_. Get the reverse mortgage if downsizing is not going to happen. We all make different financial decisions, most sub-optimal for various reasons. This would be one as well. OP is then back at square one in terms of 'where do they invest it'.


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## Longtimeago (Aug 8, 2018)

OnlyMyOpinion said:


> MOA, I agree with LTA that as wwwater provides more info, they just don't appear to have the cash flow to carry an expensive house in Vancouver.
> If they kill their debt with the RRSP then they have one less source of income and are left with only $2k/mo if I have understood correctly.
> 
> The only other way to stay in their house and have sufficient income would be take an actual chip reverse mortgage, accepting that the value of the house will be much less once it is sold or comes into the estate. That is what they are designed for, but it is an expensive way to provide cash flow.
> ...


I see a reverse mortgage as an absolute last resort under any circumstances. It's just so sub-optimal, I cant' see even considering it. But I agree, people make sub-optimal decisions all the time. I'd be trying really hard though to get them to make a better choice than that. Maybe the sell and move to a $1mil property still in the neighbourhood would be the best compromise. 

Wwwaters, I am now wondering just how important the 'what would our friends think' aspect of this situation is and just what 'socially connected' really means. If I may suggest a scenario, I am envisioning an ethnic neighbourhood where they live and a wish to stay there where everyone is just like them. Their standing and 'image' in the neighbourhood is very important to them. That can and may in this case be the big stumbling block to the obvious right answer of sell and move.

The solution might be that you need to help them come up with a 'story' to tell that will allow them to not 'lose face' with their friends. They could for example, need to sell and move into a condo because they want to give you the money for you to buy a house. That just makes them look generous. LOL Or they could decide to move to be near where you now live so that you can take care of them as they age. There are all kinds of perfectly reasonable stories they can make up as to why they are going to move.

Sometimes the solution to a financial problem has nothing to do with finances, it's about not 'losing face'. Do you think that is the real problem they have wwwaters?


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## AltaRed (Jun 8, 2009)

I had refrained from responding until now, but I am also thinking it is the 'social status' thing per Longtimeago's post #20 that is the issue. It makes absolutely no sense to do either of the OP's option #1 or #2. Both have the risk of cataclysmic outcomes during a bear market...that is ultimately just around the corner, given this very long bull cycle. Adding debt to the LOC is the wrong direction that WILL force them out of their $2.5M home at some point, perhaps when house value has dropped to <$2M due to a recession and/or creeping interest rates.

The right answer is to downsize to pull $1M equity out that can be re-invested in a passive couch potato portfolio or even entirely something like VBAL or MAW104. Financially, it is no more complex than that.


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## Longtimeago (Aug 8, 2018)

AltaRed said:


> I had refrained from responding until now, but I am also thinking it is the 'social status' thing per Longtimeago's post #20 that is the issue. It makes absolutely no sense to do either of the OP's option #1 or #2. Both have the risk of cataclysmic outcomes during a bear market...that is ultimately just around the corner, given this very long bull cycle. Adding debt to the LOC is the wrong direction that WILL force them out of their $2.5M home at some point, perhaps when house value has dropped to <$2M due to a recession and/or creeping interest rates.
> 
> The right answer is to downsize to pull $1M equity out that can be re-invested in a passive couch potato portfolio or even entirely something like VBAL or MAW104. Financially, it is no more complex than that.


LOL, I'm imagining the 'social status' boost they would get if they downsized and told their friends they had given their son $1mil in cash for whatever use. No one needs to know the truth but them and wwwaters.


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## digitalatlas (Jun 6, 2015)

Get them to sell their house, or leave them to their own devices and go live your life and stop worrying about it, pick one of those. You're about 5 years behind my personal experience, which is pretty much the same, except my parents went down hill. Your parents don't seem particularly rich, they don't even seem to be particularly good at managing their money, but they did win a lottery. Try not to be one of those stereotypical lottery winners who end up squandering the opportunity.

They could end up racking up a bunch more debt, and then someone has a medical emergency that throws everyone's life off the tracks, then the bank sells the house and they're left penniless. 69 and 70 are no spring chickens, sorry to be blunt. But life happens. It can happen to anyone.

Like someone said, almost 2.5 million in the bank, you can actually live off the distributions and rent anywhere you want. Once they get a taste of how liberating it is to have no more money worries for the rest of their lives and knowing you might be able to leave your heirs a pretty hefty inheritance, they'll make new friends in a new neighbourhood, where everyone else is similarly liberated, chilling and enjoying their golden years.

And alternatively, just let them do what they want and don't bother trying to change their minds. Disengage, because they will probably do things you wouldn't. At the end of the day, it's their house, their money. Social status? I think I know what that means, but it'd probably be un-PC to point it out. Good luck.


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## AltaRed (Jun 8, 2009)

digitalatlas said:


> And alternatively, just let them do what they want and don't bother trying to change their minds. Disengage, because they will probably do things you wouldn't. At the end of the day, it's their house, their money.


I'd give it a one time shot to persuade them to downsize and then, as you have suggested, just walk away. It's pretty clear the parents are in 'supreme' denial. Life is too short to push on a rope.


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## twa2w (Mar 5, 2016)

Lots of reasons to give friends for downsizing.
Want to have freedom to travel without having someone to look after house, eventually house will be too much or a pain to look after so being proactive by selling now, want to spend more on hobbies or with grandkids rather than cleaning and yard work looking after house, preparing for eventual limitations of aging by moving now. Don't want to be forced into a situation in the future when perhaps the market isnt very good. Etc etc
If they sell now and realize 2,000,000 after fees and LOC, they can generate >60k a year in dividends, conservatively. Even if they stay in the neighbourhood and rent, they will likely be much further ahead. Given the dividends would be split between the 2 and limited other income, they would be almost tax free.
However, I get the 'gotta stay in the house deal'.
This does limit options though. They can draw on the RSP to top up income but given the deferred tax on the RSP it does not make sense to draw extra to pay down the LOC. When the RSP runs out in 10 years or so, they can draw on the LOC until they hit the limit on that which would take about 15 years or so. This puts them close to 95 so likely have to sell house by then.

Ok so a couple of issues I see with that. Rising rates will mean a couple of things. Higher interest costs on loc which will mean higher withdrawals( rsp and LOC) to cover interest which shortens the time line. This also likely could lead to stagnating or declining house prices for when they do need to sell.
Combine this with inevitable inflation ( even if moderate) which will also accelerate the withdrawals needed, I would estimate they have until about say 85-90 before they are forced to do something with the house.

The other issue I see is that their LOC limit may get reduced down the road by the bank. Some banks have very complex algorithms that track accounts for cash flow etc. While your parents do have lots of equity, if the bank perceive cash flow is insufficient to service debt they may reassess the limit - this was not a big factor in the past but with the gov cracking down on rules for LOCs and if house prices correct and banks start seeing losses, they will take a closer look at LOCs.


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## Mookie (Feb 29, 2012)

Wwwater, I know you say your parents don’t want to downsize, but I’m going to add myself to the growing list of people who are suggesting they reconsider. As others have said, there are many good stories that can be told to save face, if that’s the issue.

Living off debt in retirement is a really bad idea. Whether it’s a growing LOC or a reverse mortgage, this is a costly way to live, and only postpones the inevitable.

Do your parents have any friends or acquaintances who have downsized? If so, they should ask them how it went. Their personal experiences may help them think more about the pros and cons.

When my parents retired, they wanted to stay in their house for as long as possible too, as they really enjoyed gardening and relaxing in their own private yard, as well as just having some space between themselves and the neighbours. About 5 years ago, they down-sized to a 2 bedroom condo with a view. In the process, they de-cluttered all that accumulated stuff that fills up a house, and bought nice new furniture to fit their nice new condo. After a few months of adjusting to their new smaller and simpler environment, they are now super happy about having made the move. Their condo complex has all sorts of amenities, and they’ve met many new friends in the building. No more mowing the lawn, cleaning gutters, raking leaves or shoveling snow. Instead, they enjoy dinner on the balcony, they play pool in the games room, and they like to watch beautiful sunrises from their bedroom window. When they go on vacation, they simply lock the door and leave. Financially, the down-size freed up a good chunk of change which they added to their investments. They now have more money coming in than they can spend, so they are financially set for life, which is how it should be in retirement.


