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Does owning a home give you a retirement advantage over lifetime renters?

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Summary

This article discusses how renters must save 50% more than homeowners to have a sufficient retirement income, as renters must save 8 times their salaries and retire at 68 while owners must save 5.25 times their salaries and retire at 65. It also explores how both renters and owners have to work extra hard to save for retirement, and suggests that renters can build wealth by saving the equivalent of property taxes and home maintenance and improvement costs.

Q&As

What is the financial impact of a housing market correction on young adults?
The financial impact of a housing market correction on young adults is that high mortgage rates cancelled out affordability gains from falling prices in the past year, and now prices are showing signs of growth again.

How much money do renters need to save to have a sufficient retirement income compared to homeowners?
Renters need to save eight times their salaries and retire at 68 to be ready for retirement, while owners must save 5.25 times their salaries and can retire at 65.

What factors contribute to a retirement saving advantage for homeowners?
The retirement saving advantage for homeowners is that they can access their equity by downsizing to a cheaper home, and they can sell their principal residence tax-free.

What kind of debt burden do owners and renters face when saving for retirement?
Both owners and renters face a debt burden when saving for retirement, as owners may need to take on debt to cover expenses and renters may accumulate debt due to high monthly rental costs.

What are the implications of the Mercer study for young Canadians saving for retirement?
The implications of the Mercer study for young Canadians saving for retirement is that they must save aggressively and invest wisely in order to have a sufficient retirement income.

AI Comments

👍 This article provides a comprehensive overview of the advantages and disadvantages of owning a home and renting in terms of retirement savings. It provides an in-depth analysis of the numbers and considerations to take into account when planning for retirement.

👎 This article fails to take into account the unique circumstances of individuals, such as their income, location, and other elements which can affect their financial planning for retirement. It presents a one-dimensional view of the issue.

AI Discussion

Me: It talks about how renting throughout your career can make it harder to save for retirement compared to homeowners. It looks at the advantages and disadvantages of both and how it could affect the retirement savings of young adults.

Friend: That's interesting. It sounds like owning a home does give you an advantage when it comes to retirement savings. But it also sounds like there are some downsides to both options.

Me: Exactly. The article also talks about how high rent costs and rising mortgage rates can make it difficult for people to save for retirement, as well as the potential debt burden on homeowners. It also points out that while homeowners can access their equity by downsizing, there's often little equity left over after they move which may require them to access their equity via a home equity line of credit or reverse mortgage and pay interest.

Friend: So it looks like it's not an easy solution either way. It seems like people need to find a way to save and invest in order to prepare for retirement, no matter what their housing situation is.

Action items

Research the current housing market in your area to determine if buying a home is a feasible option.
Consider investing in a tax-free savings account to maximize your retirement savings.
Calculate the costs of renting versus owning to determine which option is more cost-effective for you.

Technical terms

Millennial/Gen Z: Refers to the generations born between 1981 and 1996 (Millennial) and 1997 and 2012 (Gen Z).
Housing Market Correction: A period of time when the housing market experiences a decline in prices.
Affordability Gains: An increase in the ability of people to purchase a home due to lower prices.
Renters: People who rent a home or apartment instead of owning it.
Retirement Income: The income received by a person during retirement.
Rentals.ca: A website that provides rental listings for apartments and homes.
Tax-Free Savings Account (TFSA): A type of savings account in Canada that allows for tax-free growth of investments.
Pre-Tax Income: Income that has not yet been taxed by the government.
Mortgage Rate: The interest rate charged on a mortgage loan.
Investment Gains: The increase in value of an investment over time.
Home Equity: The difference between the value of a home and the amount of money owed on it.