The secret power of renters is having extra money to invest compared with homeowners who are loaded down with property taxes, rising insurance premiums and sneaky maintenance costs
showing that homeowners are much wealthier than renters. Gulp. How will young people priced out of home ownership ever build the wealth they need to retire and reach other financial goals?They will live longer than previous generations, which means they will likely work longer and have more time to save in registered retirement savings plans, tax-free savings accounts and first home savings accounts. Any unused FHSA money can be added to an RRSP.
Great returns over the decades from real estate and stocks make now “a perfect time for retirement,” said Janice Holman, a principal at actuarial consultants Eckler Ltd. “For the younger generation, who can’t afford to save because their day-to-day finances are more strenuous, I do feel that they will be in a more disadvantaged position.”
Rents are expensive today, but they remain a vastly cheaper way to live than owning. Every aspect of home ownership gets more expensive by the year – home insurance, property taxes and maintenance. Also, let’s admit that home ownership hasn’t been much of an investment opportunity lately. A renter who is disciplined about investing can create substantial wealth, but it won’t all be tax-exempt like a principal residence is when sold. Only tax-free savings accounts approximate houses from a tax point of view over the long term, and the annual TFSA limit for this year and next is $7,000.
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