House Rich, Cash Poor
A net worth of one million, but $2,500 in the bank: the trap of wealth locked up in bricks, and how to avoid it.
Source: Fabien Major | Les pauvres millionnaires: riches en briques, fauchés en fric | Noovo Info
In the Outaouais, we all know a retired couple of public servants with the big house, mortgage-free for many years, and the same routine year after year.
On paper, their net worth exceeds one million dollars, but in their bank account there is rarely more than $2,500 at the end of the month. Their RRSPs have never exceeded $50,000, their TFSAs have been empty since 2019, and they have never owned a single stock or ETF. What do they own? A house (non-liquid) and a lifetime income from the guaranteed federal government pension. With the inflation of recent years, guaranteed pensions are no longer enough.
The house, a locked safe
Many Canadians live in properties that have gained enormous value over the past 20 years. But this wealth is locked in, unusable without borrowing or selling. This is the “house rich, cash poor” syndrome. According to Statistics Canada, nearly 42% of Canadians aged 55 and over hold the majority of their wealth in their principal residence, but little in liquid assets.
Here is a typical case:
- House: $900,000
- Mortgage: -$100,000
- RRSP: $50,000
- TFSA: $0
- Bank account: $4,000
- Credit cards: -$1,500
Net worth: $852,000
Cash readily available: Not much…
The problem? This wealth is of no use for buying groceries, travelling, paying for medical care, or helping children and grandchildren financially.
Have you ever calculated the annual cost of owning a medium-to-large house? Rising municipal taxes, higher energy bills and normal home maintenance are all costs you carry, even without a mortgage.
In the end, financial freedom is not measured in square feet… but in dollars available when you need them.
If this email speaks to you, get in touch with us so we can look at your options.
There are ways to unlock that value
The good news: a house doesn’t have to stay a locked vault. Depending on your situation, several avenues may be worth examining: a home equity line of credit, a reverse mortgage, or simply selling and downsizing.
But be careful — none of these options is magic. A line of credit requires discipline, because it’s easy-to-access money that will eventually need to be repaid. A reverse mortgage lets you stay in your home, but interest compounds over time and reduces what will be left for your estate. And selling the family home is as much an emotional decision as a financial one. Each avenue has its costs, its advantages and its consequences — they deserve to be compared calmly, with real numbers, based on your reality.
Liquidity is something you plan — ideally before retirement
The “house rich, cash poor” syndrome doesn’t fall from the sky: it builds up over years, often by putting every available dollar on the mortgage while the TFSA sits empty. Paying off your home is a great reflex, but balance matters too. Contributing to your RRSP and TFSA along the way, even modestly, means giving your future self a choice between several sources of income — rather than depending entirely on the value of your front door.
If retirement is approaching, a withdrawal plan can also make a real difference: which accounts to draw from first, how to spread out the tax bill, when to apply for government pensions. Every situation is unique, and there is no universal recipe.
Where to start?
With an honest picture of your situation: what you own, what is liquid, what isn’t, and what you will actually need in the coming years. That’s exactly the kind of exercise we do together in a first meeting. If your net worth looks great on paper but your bank account doesn’t keep up, let’s talk — no obligation, and no jargon.
