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Saving for Retirement with Mortgage Investments

26 January 2022

Being able to navigate risk and uncertainty is essential when planning for retirement. While we can never fully predict the future, the power of dollar-cost averaging, compound interest and diversification will keep your portfolio on track over the long haul, regardless of market environment. Being able to think outside the box as the need arises also doesn’t hurt in helping you identify high opportunity plays. 

While retirement planning hasn’t changed very much over the years, fixed-income portfolios have historically struggled to keep pace with inflation. In recent years, fixed-income assets have exhibited high volatility due to the ever evolving mandates of governments and central banks. 

One way to enhance your fixed-income portfolio is to include higher-yielding alternative investments, many of which generate income through the collection of interest and fees. Mortgage investments fit this description very well.

Understanding Private Mortgages

Mortgage investments are geared toward investors looking for historically above average yields, and who want to generate regular cash flow for their portfolio. These investment programs provide direct exposure to Canada’s residential real estate market without any of the risks or liabilities of conventional homeownership. Typically, these mortgage investment programs are available to high net-worth individuals with at least $500,000 in investable capital.

Because private mortgages cater to a slightly higher-risk demographic of borrowers, they carry higher interest rates and fees than conventional mortgages. Although yields vary, CMI’s whole mortgage investments typically generate annual returns between 6% and 16%, depending on the investor’s investment objectives and risk tolerance. 

Optimizing Your Retirement

Running out of money is one of the biggest concerns of most retirees—and that’s before accounting for the detrimental impact of inflation—which makes income-producing assets such as mortgages that much more attractive. Although dividend stocks also pay income, their performance is tied to the cyclical nature of equity markets, and they are affected by everything from monetary policy to corporate earnings to economic data. Mortgages, on the other hand, do not have direct exposure to public markets.

Mortgage investing shouldn’t be viewed as a standalone option for retirement planning by any means, but should be part of a broad retirement and investment strategy. One of the general rules of retirement planning is that the older you are, the more your portfolio should be focused on income-generating assets and capital preservation.

As RRSP and RRIF-eligible investments, mortgage investments can be used for long-term retirement planning. Once in retirement, mortgage investments can serve as an important source of income. This additional cash flow can help to manage regular expenses, travel plans and other lifestyle requirements. Your financial advisor can work with you to include mortgages in your overall retirement plan.

Retirement planning should be a lifelong process, and one you review on a regular, annual basis. It’s never too early to start and never too late to consider optimizing your strategy.

If you’re interested in learning about how private mortgages can boost your retirement income, contact CMI Mortgage Investments to schedule a personal consultation.

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