Advice | I’m about to retire and still have a mortgage. Am I in trouble?

With the price of real estate these days, Canadians are buying houses a lot later in life than they used to.

That means some people are facing an issue not often seen in previous generations: Still having years left on a mortgage when they go to retire.

Financial planner Dan Hallett says in a perfect world, people wouldn’t have any mortgage left to pay off when it’s time to retire.

“It’s certainly not ideal,” said Hallett, vice president of HighView Financial.

Despite the recent dip in the real estate market, it still takes a lot longer to save for a down payment, and it takes a bigger portion of people’s income to pay the mortgage than it once did, Hallett said.

“Twenty five years ago, you could direct a bit of your money toward saving for your retirement and afford to pay your mortgage,” said Hallett. “These prices are going to force people to really choose and prioritize.”

Still, he added, it’s not necessarily a disaster if you’re mortgage isn’t paid off before you retire.

If you have decent retirement savings, no big debts, and only a year or two left on your mortgage, you’ll probably be fine. If you’ve got 10 or 15 years of mortgage payments to go, you’ll probably need to adjust your expectations, Hallett said.

“There are situations where it’s not a big deal, and situations where it’s a big, overhanging burden. There is a spectrum,” Hallett said, and suggested people consider downsizing, whether it’s from owning a house to a condo, or renting. “People should never discard renting as an option.”

Doing an honest assessment of your finances as early as possible can also help avoid a sudden, nasty shock, Hallett added. Figuring out how often you’ll be able to travel, or eat out, or even how much money you’ll have for household costs, is vital.

“Ultimately it comes down to having realistic expectations,” Hallett said. “Sometimes people don’t have a realistic expectation of what retirement will be like.”

Another option more people should consider as they approach retirement, says financial planner Jason Heath, is ditching big city life. Selling a Toronto home, and moving to a smaller town or another province can take care of any mortgage debt and give people a better lifestyle in retirement.

“People in the best position are people who are able to move to another city, or another province … out of more expensive metropolitan areas,” said Heath, managing director at Objective Financial Partners.

Still, Heath added, that’s not an option for everyone. Being in the same area as your kids, grandkids and friends is non-negotiable for some people, and the equation changes as we age, Heath said.

“It’s one thing for a 40-year-old to say ‘when I retire, I’m going to x, y or z.’ It’s a whole other thing when you get to 60 or 65 and you’ve got kids and grandkids and friends in the same city.”

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