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I am signing today for a cash-out refinance as I posted elsewhere. My monthly mortgage will only go up about $200 and is still only 1/5 of my retirement income (pension and Soc. Sec.)
If I had to sell and move for health reasons (the only reason I would sell) I'd be moving to senior rental in a city or two. Housing is nuts where I'm living. With remote working, better Internet here, and the town 26 miles away with a regional airport and good hospital, it's growing smartly and well. I do hope to stay here to the end of life, though. Good hospice service here also.
Someone who has 200,000 in savingsd and 1,000,000 equity in a home is better situated for retirement than someone who has 700,000 in savings and no home equity.
I count my equity as retirement savings because I didn't plan well and need to count it. But that is a different story.
I would not call it "retirement savings". I would call it a fixed asset. Certainly a given retirement strategy may call for asset liquidation (one such strategy being a reverse mortgage). Along these same lines, a pension can be considered an "annuity asset". An interesting exercise is to take a pension income, say $50K a year that is adjusted each year for inflation, and estimate the cost to replicate that income stream by purchase of a single premium income annuity.
A person who has 50K equity in a 700K home is in a different position than someone who owns their 700K home outright.
If the first person goes to sell their home they may find themselves tapping into their savings just to pay realtor fees and other closing expenses.
If the second person sells their home, they can use their rather substantial proceeds from the sale of their home to purchase a smaller home outright and have money leftover to spend as they choose.
Obviously, if you have little or no home equity you do not factor that into your wealth. Of course, if you own a home that you can not sell within a reasonable time frame then downsizing and freeing up equity may not even be possible so your wealth would be mainly on paper.
My home is part of my net worth but I don't count on it explicitly as part of my "retirement savings". It's there in the back of my mind that there's value there as probably my last asset if or when I end up in a nursing home - so it's generally an unpleasant thought.
I had a grandmother and a great aunt who both ended up in nursing homes for a decade or longer - and I visited them weekly as a child/teenager. So I know that it can happen and what that's all about. It's much more likely if you are never married, widowed, or divorced with no kids around. Otherwise "they" tend to help keep you out of a home for at least a few years - those are the "lucky" ones who are there for just a year or two.
You home's equity varies with the real estate market. That's about as consistent as the weather.
Exactly. IF you sell the house, you still have to pay to live somewhere else, whether renting or owning.
In our area, like so many others, selling even a house that can be sold for more than paid means looking in a market of overpriced, oversought properties. It is one thing to voluntarily downsize and get something desirable. It is a whole different thing to be forced out and only have lousy pickings for the given budget.
Not sure how you can use equity as retirement savings unless you truly do plan on selling.
Seems like you would simply sell your home.. buy a new home for less and pocket the left over, which would count towards retirement savings.
Not sure how you can use equity as retirement savings unless you truly do plan on selling.
Seems like you would simply sell your home.. buy a new home for less and pocket the left over, which would count towards retirement savings.
I would sell my home to finance monthly costs of assisted living or nursing home if/when I need that care. Retirement includes end of life planning, as well as travel and other bucket list items that one plans for in the earlier retirement years. .
I agreed with the camp that does not count home equity as retirement savings.
I further differentiate between "retirement savings" from "retirement income" and from "net worth".
I do the same in my planning & calculations.
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Net amount
