Back in the early aughts, I heard a demographics and financial expert suggest a future notion that didn’t seem possible: Baby boomers would not find their homes to be the financial panacea that prior generations counted on, and planning on such for retirement would lead to anguish.

Today, though, I hear a lot of people who made it through the housing crises talking about how thrilled they are that, because their house value has stopped falling, retirement is looking a whole lot better. In fact, from my experience and speaking with any number of financial advisers and friends, many people believe that because their house is paid in full, they are doing well and in decent shape for retirement — even though they have very little in the way of savings in retirement plans.

And therein lies a big problem for retirement planning: becoming financially dependent on your home.

Click to Enlarge If we’ve learned anything from the past five to seven years, it’s that home values are susceptible to massive price swings. Just take a look at the accompanying CalculatedRisk graphic of Case-Shiller price information. While the markets are slowly coming back, being in the the wrong place (a depressed market) at the wrong time (retirement) can lead to some difficult planning decisions.

More importantly, if you’re like me, you don’t want to be in a position where the only way to fund your retirement is to hock your beloved home — seller’s market or not.

So how can we if not avoid, at least mitigate, the risk of home dependency? Keep contributing to your IRA and 401k plans. Here’s why:

• Stocks and bonds pay dividends or interest at set intervals. Your home won’t provide you with any type of income while you own it unless you dip into an equity line or reverse mortgage. While not a guarantee it won’t happen, dividend cuts and bond defaults are rare, and are typically a last resort to remain solvent.
• Debt service is not part of a stock or bond portfolio. Avoiding debt is one of the biggest ways to prepare for retirement, and unless your home is fully paid, you are making debt service payments. Even worse, you might find yourself “upside down” (mortgage debt in excess of home value) at an inopportune time. Stocks and bonds cost you capital outlay, but not on a monthly basis like a mortgage.

Our home is still our castle, and we want to keep it that way — not have it become something we need to pawn just to afford life after work.

Marc Bastow is an Assistant Editor at InvestorPlace.com.