Episode 18: Unlocking Home Equity - How Downsizing Can Transform Your Retirement

On this episode of Retirement IQ, host John Stregger explores a major financial crossroad: is selling your family home the key to unlocking an ideal retirement?

Countless homeowners spend decades building substantial property equity, only to stop working without a strategy to tap into that wealth. Alongside expert guest Wayne Clements, broker at  Bolton & Clements Real Estate Group, John examines how freeing up an extra $1,000 a week could completely redefine your lifestyle, empowering you to travel, winter down south, or help support loved ones.

Catch this insightful conversation to discover how strategic real estate decisions can eliminate financial stress and help you secure a vibrant, well-funded future.

Transcript

Copy Transcript Copied

Retirement IQ - Episode 18

John Stregger: 00:00 - 01:56

I want to start today's show by asking this question. What would you do with an extra $1,000 every week during the healthiest years of your retirement? Would you finally take that trip to Italy you've been talking about for years? You know, escape winter for a few months? Even maybe help your children buy their first home. Now, before you get too excited, I'm not suggesting you go out and buy lottery tickets. What I'm talking about is an opportunity that may already exist locked inside your home. Many families I worked with have spent 30, 40 years paying down their mortgage, raising their family and watching their home appreciate, dramatically in many cases. The question isn't whether they built wealth. The question is, when should that wealth begin improving my life? So today we're gonna explore one of the biggest financial and lifestyle decisions retirees face, should you downsize. But this isn't really a conversation of buying and selling houses. It's a conversation about using your wealth intentionally so you can enjoy the years when you're healthiest, most active and most able to experience everything retirement has to offer. Welcome to Retirement IQ, where we simplify the complex world of retirement so you can move forward with clarity and confidence and focus on the life you want to live. Joining me today to help explore this topic on a deeper level is someone I've known and trusted for many years, Mr. Wayne Clements. Hello, Wayne. Welcome to Retirement IQ. How are you doing?

Wayne Clements: 01:56 - 02:01

I'm doing awesome. Thanks. Thank you so much for having me. I'm honored to be here. This is great.

John Stregger: 02:01 - 02:11

Excellent. Well, we we've known each other for a long time, but for people that don't know you, introduce yourself. What do you do for a living? That sort of thing. Okay.

Wayne Clements: 02:11 - 02:52

Uh, again, thanks for having me, John. This is great. Um, I am, uh, a real estate, uh, broker with, uh, Remax Hallmark. Uh, my, my business partner, Andrew and I run a small real estate team and we service most of the greater Toronto area. Uh, I've been a realtor now for 15 years with my broker's designation. And so that's who I am. And so what do we do sort of similar to you is we spend a lot of time guiding and protecting our clients through the complicated and often emotional rollercoaster during the buying, selling and investing process when you're buying a property. Yeah, so that's what we do.

John Stregger: 02:52 - 04:37

Awesome. Perfect. So yeah, you're, you're someone that has helped my family as well, like both purchase and sell real estate. You've also helped a lot of mutual clients that, and we've had, you know, even on the weekend, we have, we have countless conversations about retirement and how the housing decision really fits into your, your financial plan. And for that reason, when I, when I'm dealing with my clients and And anyone that I'm talking to, if the topic of downsizing comes up, I tell them to make two phone calls. You know, one is to their financial planner, which is hopefully me. And, and the second is to someone like you, who they can really trust to help navigate what, what might be the biggest real estate decision of their life. And Wayne, that's why I wanted you here today. So, so thanks for joining us. I appreciate the opportunity. Thanks for having me. Good. So, so let's jump in here. So listeners to the show will often hear me talk about retirement happening in three phases, three stages. There's your go-go years. That's like your, the first 10 to 15 years of your retirement. Then, you know, people transition to the slow go years. That's, you know, you're slowing down, not moving around too much. And then there's the no-go years. You're, you're basically house bound for the rest of your life. So. We're going to focus on the go-go years here today. And those are the first 10 to 15 years. And they're, they're usually the years where people have the most energy and, and the greatest opportunity to enjoy everything they've worked so hard for. But ironically, they're also the years where many people, many retirees, they're really reluctant to spend their money. And I don't know, have you ever noticed that either professionally or personally? in your world?

