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You have to define the word "savings" before you can determine whether home equity is "savings."
Merriam-Webster:
"savings" - plural: money put by, the excess of income over consumption expenditures.
Cambridge English Dictionary:
"savings" - plural: the money you keep, especially in a bank or other financial organization.
Investopedia:
Savings refers to the money that a person has left over after they subtract out their consumer spending from their disposable income over a given time period. Savings, therefore, represents a net surplus of funds for an individual or household after all expenses and obligations have been paid. Savings are kept in the form of cash or cash equivalents (e.g. as bank deposits), which are exposed to no risk of loss but also come with correspondingly minimal returns. Savings can be grown through investing, which requires that the money be put at risk.
Quicken.com:
Savings refer to money you put aside for future use rather than spending it immediately.
Given those definitions, no, I don't consider the equity in my home (it's paid for) as retirement "savings."
But I do consider it a comfortable potential source of cash in addition to my monetary savings should the need arise.
We have about equal amounts in investments and equity. We live more cheaply in our nice house than we could in a small apartment, so we are staying until we aren’t able to care for it. I suspect that when one of us dies, the other will sell and add the equity to the money pile to live off of.
Right now, I have a $500K mortgage on a house worth $1.2M (so $700K equity). I have a 15 year mortgage, and my mortgage+taxes is about the same (probably more) than if I were to rent the same house.
So basically, if I sold my house and rented it back from the new owner, I would have around $600K in the bank AND the same $6K monthly payments (for at least the next 15 years or so). So why wouldn't I count that towards my retirement savings?
If I just plan to pay $6K/month (and adjust for inflation) for housing, it seems totally reasonable to count $600K towards my retirement goal (if I have enough other money to last me 15 or so years before I need that money).
Just seems silly not to count it just because I "own" the house
The value of my home is included in my net worth. My savings and investments are also part of my net worth. The value of my home is definitely NOT part of my savings.
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".
Retirement savings is the CASH I have in savings, checking, or investment accounts. It could be in the form of roll-over IRA, Roth, etc. I can easily access it in the matter of days.
Retirement income is the CASH FLOW I can expect. This can be in the form of SS, pensions, or other investment income such as dividends, rentals, etc.
Net worth is really a PAPER NUMBER. It includes the equity I have in the properties I hold but can not be easily converted to cash.
You could also include the present value of your pension as part of your net worth, but that's a tricky number as we don't know how many years we will live. But if you use the age 85, you're probably pretty safe actuarially speaking.
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.
In my situation I would be selling a big price inflated home and downsizing into a smaller price inflated home. I could own the smaller home outright and use the extra for whatever other needs (like health insurance, food, etc) I might have.
Smaller home, smaller yard, easier maintenance, ease of living, convenient to shopping/amenities/medical is what I would prefer.
Good question, and in Googling it, the sites on the first search page indicated from about one year to about 2.5 years. The following is a very good article, I think, and it says "about one year" which ties in with my personal experience. (FWIW, three of my four grandparents ended up in nursing homes for a stay of from two weeks to about 18 months before they died, with my last remaining grandparent dying in 1994.)
P.S. I also saw a quote on another site that said 7 out of 10 seniors end up in nursing homes, and that also ties in with my experience with my family members who lived past the age of 75.
We consider our home part of our net worth. It is there because we worked hard to pay it off. We will remain here for a while. As long as we can maintain it and my MIL is with us we will stay. Paid off homes make living much less problematic though having a monthly mortgage or rent payment is not unreasonable either.
Certainly I count our home value as part of our net worth, the last asset to be sold when/if needed, sometime if/when the last person needs the money or is moving into a care facility. If not ever needed then it will go to survivors.
Our home is an asset that we use to live in. Not counting it's value, when for most people it is their largest asset, seems foolish. For us it is not our largest asset but it's mortgage-free and would sell in a couple of days at a good price.
For people whose home is their largest asset, compared to other things like cash or stocks, I think they would have a different way of thinking of their home's value. I think they'd consider how they'd replace their home with something less expensive like renting, for example. And monetize mentally "current home minus future home" to arrive at the actual asset value.
We have our liquid assets such as 401k, cash, stock, IRAs, and ROTHs.
We have our cash flow such as our Social Security and pensions.
We have our non-liquid assets such as our house.
All of the above adds to our net worth but we only count liquid assets and cash flow as our retirement savings.
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