BY MARIO TONEGUZZI, CALGARY HERALD,  FEBRUARY 19, 2014

CALGARY - With house prices continuing to rise in Canada, a new survey reveals nearly 26 per cent of Albertans plan to use their homes as their primary source of income after they leave the workforce.

The 2014 Sun Life Canadian Unretirement Index, released Wednesday, also found that 17 per cent do not know if their investment in their home will serve as their primary source of income during retirement.

The survey also found that 12 per cent of Albertans expect retirement income to come from home equity; 28 per cent to come from government plans; 29 per cent to come from personal savings; and 21 per cent to come from employer plans.

According to the Calgary Real Estate Board, month-to-date until Tuesday, the average MLS sale price in Calgary was $490,882, up 7.33 per cent from a year ago while the median price has risen by 7.68 per cent to $425,350. In the single-family home market, the average price has jumped by 7.33 per cent as well to $554,011 while the median price has increased by 8.83 per cent to $480,000.

“A home is not a retirement savings plan. Saving for retirement is,” said Lesley-Anne Scorgie, a financial author in Calgary. “It’s very concerning to see the results of Sun Life’s survey indicating how many Canadians plan to cash out their home equity to fund their retirement. The reason many Canadians are planning to do this is because they are underprepared for retirement. This is likely a result of lack of financial literacy, not saving enough through personal or employer-based retirement savings programs, a struggling stock market, underfunded pension plans, increased cost of living and individuals generally living much longer due to medical advances.”

Although there are some practical benefits to using home equity to help fund retirement, Scorgie said there are clear disadvantages to using a home as a retirement savings plan.

“First, that the value of a home can fluctuate; second, reverse mortgage structures have limitations on how much can be borrowed, how it is paid back and when; third, besides generally having to pay higher interest rates than traditional mortgages, the equity in a home will decrease and eventually run out; and lastly, a homeowner’s estate must repay the loan when they pass away which can leave estate heirs with expensive liabilities,” she said.

“Yes, in retirement it often makes sense for Canadian households to downsize their home and use the equity to help fund retirement expenses. But, this money is only one part of the total retirement planning picture. Old-Age Security and Canada Pension Plan are two additional parts and a household’s retirement nest egg, their savings, generally makes up the rest, which just so happens to be the majority of the money needed to fund retirement.”

The survey said 28 per cent of Canadians expect to be retired at 66 while 56 per cent are expecting to work past the traditional retirement age. It said 65 per cent of Canadians feel they will need to work past traditional retirement age.

“The average expected retirement age in Canada has hit its lowest level in four years - it’s 66 this year down from a high of age 69 in 2011,” said Kevin Dougherty, president of Sun Life Financial Canada, in a news release. “With people living longer and more Canadians expecting to retire sooner, it’s important to look at what savings you will need to be fully prepared and how having a financial plan can help protect against risks that can be magnified in retirement such as market shocks and health events.”

The survey said Canadians on average expect about 10 per cent of their retirement income to come from home equity. They expect: 30 per cent to come from government plans; 27 per cent to come from personal savings; 23 per cent to come from employer plans; five per cent to come from inheritance; and six per cent to come from other sources