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## wwwater (May 28, 2009)

So I had a sit down session with my parents. I prepared a spreadsheet listing the various assumptions and options - projected debt growth vs estimated portfolio growth and draw-down should they downsize. I told them on one hand they will deplete their life's saving and maxed out on debts in 8-12 years, the other option will allow them to live, essentially, financially free for the rest of their lives.

My dad waited for me to finish and said outright he's made up his mind about not selling. While he appreciates the effort I put in to this analysis, he's banking on his Vancouver place further appreciate into the $3M range. He also added a whole bunch of emotional crap such as if he runs out of money in 10 yrs then he'll end himself, blah blah. He stated that he'd be extremely depressed and lose the will to live if he loses this space right now. 

My mom has been onboard with downsizing all along. However she can't persuade my dad. Family issues. I"m sorry for her that she has to live with the perpetual stress of having a ever growing debt snowballing in the back of her mind for the rest of her life. It's not fair for her; but to be honest, managing one's spouse is one's own battle to fight, not mine.

So apparently their plan now is to draw out the RRSP, and then max out the LOC. Finally when the earliest of a) they run out of money, b) one of them dies, or c) they reach age of 80+, happens, then they'd sell the place and downsize.

I never think of their assets as my future inheritance. My desire to want to help them preserve what they have is for their own benefit. Being one who's organized and have things in order, I've come to feel ashamed and resentful for my parents who cannot make critical life decisions based on reason and logic, or to stand-up and do the right thing.

Like one of you here suggested, I'm going to disengage now. Let them deal with their money. I can only hope the $2M+ will last them long enough.


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## Mookie (Feb 29, 2012)

Thanks for the update wwwater. Hopefully your parents appreciate the effort you put into doing this analysis for them. I think you’re right in just disengaging at this point. You can lead a horse to water, but you can’t make it drink.


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## My Own Advisor (Sep 24, 2012)

I read upstream about a reverse mortgage...don't do it!

The biggest one....while the home may continue to appreciate in value and offset some of the interest costs and loss of equity, *interest will rapidly accumulate on the amount you borrow.* 

They are already in debt!

This form of leverage adds risk. No smart for anyone in their 70s.


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## My Own Advisor (Sep 24, 2012)

Just read the reply today wwwater...sorry to hear.

It must be frustrating but you've done your best to put financial literacy in front of them. Good idea to back off and let them do their thing. Grand effort to try


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## lonewolf :) (Sep 13, 2016)

wwwater said:


> bout not selling. While he appreciates the effort I put in to this analysis, he's banking on his Vancouver place further appreciate into the $3M range.
> 
> .


 No one wants to sell near a top & very few do. There is a limited amount of time to take advantage of the situation. Another .5 million will not add to the happiness index. If prices drop so homes in Vancouver are worth close to the same amount as in other areas the opportunity is lost.


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## Longtimeago (Aug 8, 2018)

As noted, 'you can lead a horse to water........' You've done your best, your Dad is adamant. Worst case, the day will come when they are forced to sell regardless of whether the market goes up (I always shudder when I hear someone say something like, 'I'm banking on') or goes down. Chances are if the current value is $2mil, even if the market tanks, they will still be OK if not able to afford the same lifestyle as they would if they sold now.

It sounds like your Dad at least somewhat graciously accepted your analysis and the work you put into it. No amount of money is worth harming your relationship with him.


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## agent99 (Sep 11, 2013)

wwwater said:


> RRSP: $190k
> 1) Invest the RRSP in some high-yield mutual fund, and withdraw monthly from the RRSP. (or as they will soon be required to when RRSP converts to RRIF at age 71).
> 2


Have no useful input on the major problem. But one thing - You can convert to a RRIF at any time. It is better than a RRSP if you want to draw it down. The withdrawals are considered pension income for tax purposes. If they can arrange to both have RRIFs, they will both get a Federal pension tax credit of up to $2000 plus other provincial benefits. . Might help reduce their taxes a bit (although by the sound it, they won't have to pay much in way of tax anyway). More here:

https://www.advisor.ca/columnists_/frank-di-pietro/understanding-the-pension-income-tax-credit/

One thought. How about buying a joint or two separate life annuities with the $200,000 in RRSP? Might generate about $1000/month with no worry about running out of money? Worth looking into? But then there is the LOC. No solution other than selling home, it seems.


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