September 20, 2020

Scrounging for cash in retirement?

Ted Rechtshaffen

Many people planning for or living in retirement struggle to find cash. Often, they wrestle with the obvious choices: do they tap into their RSP? Do they take CPP early, or is it best to wait?

But there are other, less traditional sources of income for cash-strapped retirees:

1) Tap into existing home equity
This is often the largest unused source of retirement income. Many retirees own their homes, most of which have soared in value. Instead of letting the money sit within the house, think about taking out a line of credit or a mortgage against the house at low interest rates. You can use this cash to generate a stream of monthly income.


This is not a reverse mortgage. It is simply borrowing some small percentage of your home equity, likely a few years before you are going to sell your house and pay off any debt.

I once had a 69-year-old client who had a house she didn’t want to sell just yet. She had just recovered from cancer and wanted to take a trip to Europe, but she didn’t have the cash. She didn’t spend much – most of her expenses were covered by government pensions. I advised her to get a line of credit for 25 per cent of the home’s value and use a small portion of that, a few thousand, to take her European holiday.

For the first time, this woman realized that her dream trip was indeed going to happen in her lifetime. Before our conversation, she simply didn’t know of any way she could pull it off, despite having $450,000 in home equity.

2) Insurance policies
Another unlikely yet effective source of retirement income can be insurance policies. Policy holders can often access cash by withdrawing assets from something called the cash surrender value of the policy. This can often be done while keeping the insurance intact.

Some policies also have a benefit that allows you to borrow funds against the value of the insurance policy. This loan is paid back after you pass away and is subtracted from the benefit paid by the insurance policy.

When looking at retirement assets, it is important to review your existing insurance policies to better understand what you have, what it is worth, and whether you even need it.

3) Your kids or other family
Some children are in a good financial position and are willing and able to “gift” cash to their parents. Although some parents can be reluctant to take money from their kids, they can comfort themselves with the knowledge that it worked the other way around for many years. Sometimes turnaround is fair play.

When trying to determine the best way to generate a retirement paycheque, don’t forget to look at all of your assets – not just those in investment accounts.

Ted Rechtshaffen is president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He has an MBA from the Schulich School of Business and is a certified financial planner. He was vice-president of business strategy at a major Canadian brokerage firm.

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