Financial planner with couple


With tax season just around the corner, some of your more affluent clients may be disappointed to realize that their Old Age Security (OAS) benefits will be clawed back due to withdrawals from registered plans that lead to higher declared incomes. Retirees often place great importance on OAS, viewing the benefit as money they are entitled to. When they sit down with their tax accountant in April, they may be caught off guard that their benefits will be clawed back. Of course, this can lead to some challenging conversations for you and your clients at your next meeting.

Avoid the tough conversation next year

Having a plan to find alternative sources of cash flow that do not raise your clients’ taxable incomes and lead to OAS clawbacks will be welcome news to your affluent retirees – who must pay back all or a portion of their OAS if their annual income exceeds $81,761. And it will help you avoid a challenging conversation next year.

The good news is there is a strategy that can solve a pain point about the OAS and generate cash flow for your clients. With inflation continuing to rise and clients wanting to maintain their desired lifestyles, the need for higher cash flows is not going to disappear any time soon.

An increasingly popular solution

Most of your clients’ wealth will be found in their investment portfolios and their homes. When it comes to generating cash flow from their investment portfolios and registered plans, taxes become a consideration. Withdrawals from a Registered Retirement Income Fund (RRIF) are considered taxable income, while selling a non-registered investment that has risen in value gives rise to a capital gain. Both are taxable events which can lead to a loss of income-tested benefits. Your client’s home is also an asset class, but withdrawals from their home equity wealth do not generate taxable events.

Of course, there are ways for clients to tap into their home equity wealth – through lines of credit and mortgages, for example – but both require them to demonstrate regular income, which is a challenge for many retirees who rely on their RRIFs for cash flow. The solution? The CHIP Reverse Mortgage by HomeEquity Bank.

This innovative financial planning tool allows Canadian homeowners age 55+ to access up to 55% of their home’s value and turn it into tax-free cash without having to move or sell. Plus, there are no monthly mortgage payments required. In other words, with a reverse mortgage, the client’s home pays them.

Did you know? Canadians 55+ are Canada’s largest and fastest-growing demographic and have over $1 trillion locked in their home equity.

Benefits of a CHIP Reverse Mortgage

Besides being an elegant financial planning solution that solves pain points for your clients, the CHIP Reverse Mortgage delivers many other benefits:

  • Tapping into their home equity allows a larger portion of your clients’ registered plans to continue growing on a tax-free basis.
  • Your clients gain access to greater cash flow (received as a lump sum or as monthly supplements) that can be used for a number of purposes – funding their retirement lifestyle, paying down debt, doing home renovations, or purchasing an investment property. The choice is theirs!
  • Because the money your clients receive is a loan, it’s not added to their taxable income and does not affect income-tested government benefits.
  • Your clients get to stay in the home they love and maintain ownership and control of it.
  • Plus, there are no monthly mortgage payments to make while your clients live in their home, which frees up cash for your clients. The full amount only becomes due when their home is sold, or if they move.
  • On those rare occasions when the value of a home depreciates below the loan amount, your clients and their heirs are not liable for the excess payment: HomeEquity Bank will cover the difference as part of our No Negative Equity Guarantee.

And the benefits of a reverse mortgage don’t just flow to your clients: Delivering solutions that provide your clients with tax-free cash flow helps to preserve their investment portfolios and helps you preserve your hard-won client accounts.

Did you know? 93% of Canadians want to stay in their current home throughout their retirement. 

The CHIP Reverse Mortgage is a product of HomeEquity Bank. To learn more about this innovative financial planning strategy, visit us online. 

Ready to provide your clients with a tax-efficient solution that will help them live their retirement on their terms? Contact a Business Development Manager today.

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