Wayne Clements: 04:37 - 05:14

Yeah, absolutely, John. I think that, you know, retirement offers a lot of exciting and new and exciting things. However, I think it also comes with some level of fear because where you're not working for the man anymore, the man is also no longer providing you with that paycheck, right? So I think a lot of people start to worry about, you know, you know, how long am I going to live and, and what, how much travel can I do? And during that time, and will there be money left for my family? There's a lot of questions, you know, and can we stay in our current house and how much work do we have to do? So, yeah, I think there's a fair bit of, uh, yeah, there's some, there's some, uh, there's some fear in there.

John Stregger: 05:14 - 08:26

Yeah. So yeah, you, you touched on the emotional aspect about it. So it's, it's really, you spend your life, you know, you get out of school. Whether it's 18 or 25 and you start working, you're working for 40 years and you're training yourself to save, don't spend, delay gratification. But when retirement starts. that the habits of, of changing your mind to spend really become quite difficult. And it's almost like they're, they're retiring themselves, but their habits don't, don't retire. Um, it's really hard to which flip that switch from saving to spending. Uh, so it's definitely something I see a lot and, but it's also not uncommon. Talk to those people that are on the cusp of retirement or actually retired, for them to say, we'd love to travel more and we'd love to help our grandkids. But then they tell me that, we just don't know if we can afford it. But meanwhile, they're living in a $2 million house. And there's some irony to it. You know, it's like they're house rich, but experience poor. Um, so actually I want to shift back to the beginning of our episode for a second, Wayne. So I started the show asking the question, you know, what would you do with another $1,000 per week during retirement? And it sounded kind of far fetched. You know, I kind of wrote that opening before we got on the show today and, and it sounds a little bit farfetched. It's not a lottery, but it might be a different way of looking at your home equity. Okay. And I use that $2 million example. And that's not uncommon, as you know, in the real estate market in Toronto, people's homes range in anywhere from a million to $4 million. But let's say you got a couple and they're in that $2 million home and they find another property and it's 1.3 million. It's another beautiful property. There's, you know, after they sell, there's going to be some moving costs and transaction fees and all that kind of thing, but they've literally, they can literally unlock $600,000. And, and here's where I think most people think differently than I do. Most of, most people look at that and say, great, I got another 600 grand for my TFSA and my investment account. That's great. But I think there's another way you can look at it. I think people should look at and say, well, what can I do with that $600,000 for the next 15 years of my life during my, my go-go years? Because if you took that money and invested it responsibly and intentionally spent that money over those go-go years, you know, you can potentially create another $1,000 paycheck each week. during those those years where you really want to do you want to experience life at its best and I don't know like maybe you're more boots on the ground when you see people sell that house and and get that money. What what do you see in that world?

Wayne Clements: 08:26 - 09:20

Yeah, I think the, and you and I talked about this on the weekend, the conversation that we're having a lot with our clients right now, cause you mentioned, you know, the, the price of real estate and what's been happening in them. Obviously the market's come down a little bit over the last couple of years. And so a lot of the conversation were having with people is, you know, what is my current home worth? And so where we're, we're sort of asking them to look is, okay, maybe that $1.3 million home they were looking at is now, you know, 1.1 and maybe their house isn't worth 2 million, maybe it's worth 1.8, but the gap is still the same. And so that's where we're focusing on with our clients right now is like, let's sit down and let's look at the gap. Is it moving? And sometimes it's actually moving in their favor. Cause you know, maybe the GTA starting to soar a little more of a bounce back and they're looking at moving to the 705 and actually they may actually make X, you know, It might be a better move for them now than waiting. The gap has actually grown for them to put more money in their pocket.

John Stregger: 09:20 - 09:58

Yeah, so this conversation really comes down to three retirement questions and they just happen to involve real estate. And I honestly think every retiree should answer these three questions before they decide to put that for sale sign on their lawn. And the first question is, will this decision to downsize actually improve my life or simply change my address? So when you're seeing people make great downsizing decisions, what was different? Was it the actual home or was it the lifestyle they were buying into?

