Tips for turning home equity into retirement income

Risk, investment choices, taxes and more

I have yet to hear from anyone who aspires to move into a retirement or long-term care home.

But many people won’t have a choice because of declining health and mobility. They’ll need to find the right type of accommodation and then figure out how to pay for it. In this post, we look at how retirees and their families can use home equity to cover care costs.

A previous post discussed borrowing against the equity in your home using a reverse mortgage or home equity line of credit, both of which expose you to hefty interest costs. Home equity works well if you sell your house or condo and move into a retirement or long-term care home. Retirement homes offer independent living with some degree of help, while long-term care homes serve people who need lots of assistance.

I’ve seen situations where seniors could easily afford their lives while in their mortgage-free homes, but lacked the income to cover the monthly costs of retirement residences or long-term care. Figure on a monthly minimum of $4,000 to $5,000, and up, for retirement homes — way up for premium spots. Long-term care costs somewhat less in provinces that cap monthly fees.

These monthly expenses can rise a lot when you need visits by personal support workers (PSWs), which can cost $25 to $40 per hour once you’ve used up the base level of service provided by some provinces. Yes, you could find yourself hiring PSWs for additional help when you live in a retirement facility.

Here are some points to help seniors and their adult children cover retirement homes and other care costs by deploying home equity to supplement other forms of income: