PERSONAL FINANCES: Should you consider your home as a retirement asset? | Business

If you own a home, chances are your net worth has increased over the past year. Soaring home prices caused by a pandemic-fueled housing frenzy have led to a scenario where American homeowners are sitting on a record $22.7 trillion in net worth, according to a new report. Seeing the estimated value of your home increase on real estate sites can be exciting, especially if you’re counting on that money to one day help fund your retirement lifestyle. But it’s important to remember that real estate is a more complex asset than money. Keep these factors in mind when thinking about how the value of your home can be used to fund your retirement.

1. You need a place to live.

Whether in your current home or elsewhere, you need a roof over your head, and that usually comes at a significant cost. Many people who downsize their homes underestimate how much they will end up spending on a smaller condo or living in a retirement community. In fact, some find that their new home is comparable to or even more expensive than their old home – especially since they could end up spending two or three decades there in retirement. Whatever your situation, do the math so you know what you’re getting into financially and how it will factor into your retirement plans.

2. Selling your home may not be as easy as you think.

With the high demand and shortage of homes on the market, you may see homes selling at lightning speed in your local community – but it’s important to remember that there are no guarantees. . In some parts of the country, hot real estate markets are starting to cool. As a result, you may be disappointed with the price you are able to generate when you sell your property. Many people have been disappointed to discover that their home did not have the value they might have imagined. It’s important to keep track of the housing market in your area to help you determine what you might get for your home.

3. Determining the value of a home can be difficult.

Compared to a stock, bond or mutual fund whose price can be easily valued in the market and bought or sold daily, a house is a different type of investment. The value cannot be accurately determined and it is not considered a liquid asset. If you are seriously considering selling your home, it can be helpful to hire a professional appraiser to give you a realistic idea of ​​how much you can expect a buyer to pay you.

With these factors in mind, it’s important to maintain a good perspective on your home’s value in the context of your overall financial situation. Be careful not to overestimate a home’s contribution to your retirement security based on its current valuation, as these numbers are subject to change. Even if your home goes up in value, be careful about saving for retirement in other ways, such as through a workplace savings plan or an IRA.

Talk to a financial advisor about your retirement plans and the potential value of your home in your overall portfolio. A qualified financial advisor can recommend strategies for generating retirement income and provide advice on how to build equity, regardless of the value of your home. Then any funds you generate from your home will be an additional retirement bonus.

1 2021 Home Equity Report, Real Estate Equity Exchange Inc.

Holley Smaldone-Cragg, CFPC, is a Financial Advisor at Ameriprise Financial in Geneva. She specializes in fee-based financial planning and asset management strategies and has been practicing for over 35 years. His website is

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