Home equity and retirement funding: Challenges and opportunities

Abstract

We investigate the use of home equity to address the retirement saving crisis and funding shortfall. Using survey data from consumers and financial planners, we examine Canadian consumers' views on equity release and gauge financial planners' knowledge, attitudes, and perspectives towards recommending equity release products to their clients. Our findings indicate that a primary barrier for consumers is their lack of understanding about home equity release schemes. However, when these schemes are more cost-effective and endorsed by financial planners, they become more attractive. Behavioral biases and emotional attachment to one's home did not affect consumers' willingness when considering these options. Among financial planners, there's a general comfort in advising on home equity release. Their preferred recommendation is the “sell and downsize” strategy, followed by HELOC. Interestingly, older planners and those with personal biases tend to be more hesitant in giving advice on this subject. The results of this study suggest there may be a willingness to access home equity by future retirees, and that there is less desire to bequeath assets to the next generation.