Wayne Clements: 09:58 - 10:46

Well, kind of reflecting on that, John, I had a great coach that, uh, he said that people really only move for one reason is because they think by the time they get to the other end of the transaction and the house is closed and you know, all the boxes are put away that their life is going to be better off. And, and I think that when I look at every transaction, I'd, whenever we talk to people, I look at it from that perspective and that applies to whether or not people are getting married or whether it's a job relocation, even a divorce. or an estate sale or something like that, it's always, okay, when I get to the other side of it, is my life going to be better off? And so I think it's always a lifestyle question. And yes, I mean, the address plays into account in terms of amenities and all the rest of this stuff. But I always, I think it's, yeah, 100%, it's, it's the lifestyle question in the end.

John Stregger: 10:46 - 11:39

Right. Yeah. I love that. So it's sometimes people can confuse, you know, the house transaction with the life that the house supports. Right. So it's like, you know, you probably don't hear people come in and say, you know what, Wayne, I'm looking to mow more lawn or, or. clean out the gutters and I want bigger gutters to clean out on the weekend sort of thing. They're, they're looking for what's, what's going to support this at the end. And again, more freedom, more travel, less stress. I think that's the first question is, you know, how does this improve my life? Or is it really just a change of address? I think that's really important aspect. 100%. So actually just dovetailing on that for a second. So let's say you're meeting with a couple for the first time that we're thinking of downsize. What's the first thing you're going to ask them? Like what, what comes to mind? What do you need to know to help them?

Wayne Clements: 11:39 - 13:40

So the first question I asked them is what's got you making a move? And we ask a lot of questions when we're meeting with clients, because we, we, do we just feel that in order to get a true understanding, if we're going to walk beside you during the real estate transaction and guide and protect you properly, we need to truly understand what your, what your goal is, because ultimately this, this it's all about you. So we sit down and say, what has got you? Why'd you call me today? What's got you making a move? And then, you know, from there, we just keep asking follow-up questions. Okay. So what does that look like to you when you get there and who do we need to involve? And you kind of go down to the who, what, where's and when's. Um, you know, who do we need to involve in the transaction to get, to make that happen? You know, when do you think you're going to want to put a sign on the front lawn? And, uh, yeah, so that's, those are the questions we, and we just keep diving deeper and deeper and deeper and try and, you know, get down and we call it the big why. What is that big why? Um. For those of you who haven't moved in a while, or for those of you that have moved recently, you know that moving kind of sucks, right? And we have that conversation with our clients when we sit down with them, we were like, full on, this is, you know, this is a stressful process. And it's one of the most stressful processes you're going to go through in life besides divorce and death is moving is not fun. And so, you know, during the process, it's, it's emotionally taxing, it's really physically taxing and it can be financially taxing. And so during the process, when we have clients who get to that sort of messy middle, when they're like, Oh my God, why did we even do this in the first place? We sort of take them back to that question. Hey, remember when we said, if you could wave a magic wand, what would your, you know, what would your ideal universe look like on the other side? We just sort of take them to that, that positive future and remind them in the end. Yes, it's not fun right now, but by the time you get there and when you get settled in and your feet are on the dock or youre locking the condo door, cause you're going to spend three months or four months overseas or in Florida or wherever else you're going to go, it's all going to be worth it.

John Stregger: 13:40 - 14:16

Yeah, that's, that's perfect. Good. And I've, I've experienced that firsthand with, with you when, when Linda and I were looking for cottage property and, and you'd be asking us questions, well, John, do you, are you, what does that drive look like? You know, and just some common questions like really get us thinking like, Oh, we can't, maybe we should rethink that aspect or. I think it's so important to have a vision for what you want to accomplish at the end of the day and basically build towards that vision. I think that's true with any financial decision that you make. And sometimes people don't always have real clarity on the why.

Wayne Clements: 14:16 - 14:48

And sometimes we just have to, we just have to keep asking questions and actually it can be quite powerful for them as well. And, you know, you ask the right questions and all of a sudden they go, well, I thought it was really because, you know, I didn't want to cut grass anymore, but now I'm realizing that it's really because I, you know, I just want to be closer to my family. Or I want to, I want to spend, you know, three months or four months, you know, not here and in the winter. Like it really, it's, it's a, it's a really powerful and a really, uh, it's a great conversation for us, but it's actually really empowering for our clients.

