Home Equity no Guarantee
Homeownership has for generations been the greatest source of net worth for many households and a consolation for seniors who may not habe saved enough cash during their working years....
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Michael Kresh is a dynamic speaker and his passion for retirement planning and
investing becomes clear to anyone who
has ever seen him live or on television. Whether talking to a roomful of CEOs
about their company pension plans or a group of Baby Boomers about making their retirement affordable and meaningful, audiences truly enjoy his informative programs.
For many Americans over many generations their house has been their biggest equity asset. Often people say they will sell their house and move into a smaller property to assist with their retirement planning. However there are many problems with using home equity to finance retirement, not the least of which is yesterday’s government report that states for the first time since 1945 the average homeowner has less than 50% equity in retirement.
Let us look at some of the problems with this assumption. First it was a long held belief that home values will always go up recent history shows that this is not the case since 1980 this is the third time that home prices have pulled back. We can now see that at least some of the recent home price increase (especially when the stock market was in the doldrums) was created by a speculative bubble not very different than the dot com bubble.
Also to unlock home equity to fund retirement you must be prepared to move. Some retirees are tied to their house due to the presence of children and grandchildren. In many places of the country downsizing is difficult do to the lack of affordable housing or high property tax for new purchases (look and Florida and California).
Unless you live in a high tax high home price area and are willing to relocate many states away there is little cost savings and money to free up.
There are other specifics to review if you need more.
