Illustration by The Globe and Mail
Q: I’m recently separated, in my late 50s and worried about my retirement plan as I’m now just preparing for myself. I’d like to buy my spouse’s share of the house to keep the family home. How might this affect my retirement?
We asked Leslie Logan, senior financial planner at TD Wealth, to answer this one.
Although divorce rates have been steadily decreasing in general, the number of people who are either separated or divorced later in life is rising in Canada, according to Statistics Canada. It’s a trend that spurred the term “Grey Divorce,” and women, more than men, are more likely to be separated or divorced after the age of 55.
“New beginnings can bring a lot of uncertainty as you shift from planning as a couple to planning on your own,” Ms. Logan said. “It’s completely natural to feel off-balance and wonder what’s still possible. If you’re considering buying out your spouse’s share to keep the family home, it’s an important decision that can have a meaningful impact on your long-term financial picture.”
Keeping the family home can provide stability, especially during a time of transition, but she also pointed out that it may have unintended consequences on your long-term plans.
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To proceed, Ms. Logan noted that you will either need to divert your long-term savings, take on additional debt or likely do both. “If debt is required to be taken on, you will need to qualify for any mortgage or refinancing based solely on your own income and new financial position.” This, she added, can affect how much you’re able to borrow and the overall affordability of keeping the home.
The sustainability of keeping up the carrying cost of the home should also be considered. Ms. Logan starts by asking the question: “Beyond mortgage payments, is your revised income able to comfortably cover the property taxes, insurance, maintenance and repairs? And, it’s important to consider whether this will cause you to lose your lifestyle, have to work longer than desired or create hardship in your retirement.”
Additional financial responsibilities, such as supporting adult children, may also need to be factored in if they are no longer covered through support arrangements. In some cases, keeping the home makes sense, Ms. Logan said. In others, she cautioned that it can create undue financial pressure that affects both your current lifestyle and future retirement options.
This is where thoughtful planning can really help, she advised. “Building both a short-term transition plan and a long-term retirement plan allows you to see the trade-offs clearly and make a decision that aligns with your new direction.”
Do you want advice on a financial planning or retirement issue that’s affecting you? Send us an e-mail.