John Stregger: 14:48 - 16:10

So that, that dovetails really well into another question I was thinking about is people should really think about what, what can this equity really do for me during my go-go years. And when it comes to retirement, most people stop asking, you know, how do I build wealth? And they need to start asking, how do I use my wealth? Right. So let's go back to that example. I was using where a couple unlocks 600 grand and, and most people think, Hey, I've got another investment account. Whereas they should, as I mentioned before, they immediately start thinking about possibilities. What can you do with a thousand dollars a week? What can you actually do? Maybe it funds two major trips per year. Maybe it's, you know, no more winters in Canada. Maybe it's take the grandkids on a Disney cruise or, or. Or, you know what, maybe as something as simple as not worrying about spending money every time that they have to, right. Can really that flexibility, that, that ease of, of financial stress is really important in retirement. Because one thing I've noticed is that money doesn't always buy happiness, but financial flexibility, it certainly does reduce stress. Um, so, so to that point, Wayne, when people unlock that equity, uh, what, what changes have you seen in people's lives? Not, not financially, more personally.

Wayne Clements: 16:10 - 18:15

Great question. I think the thing I love is it doesn't let you, it doesn't buy you happiness, but it sure lets you pick your misery. We've seen it on many different things. And it's really, I think what you're talking about, John, is I totally agree with you. It's just the reduction in stress. I mean, there's so much stress today and that builds up physically and mentally and just reducing that stress. And what you can do with the equity is we've had clients that They'll, they'll move and they don't go all the way to the cottage, but they go a portion of the way to the cottage. They downsize, they put some money in their pocket and they cut their, their commute time from two hours down to 45 minutes. And that cottage time is key for them. We, again, we've had clients who have moved, sold their larger home. And these are homes that, you know, they're 2,500 to 3,000 square feet. And we've got two people kind of knocking around inside them and they're looking at it kind of going, Oh, you know what? the next five years, we're going to be doing roofs and kitchens and bathrooms and we're just done cutting grass and cleaning. So they've downsized into condominiums and the condominium life, again, allows them the flexibility of just locking the door, you can go when you want to go, you don't have any worries about the, uh, about maintaining the property. And, and then you've got that money. And I think the big one too, is for people who are sort of in that, those early years, you've probably now have children that are. are maybe still at home, right? There's a lot of people who are not buying homes who are in their late twenties and early thirties. And man, I mean, taking that little bit of extra equity that you've got and helping your kids, you know, go out and purchase a home is, is a big deal. I mean, you can leave all that until after you're gone, you know, and when your kids are financially stable and they've got their own lives going on, or you can, you know, Think about helping them out now. What joy would that, would that bring you to sort of see your kids? You know, it's another way of, it's maybe not building your equity, but it's helping your kids build their equity.

John Stregger: 18:15 - 19:56

Right. I think that's a really important point. And I've seen that it comes up on almost every conversation with people right now, because they've got kids, they, people recognize how difficult it is to get into the housing market and they want to do something, but they don't know how. And sometimes this is one of the avenues that we pursue to help people, you know, give their kids some equity to get in that market. And it really segues really well with, with my next question for you here. Um, it's really comes down to if not now, when, right? So in other words, the question is if you're not going to do it now, when are you going to do it? Exactly. So you might be 60 years old, 65 going on to retirement and you're thinking, okay, this is a possibility. It's something that you should think about doing right now. If it's not going to be now, is it going to be 75, age 85, or is it really just going to be a part of your estate at the end of the day? And there's nothing wrong with that, but the longer you delay, one of the problems with doing that or not acting on this opportunity, if it is an opportunity for you, is that the longer you delay, the greater the risk of a health issue coming up. And I'm not talking about, you know, passing away or anything, but you know, people become less nimble and able to do a lot of things that they want to do. Um, and, and then equity just sits in the house and doesn't get utilized into, into your lifestyle. So have you ever had someone come back to you and say, I wish we'd have done this five years ago, as opposed to now?

