Blogs & Comment

All your eggs in the house?

It is with trepidation one suggests a caveat to pension actuary Malcolm Hamiltons claim, recently reiterated in a Financial Post article, that priority should be given to paying off ones mortgage over saving and investing for retirement. He is obviously a smart guy and a leading authority in the Canadian retirement field.
But one thing not mentioned in his analysis, as well as the analysis of othersin favour of attacking the mortgage first, are the risks of concentrating all ones wealth in a single asset: their house. My personal preference would be for greater diversification, to also have some, say 15% to 20%, of ones wealth in financial assets that could offset the risks.
What are the risks? Just look at whats going on in the United States. House prices are down an average 14% according to housing indexes, and forecast to fall 25% to 30% in total, according to the likes of Professor Shiller. Even if Canada is insulated to a large extent from such dramatic declines, they still can occur on a local basis as when, for example, your house is destroyed by some event not covered by your insurance.