Couple in Toronto weighs renting vs buying for retirement security
A couple in their 40s relocating from Alberta to the Greater Toronto Area must decide whether to buy or rent a home to support their retirement plans. Tony, 45, and Rebecca, 43, have a young child and intend to remain in Ontario until age 60. Their goal is a post-tax retirement income of $100,000 annually, though their current combined pre-tax income stands at $210,000. Tony’s prior employer provides a $3,400 monthly pension, while Rebecca lacks any pension benefits from her workplace.
The pair owns three rental properties in Calgary—two houses and a condo—valued together at $1.865 million. All mortgages are set to be fully repaid before retirement, and these properties generate about $80,000 annually after expenses. This income would substantially enhance their retirement savings. They are evaluating three strategies: maintaining all three properties while renting in the GTA, selling everything to purchase a Toronto home, or selling just the condo to fund a home purchase in the region.
Comparing Rental Income to Homeownership Costs
Rebecca advocates for buying a Toronto home, arguing that paying off a mortgage is preferable to renting indefinitely. Tony, however, expresses concern over the high ongoing costs of homeownership in the Greater Toronto Area. Their preferred purchase range is $700,000 to $800,000 for a townhouse. Renting in the GTA would cost approximately $3,000 monthly, while buying a $750,000 property with a $100,000 down payment would require financing $650,000.
Financial planner Ed Rempel estimates that a 25-year mortgage on that amount, combined with property taxes, utilities, and maintenance, would total roughly $5,000 per month, $2,000 more than renting. If they invested that $2,000 monthly difference in equities over 15 years, their investments should be worth about $675,000, generating $27,000 annually in retirement based on a 4% withdrawal rate.
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Rempel notes that their current spending habits may strain their retirement plans. Their after-tax income is $155,000, but their target retirement income of $85,000 after tax represents a substantial reduction.
Their three Calgary properties play a key role in their decision. Keeping them ensures a consistent rental income stream in retirement, while selling would eliminate that revenue. Rempel advises that equity investments, such as exchange-traded funds, typically deliver stronger long-term returns than real estate and provide tax-efficient retirement income.
The couple must weigh stability against growth. Scenario 1, keeping all three Calgary properties while renting in the GTA, secures their $80,000 annual rental income, closely matching their target retirement budget. This approach also preserves their inheritance plan for their daughter, as the properties’ equity would remain intact. However, it requires them to manage long-distance landlord responsibilities, including tenant relations and property maintenance, while dealing with Toronto’s rental market.
Investment Strategy and Pension Considerations
Rempel stresses that their retirement income projections depend heavily on supplementing Tony’s pension with investments. His defined benefit pension of $3,400 monthly will be reduced by the Canada Pension Plan offset when he turns 65, cutting his annual income by about $1,200. The value of his defined contribution pension from his current employer remains uncertain, but Rempel advises verifying its projected worth.