Wayne Clements: 19:56 - 21:32

Yeah, that along with when, once they get the house ready for sale and it, and it's looking really great, they always say, man, I wish I kept my house like this all the time, but absolutely. And I think some of that too is, you know, it is a journey, right? Life is a journey and it, and it unfolds as it not to get too woo woo. But it does unfold the way it is, but most people, and it's, and when, when you invited me on to do this, I sort of went through our, our VIP database and we have, you know, all the people have transacted and I was focusing in on all of my clients that have downsized. And I, it, it made me smile, you know, cause I was thinking about all these people cause I do actually stay in touch with them on a regular basis. And one of my clients I was talking to just two days ago, um, she's, they sold their 10 acre property. They, uh, moved up to their cottage full time. They now spend nine weeks in Mexico. And then when I called her, all of her grandkids and all of their dads were all at the cottage horsing around in the water and they were just having a great time. And, and she said like, man, we should have done this. Like we should have done this sooner. Right. And you don't know until, you know, right. Um, and so, but yeah, most of my clients that I think about that have downsized, I don't think there's anybody, right. If I were to call them and said, Hey, if you had the opportunity to have done that sooner than you did, uh, would you have done it now? Some of them may say, depending on where the market was at the time, you know, because, you know, situations are a little different for those of us who are. you know, moving to the cottage full time, you'd really like to kind of, you know, maximize the peak market because that's going to be the last house you're ever going to sell out of the cottage. But for the most part, yeah, I think most of them would say, yeah, I would have done this sooner if I'd have known how great it was going to be.

John Stregger: 21:32 - 22:11

Actually, we would be remiss if we didn't. talk about when does it not, when does downsizing not make sense? Right. Because it sounds like we've been trying to solve real estate transactions for the last 20 minutes, but we should talk about, you know, well, maybe, maybe there's situations where people do not downsize, right. Even if they're thinking about it and for, it's not always the right decision. Uh, so what are situations where people should. think about, well, not think about, but maybe take a hard look at their life and say, okay, well, maybe this isn't the right decision for you at this time. So any situations that come to mind for people?

Wayne Clements: 22:11 - 24:05

Yeah. I mean, it's kind of that, you know, if we run on the premise that life's going to be better once you move, if you, if you run through the scenario and wave that magic wand and at the end of it, you go, oh, My life won't be better. It could be somebody who I think about my mom all the time. And my mom lived in her, her, her house for, oh my gosh, it was 50, maybe 60 years. Um, and, um, kind of going back to what you said before, John was, you know, she was always able to stay on the property. She was, she had the financial means. She was physically able to stay in the property. She had a fantastic community around her in terms of a group of friends and a support, you know, community. She had all the amenities that she needed in terms of, you know, uh, doctors and all of that stuff that was her, her place. And really for her to have moved out and for us to have put her into, you know, retirement home or something like that, she was still able to do it. And then there's other people that maybe financially, it doesn't make sense. You know, there, there could be, you know, a mortgage on the property that you're going to have to pay, you know, substantial penalties on, and maybe it makes sense to wait until closer to the expiration of that mortgage so that you're not taking such a big hit. So we, we have conversations with people kind of at exploratory conversation, and we sit down with them afterwards and we've, we've had looked at people and said, I don't think it's the right time for you to move right now. I think you should stay put for a bit, you know, and when these things align or when these other things, and you've got family nearby, when something changes, where you, you know, some, one of those things changes and all of a sudden you're looking at this going, yeah. That's not the best place for me anymore. Then let's sit back down and then we'll put the sign back on the lawn. But in the meantime, no, it's not always the right time for people. Sometimes it's just better to stay put. Yeah. I think about Janice and I, we, we love our home and I don't know a situation where we could move right now where I would, I mean, other than, you know, maybe moving to Aruba or something full time. Uh, I don't know if there's a situation that would cause us to sell our house right now. Cause we just, we're not ready.

John Stregger: 24:05 - 24:25

Right. Right. So we've, we've touched on this before, but I'm going to ask you to just elaborate, uh, focusing in on that 62 year old couple that walks in your office, they're thinking about retirement. They've never really considered downsizing. What's the first thing you tell them? Oh man.

Wayne Clements: 24:25 - 26:20

Time is your friend, right? So we, we do, we meet with people quite often, uh, and they're years in advance of, of getting there, of thinking they're starting to think about it. And these are the real planner people that are, you know, time is your friend. Cause again, if we go back to the premise that moving sucks and it's going to be very stressful. Even when you plan for everything, it's still going to have, you know, they're going to be stuck. Uh, so the more you can plan, the more time you put into it, because the number one thing that we see with people is that there's just clutter. There's stuff you've been in your house for 25 years. You've got boxes of things that you don't even know you have anymore. And you know, it takes time to go through those things. You've got to go through them slowly. You've got to talk to your family about what. You know, what do they want? What are you going to throw away, give away or, and donate and just start planning for that stuff. I mean, it, it seems, and I think a lot of people just get caught in the, the size of that process and they look around a house and go, Oh my God, I've got all these things. And, you know, so it's like, you know, the best way to meet an elephant is one bite at a time. So just start planning now, um, even if you're five years away. Have a guy like you come in, have a realtor come in, give you some advice on where would be a good place to invest some money. Maybe there's some things around the house that need to be repaired. You know, some of the things that either drippy faucet or some other stuff that, you know, need to be, you know, taken care of, start doing that stuff. Cause the other thing is when you do those repairs, then you actually derive some satisfaction and some joy out of, you know, doing that stuff. Um, but yeah, so I would say start planning it now and start and just start chipping away at the stuff that you, you need to get done. It's going to make your life so much easier. Cause even when you, when you get ready, we say, okay, now we're ready to put the sign on the line. You're going to go from, you know, basically cruising along the highway at, you know, 40 up doing up to a hundred. It's still going to be a, a very, uh, it's going to be a process that's going to blow your hair back.

John Stregger: 26:20 - 26:57

Yeah. So I think that's probably one of the biggest lessons from today is don't wait, don't wait until you have to move because that's a pretty overwhelming transaction and situation that you find yourself in, you know, just gathering and decluttering. Start thinking about it while you're, while you're still, while it's still your choice. Uh, because if you want to be opportunistic about the sale of your house, it's better to be really well prepared and, and not making the decision out of necessity. A hundred percent. So that's really good advice, Wayne. We're running low on time here. Do you have any closing thoughts for, for our guests today?

Wayne Clements: 26:57 - 28:10

Yeah, I'm just going to sort of go back to what you said at the beginning of this. I think when you're planning, you know, all of the stuff that kind of bundles into estate planning. And I think that you need to build a great team. Um, and I think that having a guy like you as a financial advisor, cause Janice and I have worked with you for many years. We trust you implicitly. You helped us build a nice nest egg and, and God gave us great advice throughout the years. And so I think that's really key that you have somebody in your corner who's who's vested in you and believes in you. And then I think the other thing is, you know, then you can sit down and talk to a realtor as well. And, um, a realtor who really cares about your, your future. We'll sit down with you five years in advance to putting the sign on the lawn. So I think, you know, you build that team, have that person in to say, Hey, look, I'm not selling the house anytime soon, but I really would just like some advice. Would you come over and have a coffee with me? Tell me what, maybe do I get rid of the green shag carpet? You know, other, some other things around the house, some, some good investments I can make. And somebody who's, who's, who believes it was invested in your future. Um, won't say no, they'll say, sure. Yeah, I'll come over and we'll have a, we'll have a coffee and we'll talk about what it is. But I would say, you know, build the team, um, and build a team you can trust and they'll give you great advice.

John Stregger: 28:10 - 28:39

Awesome. Thanks Wayne. You know, and thank you for joining me today. I really appreciate your, your help here. And we've, we've appreciated your help as well on the real estate front. Um, we appreciate your friendship, your insight, and I've seen the care that you show with the families you work with. And I think it's, uh, you, you bring a high degree of professionalism to your work and your craft. And I appreciate that. And this has been awesome. Thanks. Thanks for joining me today.

Wayne Clements: 28:39 - 28:41

Thanks, John. Thanks for having me. It's been good fun.

John Stregger: 28:41 - 29:31

Good. Awesome. Now, if there's one thing I hope everyone else has taken away from today's conversation, it's this. The most important thing isn't whether you downsize. The important thing is making that decision intentionally and not by default. Thanks for tuning in today. And if you enjoyed today's episode, please like subscribe or share it with someone you care about. And if you want to learn more, you can always visit us at freeretirementreport.ca. Because retirement isn't measured by the size of your home. It's measured by the life you create after leaving it. I'm John Strager. Thank you so much for listening.

Female Narrator: 29:31 - 29:50

The information provided in this podcast is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax, or other professional advisors.